No one wants to believe that their spouse is capable of something as sneaky, unethical, and potentially illegal as hiding assets, which are or which could be divided in a divorce … But some actually do exactly that. Here are several of the most common tactics used:
Stashing Cash in a safe deposit box or in a safe in the office.
When a spouse has access to large sums of cash and is likely to hide it, it’s most likely going to end up in a safe in his personal office or in a safety deposit box at the bank where his business account[s] is located or in a safety deposit box near the home, office or the paramour’s home. Even though some people will hide cash, they tend to select a place that is convenient for them to get to it in an emergency or convenient for them to off and pick up, if cash is needed on an emergency basis. Consider having counsel serve subpoenas upon those institutions as part of the discovery process to determine if there are any safety deposit boxes at any of those institutions.
Transfer Stock, bank and brokerage accounts into the names of family members, business partners, or D/B/A companies
Look back at the last 3-5 years of tax returns to determine where accounts were held and in the divorce discovery process, make sure that the lawyer gets the account records for each of those accounts to trace the monies in each account through to the present. If an account was reflected on the personal tax return 3 years ago and no longer shows up on the current return or the interest or dividend income is materially less than previously reported, track the account statements backward to see if monies were moved from the account elsewhere. If moved, get the underlying record from the new institution to see where it was moved to and whether it was disclosed by the other party in the financial disclosure documents.
Custodial Accounts or Accounts in the children’s name.
Setting up accounts, using the children’s social security number to make the account hard to find or to create the appearance that the funds belong to the children and are not marital monies to be divided in the divorce. Check to see when the account was established and where the funds came from. If the funds were transferred into the child’s name at or around the time of the divorce filing, a court may have the right to view the transfer as improper and pull those funds back into the marital pot, especially if the other spouse was unaware of the transfer of marital monies into that account.
Overpay the IRS for future tax payments.
The IRS will gladly accept the over-payment of taxes but sometimes that over-payment of taxes when a divorce is pending may be to ensure that those funds are not available for use in the divorce or not available for division purposes.
Under Report Income on tax returns & financial statements.
If it’s not showing up as income, then it will not be used to determine total compensation for support and asset division purposes. Believe it or not, some people will file false tax returns with the applicable taxing authorities and provide those false returns to the other side in the divorce or post-divorce matter… And then, immediately thereafter file “amended” tax filings to correct the errors in their returns. But by not inquiring as to whether any amended tax filings took place, a spouse can be relying on incorrect financial information by the other side. Always consider requiring the other spouse ( where the parties are filing separate tax returns ) to sign an authorization in favor of the taxing authorities so that a determination can be made as to whether there were any amended returns filed and whether the amended returns materially alter the financial information provided to you.
Create Phony Debt with family members & friends.
Whenever there is a claim of a “debt” owed to a parent, sibling, business partner or friend, ask to see the underlying account records from that person to see the money leave their account and trace it into your spouse’s account/joint account, to ensure that loan truly occurred or was provided for the purpose claimed ( ie payment of a specific tax liability to the federal government for that parties 2016 tax deficit). Also, too many times, a parent will make a “gift” to the marriage and now that the parties are getting divorced, the spouse wants to view that money as a “loan” with an obligation for repayment. The fact that the spouse now wants to view it as a loan does not make it a loan and there are telltale signs of whether it was a loan or a gift to look for. Was there writing at the time that the money was provided, confirming the loan nature of the transaction? Did you sign that documents? What were the repayment terms and if so, were those terms honored and have payments been made back?
Deferral of Salary, Delay in implementing New Contracts, and Holding back receipt of Commission income until a future date.
Believe it or not, some people will ask their bosses or partners to hold back payment of their commission income and bonus monies into the 1st quarter of the following year to create the appearance of generating less monies in the prior year. As a result, it is important to look at movies received in the 1st quarter of the following year to determine if those funds were generated as a result of work performed the prior year or relate to work performed in the new year. If the money paid in the 1st quarter was for work performed in the prior year, match up the same time frame for the earlier year to see if he did the same thing (deferring payment into the new year) or whether this was a “one-time” deferral. The same is applicable for “new contracts” and whether they are delayed to create the appearance of a lower-income setting or whether it is an ongoing type of practice. Lower revenue for a business is relevant to its valuation and relevant to the issue of alimony and child support.
Business or Personal purchases out of the ordinary course.
This is where a business reflects an expense that appears legitimate but is simply a way for the owner to hide assets. A common example is a dentist, whose books reflect the purchase of a quantity of gold or silver. Yet, a closer examination of the records for those purchases shows that a portion of the purchase was for investment gold and silver instead of gold or silver used for filling cavities. Sometimes also when a party offers to provide his quick book records instead of his actual bank and brokerage account statements, a reason may be that one or more of the entries are not truthful. Yes, believe it or not, sometimes entries for landscaping expenses ( as an example) when matched up against the actual underlying canceled checks might show that a 7,500 landscape bill was actually a purchase of a gift for a paramour that the party was trying to hide.