Hiding assets during a divorce can be a big problem. Although against the law, spouses sometimes try this route. Sometimes, a spouse may even get away with it.
In other cases, marital assets may be overlooked during divorce even when neither spouse is intentionally trying to do so.
Red Flags that a spouse may be Hiding Assets
The following are possible red flags regarding hidden assets:
- One spouse controlled and/or managed the financial resources during the marriage.
- Both spouses kept their finances separate during the marriage.
- One spouse controlled and/or managed expenses during the marriage.
- A spouse doesn’t know about all of the marital assets or their values.
- Neither spouse realizes what he or she is entitled to in a divorce.
- Only one spouse understands what each is entitled to in a divorce.
- One spouse was solely in charge of doing the taxes during the marriage.
- Only one spouse worked outside the home during the marriage.
- One spouse is self-employed. When there isn’t a W-2, it’s easier to under-report income.
- A spouse has been privately planning the divorce for some time.
- One spouse is not being forth coming with bills, pay stubs, account statements, etc.
- A spouse insists that financial documents aren’t needed and adamantly tries to convince the other spouse to trust his or her ‘word’.
- One spouse wants to quickly rush through the divorce.
- One spouse tries to convince the other that a divorce lawyer is not needed.
Top Hidden and Overlooked Marital Assets
In addition to being mindful of red flags, know the types of marital assets that are more commonly hidden during a divorce. In general, spouses are more tempted to hide marital assets that have great value and aren’t easily visible to the other spouse.
Thus, some commonly hidden assets in divorce include the following:
- Bank accounts,
- Retirement accounts (especially pensions),
- Real estate, and
- Personal property of value (e.g., Jewelry, electronics, guns, and tools)
Discovery: How to Uncover Hidden Assets in Divorce
In Minnesota, it’s illegal for either spouse to conceal or hide information from the other spouse during the divorce. The law provides processes to get this information. This process is discovery. Discovery is the mandatory disclosure of information between a couple during a divorce. Parties or attorneys can conduct discovery either informally, formally, or both ways.
Informal discovery is more typical in a divorce. Parties simply request information regarding the specific asset(s) of concern from the other spouse. Either spouse in the divorce can use informal discovery to obtain specific information from the other. If the other spouse doesn’t comply, a spouse can use formal discovery.
Like informal discovery, either spouse in the divorce can use formal discovery to obtain information from the other spouse. Formal discovery involves the drafting and serving of legal documents which clearly request information from the other side, including information about the asset(s) in question.
Formal discovery is typically much more comprehensive and thorough. The legal documents that need to be drafted for formal discovery should be meticulously written and the procedures involved are very precise.
If a spouse does not respond, or incompletely responds, to formal discovery requests, a spouse or his or her attorney can request court intervention, including sanctions.
If formal discovery is not done properly, it can be detrimental. Therefore, most individuals who go through the formal discovery process have an attorney.
As mentioned, Minnesota law discourages a spouse from hiding assets by requiring both parties in a divorce to disclose relevant information to each other.
Additionally, a judge can only divide marital property that is known to him or her. Thus, if the parties haven’t listed all the marital assets, a judge can’t ensure a fair and equal division of marital property. Therefore, ultimately, it’s up to you and your lawyer to take steps to protect yourself against hidden and overlooked assets during a divorce.
What To Do If Spouse is Hiding Assets
Although it’s illegal to hide assets, in order to prevent a spouse from doing so, the other spouse not only has to uncover the hidden asset(s), but also has to convince the court that his/her spouse:
- A. Transferred, encumbered, concealed or disposed of a marital asset;
- B. Without his/her consent;
- C. During the divorce or in contemplation of starting the divorce; and
- D. That it was not in the usual course of business/generation of income, necessities of life or preservation of assets.
(Minnesota Statutes, Chapter 518.58, Subdivision 1a).
As indicated earlier, in the event this can be shown, the court can issue sanctions against the offending spouse.
How to Protect Yourself from Hidden & Overlooked Assets During Divorce
To protect yourself:
- Learn about marital property. Know what’s considered marital property, and non-marital property. Find out what you’re entitled to in a divorce.
- Be aware of common myths regarding marital property division.
- Pay attention to the red flags discussed earlier.
- Be aware of marital assets that are easier to hide and common assets that are hidden or overlooked during divorce.
- Take inventory. Become aware of every marital asset that exists and know the correct value of each. A spreadsheet may be useful.
- Have financial documentation, hire third-party appraisers to value marital assets
- Use informal and formal discovery processes.
- Get an attorney, particularly one who specializes in family law.
Take Away Messages
Hands down, the best thing you can do if you believe your spouse is hiding assets from you, is to hire a divorce attorney. Not only will a divorce attorney know what to look for, but he or she will know how to uncover and prove hidden assets.
Unbelievable as it may seem, you’re actually at a greater risk of your spouse hiding assets when you or your spouse is not represented by an attorney because attorneys are held to a strict set of ethical rules.
Such ethical rules include honesty and candor with the court in all legal matters. Therefore, many attorneys, rightfully so, will not risk their license, career, livelihood, etc… to help one client hide assets from his or her spouse when there has been a discovery request.
For other divorce or family law questions, please consult the list to the left or the FAQ page. If you’re interested in retaining an attorney to help you, please feel free to contact my office for a consultation using the contact information on the left or the contact form on the Majeski Law home page.