Penalty for Hiding Assets in a Divorce
By Angie Gambone
Sometimes, in a divorce, one spouse will try to hide or conceal assets from the other spouse. For example, this may occur because a husband does not want to share a large asset like a bank account or a piece of real estate with his wife, as is usually required in divorces. Also, one spouse may want to artificially deflate his income for the purposes of determining alimony or child support. Although it is not uncommon for a spouse to try to hide assets in a divorce, there are steps that a vigilant party can take to try to uncover this. Also, it is risky to try to hide assets in your divorce because there can be very serious penalties, including monetary sanctions.
Methods of Hiding Assets
There are several ways that your spouse may try to hide assets during your divorce. If he owns real estate in just his name, he may try to transfer that property out of his name by signing the deed over to a family member or friend. If valuable art or tool collections exist, your spouse may stash them with a friend and claim they do not exist. With respect to your bank accounts, your spouse may withdraw large sums of money and place it into a safe deposit box titled in someone else's name. You should look carefully for any changes in the way in which your spouse uses his debit card or makes bank withdrawals because he may try to hide money in small steps rather than taking it all out at once. Your spouse may also make expensive purchases right before the divorce, hoping to resell the items after the divorce.
Methods of Deflating Income
Sometimes a spouse may try to artificially deflate his income during a divorce so that it looks like he earns less. If your spouse is self-employed, this is easier to accomplish. This is because as his own boss he can simply write himself lower paychecks or manipulate the business ledgers to make it appear as though the business is doing poorly. If your spouse works for a small company or a family business, he may have his superiors assist him by claiming he got demoted or that his pay or hours were cut. If he is not self-employed, your spouse can still try to deflate his income. He may ask his boss to hold off on giving him his bonus until after the divorce. He may also decrease the tax exemptions that he claims on his paychecks, which would cause the IRS to withhold more money in taxes. Also, he could refrain from submitting expense reimbursement sheets and could start contributing more money to his retirement accounts which would also reduce the amount of his take-home pay.
Uncovering Hidden Assets
If you suspect that your spouse is hiding assets during your divorce, there are things you can do to try to unearth this fraud. You can hire a private investigator who can follow your spouse to find out if he goes to work full time or if he uses a bank that you did not know about. You can also hire a forensic accountant, a financial expert who can look at your family's finances to help you determine if money has been hidden. The forensic accountant can help you trace bank accounts and can determine if your family expenses are greater than the income your spouse claims to make. If you do not hire an investigator or accountant, you can still uncover hidden assets on your own. During a divorce, the court typically allows spouses to seek out information during what is called the discovery phase. During discovery, you can send a subpoena to your spouse's employer asking for his employment records. You can also subpoena his bank statements. Finally, if necessary, you can follow your spouse on your own and document his activities if you believe he is being dishonest.
Effects of Hiding Assets
If your spouse successfully hides assets, this can have a significant effect on many aspects of your divorce, including property distribution, alimony and child support. For example, if your spouse is able to deplete a large savings account, you may not ever get that money back. Under normal divorce laws, if you live in a community property state, you would have been entitled to 50 percent of the bank account. If it is depleted, you could get nothing. In equitable distribution states, although you may not have been entitled to 50 percent of the account, you may have been entitled to some other percentage. Again, if your spouse depletes the account, you could get nothing. Also, if your spouse is able to convince a court that he earns much less than he really does, he may pay you less alimony or no alimony at all. This could also reduce the amount of child support that he would pay you.
Penalties for Hiding Assets
If you are caught hiding assets during your divorce, you can get in quite a bit of trouble. A judge could impose sanctions against you, which are monetary penalties that you would be required to pay. A judge could also force you to give up your entire share of a remaining asset to your spouse to make up for the assets you hid. A judge may also require you to pay more support to your spouse until you essentially pay back what you took. For example, if you drained a $1,000 bank account, then you would probably owe your spouse $500. A judge could require you to pay alimony at whatever rate he demands, and could then increase those payments by $100 per month for five months until you pay back the $500 you owe your spouse. As a last resort, in some states, you can even be arrested for very serious incidences of hiding assets. This is more likely if you continue to hide assets even after your spouse has brought it to the court's attention.
Remedies After Divorce
Sometimes you may not find out that your spouse hid assets until after your divorce is finalized. For example, you may later learn that your spouse sold a house during the divorce. You may also hear from friends or family members that your spouse is bragging about how much money he earns even though he claimed during your divorce to earn much less. If this occurs, you can file a motion in the court where your divorce was finalized and ask them to reopen your divorce case and possibly amend your divorce agreement. This is easier in a community property state where the court considers all assets earned during the marriage to be joint assets. In equitable distribution states, the court cannot always change a final divorce agreement with respect to property distribution. In those states, you are expected to do as much research as possible during the divorce process. However, you may still be permitted to sue your ex-spouse in civil court for monetary damages.
Angie Gambone is an attorney who has been writing for various websites since 2009. She covers a variety of topics, focusing on legal issues, family law and LGBT rights. Gambone holds a bachelor's degree in social work from Rutgers University and a law degree from Rutgers School of Law, where she graduated with honors in 2010.