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Hidden Assets: Uncovering and Addressing Financial Deception

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In family law cases, particularly divorce and separation, the accurate disclosure of assets forms the bedrock for a fair resolution. However, it's not uncommon for financial deception to surface, where one party attempts to hide assets to skew the settlement in their favor. This act of concealing assets undermines the integrity of the legal process. It can result in one party being financially disadvantaged.

Given the issue's complexity and potential ramifications, it's essential to understand the nature and tactics of financial deception. These tactics can generally involve hiding, understating, or undervaluing assets or overstating debts. They may be conducted through various means, such as transferring assets to a third party, purchasing items that could be overlooked or undervalued, or creating fictitious debt.

Family law attorneys are skilled at navigating these intricate and often concealed financial landscapes. They employ various tools and strategies to uncover hidden assets, facilitating comprehensive and accurate financial disclosures. These can involve conducting in-depth investigations, working with forensic accountants, and using legal discovery methods.

At Claery & Hammond, LLP, we understand the financial stress that family law cases can impose and strive to protect our San Diego clients’ best interests. To learn how we can help, contact us at (310) 817-6904.

What Are Hidden Assets?

Hidden assets represent any assets one party in a family law case, such as a divorce, purposely conceals to prevent them from being included in the property division.

This practice intends to manipulate the financial distribution, thus securing a more favorable outcome for the person hiding the assets. The tactic not only undermines the principle of equitable distribution but can also severely impact the financial future of the other party.

Common methods used to conceal assets include:

  • Overpaying taxes: An individual might purposefully overpay the Internal Revenue Service (IRS) or state tax agency to receive a tax refund after the divorce settlement.
  • Deferring income: A person may request their employer to delay bonuses, promotions, or raises until after the divorce proceedings to reduce their reported income and, consequently, lower spousal or child support payments.
  • Creating phantom debt: This involves creating fictitious debts to friends or family members and repaying them once the divorce is finalized.
  • Making expensive purchases: Some individuals buy valuable items such as art, antiques, or jewelry and underreport their worth. The individual could sell the items post-divorce for their actual value.
  • Transferring assets: Assets might be temporarily transferred to a friend, family member, or a new partner until the divorce is final.
  • Maintaining overseas accounts: This illegal method involves stashing money in offshore bank accounts.

Understanding these tactics can help parties stay vigilant during a divorce or separation.

Signs of Financial Deception

Recognizing the signs of financial deception can be challenging, especially if one party has historically managed most of the couple's monetary affairs. However, certain red flags might indicate the presence of hidden assets.

These signs include the following:

  • Change in financial behavior: Sudden or unexplained changes in spending habits, income, or lifestyle could signal hidden assets. The deviations can involve an unexpected decrease in income, extravagant purchases, or unjustified gifting to third parties.
  • Overcomplicated finances: If a spouse's financial affairs become overly complex or involve multiple bank accounts, corporations, or partnerships, it may be an attempt to hide assets.
  • Secrecy and evasiveness: A partner who becomes secretive or evasive when discussing financial matters or insists on handling all monetary affairs without transparency may be concealing assets.
  • Missing documents: If financial documents such as tax returns, bank statements, or business records disappear, it could suggest an effort to hide assets.
  • Newfound interest in cryptocurrency: A sudden interest in cryptocurrencies might be a way to move and hide money, as transactions with cryptocurrencies like Bitcoin can be relatively untraceable.
  • Frequent travels abroad: Regular trips to countries known for financial secrecy laws may signal an attempt to deposit money in offshore accounts.

These are just a few examples, and the presence of one or more signs does not necessarily prove financial deception. However, they can provide valuable indications of potential hidden assets.

Possible Legal Consequences of Hiding Assets

The act of hiding assets violates the fiduciary duty that each spouse owes to the other during divorce proceedings. This duty includes the obligation to disclose all assets honestly and completely.

A breach of this duty can lead to consequences such as:

  • Contempt of court
  • Monetary sanctions
  • Reassignment of assets

Individuals undergoing divorce proceedings must understand the gravity of these consequences. It is always advisable to act transparently during the divorce process.

Methods to Uncover Hidden Assets

Uncovering hidden assets during a divorce or separation process can be a complex task. However, several strategies and tools can be employed to expose concealed assets and facilitate a fair property division.

Forensic Accounting

This accounting field involves examining financial records to uncover economic deception, including hidden assets. Forensic accountants utilize their expertise in accounting, auditing, and investigative skills to identify irregularities that may indicate the presence of concealed assets. They meticulously review bank statements, tax returns, business records, and other financial documents to track and trace hidden funds.

Private Investigators

In some cases, hiring a private investigator may be beneficial. They can conduct surveillance, interview potential witnesses, and gather information that may provide leads to any hidden assets.

Legal Discovery Methods

Family law attorneys can leverage legal discovery tools such as interrogatories, depositions, and requests for the production of documents. These methods can compel a spouse or a third party to disclose information or documents related to the marital assets.

Public Records

Public records can provide valuable information concerning assets owned by a spouse. These may include real estate records, corporate filings, Uniform Commercial Code filings, and court records. Reviewing these documents can reveal property or business interests that a spouse did not disclose.

Tackling Financial Deception with Legal Help

Dealing with hidden assets during divorce or separation is a complex and often stressful situation. Honesty and transparency are crucial during the divorce process, not only for legal reasons but also for achieving a fair and equitable distribution of assets. The potential existence of hidden assets underscores the need for professional assistance in such challenging scenarios.

If you suspect your spouse of hiding assets, seeking professional guidance is essential.

Schedule a consultation with Claery & Hammond, LLP in San Diego by calling us at (310) 817-6904.


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