One of the most important stages of a divorce is property division. To ensure a 50/50 division of community assets and liabilities, the court has to understand which items of property the spouses own, but this process falls apart if one spouse is deliberately concealing assets. Not only is this an affront to the court, but it also wrongs the other spouse who is simply trying to obtain what the law entitles them to have.
If you are going through a divorce in Orange County and have concerns that your spouse is not being truthful about their property, work with a dedicated family law firm that understands how to find hidden assets and ensure that justice is done. Count on Pinkham & Associates to serve you.
Why Hiding Assets in a Divorce Is a Serious Issue
During divorce, California state law mandates that spouses exchange what is known as a Declaration of Disclosure. It is a set of financial and document disclosures that ensures the spouses are aware of everything they both own (as a married couple and individually), so their assets and debts can be equitably divided. This information also plays a critical role in spousal support and child support determinations.
Accurately preparing these disclosures is vital to ensure the divorce is fair to both spouses and that property and debts are allocated appropriately. Hiding assets or misrepresenting the nature of one’s property in the Declaration of Disclosure could improperly skew the property division to the disadvantage of the other spouse. It can also provide inaccurate information for purposes of calculating child support and spousal support.
What Counts as a “Hidden” Asset in a Divorce?
Hiding assets includes doing any of the following during a pending divorce matter:
- Intentionally failing to disclose items of property
- Transferring property to hide it from the other spouse
- Disposing of property to deprive the other spouse of it
- Forging and falsifying documents to disguise the nature of the property
There are many ways to hide assets, and spouses have devised clever and sometimes complicated schemes for doing so. One example is temporarily transferring property to friends or family with the expectation of getting it back once the divorce is over. Another is liquidating assets and then hiding the cash or using it to purchase something else.
How to Find Hidden Assets in Divorce
Although the prospect of trying to find hidden property may seem daunting, there are a few steps you can take to learn what you need to know:
- Review any records you already have: Whether you are in an active divorce case or not, you may already have documents like tax returns, account statements, loan applications, financial disclosures, and other records. Closely examine what you have for clues about what your spouse may be concealing.
- Hire a private investigator: A private investigator, or PI, can track your spouse and determine if they are working another job, accessing or using personal property (like a vehicle) you didn’t know about, visiting real property to which they may have title, and so forth. The evidence that a PI uncovers could prove vital not only to property division but alimony and child support as well.
- Work with a forensic accountant: Forensic accountants are experts at analyzing financial records, tracing suspicious transactions, and ultimately uncovering evidence that property or money has been hidden or disposed of. No matter how complicated the asset in question is, a skilled forensic accountant can assist.
- Use the discovery process: Once the divorce petition has been filed, parties have the right to use discovery. This formal process involves the request and exchange of relevant information and documents by way of document demands, inspection demands, interrogatories, requests for admission, and other tools.
- Use subpoenas and depositions: These are more aggressive forms of discovery, which may be necessary if the other spouse is refusing to cooperate or being particularly evasive. For instance, your lawyer can help you subpoena bank records or depose third parties who can attest to what your spouse is doing to hide assets.
Do Courts Issue a Penalty for Hiding Assets in Divorce?
Hiding property during a divorce case can land a spouse in legal hot water. To begin with, if the divorce has been finalized, the court may decide to reopen the case and reallocate property that was unfairly divided based on the concealed asset.
A spouse who has hidden property and then been exposed for it may believe that once the asset is uncovered, they will only have to share half of it with their spouse. But this may not be true. California Family Code 1101(h) allows the court to award 100% of the previously undisclosed asset to the other spouse.
Additionally, Section 1101(g) of the Family Code authorizes the judge to order the concealing spouse to pay the other spouse’s court costs, attorney’s fees, and other expenses. Sanctions are also allowable depending on the facts of the case.
Lying to the court by hiding assets will have continuing repercussions in the divorce case or in any related matter that the judge hears later, such as child custody and modification proceedings. Put simply, if a spouse has deceived the court by hiding property, they will likely lose credibility with the judge, and any uncertainty will be resolved in favor of the non-concealing spouse.
Is Hiding an Asset in a Divorce a Crime?
The above remedies are largely civil and mainly hurt the concealing spouse in terms of property, money (e.g., sanctions), and their standing in the case. But there are certain aspects of hiding property that can lead to criminal consequences. Some examples include:
- Perjury: Financial disclosures are signed under oath, and testimony given in court or a deposition is also under oath. Lying about one’s property is, therefore, perjury and can lead to stiff fines and even jail time.
- Fraud: One way that spouses hide property is to forge, alter, or otherwise falsify documents. These and similar actions amount to fraud, and the concealing spouse could be charged pursuant to California criminal fraud statutes.
- Contempt: Ignoring court orders, refusing to comply with discovery and disclosure requests, and otherwise impeding the court’s work could lead to a contempt of court action. Fines and wage garnishments are possibilities, but so is jail.
- District attorney involvement: It’s bad enough to have a family court judge upset with a spouse for concealing assets, but if the concealment involved crimes like those listed above, the DA could get involved as well. This could lead to serious criminal charges like fraud and tax evasion, which can harm a spouse’s freedom, finances, and even their ability to work if they hold an occupational license.
How to Protect Yourself from Hidden Assets During Divorce
One of the best ways to protect yourself from a spouse who conceals property is to hire an experienced Orange County divorce attorney early in the process, preferably before any court papers are even filed. Your lawyer can assist in the following ways, among others, to prevent the other spouse from hiding assets or to recover them if they have already been hidden:
- Using the discovery process, including more aggressive forms like subpoenas
- Referring you to a private investigator or forensic accountant who can assist
- Filing temporary restraining orders to freeze assets and prevent further concealment
- Moving for contempt of court to enforce the judge’s orders
- Using other legal proceedings to compel the other spouse to be truthful and disclose or return hidden assets
There are also several steps you can take on your own, or with the assistance of legal counsel, to look after your interests:
- Keep an eye on spending: Assuming you still have access to your spouse’s checking account, or if you share a joint account, monitor your spouse’s spending and be especially mindful of large, unusual, recurring, or vague transactions (e.g., large cash withdrawals). If possible, try to also determine where money is being spent or transactions are being made.
- Review credit reports: If you can see your spouse’s credit report, be on the lookout for new lines of credit and other debts. Check your credit report for these as well. Such activity could indicate an attempt to make undisclosed purchases, move money around, and otherwise facilitate concealment of property.
- Take a look at public records: With respect to real property and businesses, public records often contain valuable information. Deeds and other property transactions and business filings (e.g., to start a limited liability company or update corporate records) could invite further scrutiny.
- Examine tax returns: State and federal tax returns contain a great deal of property and financial information. You may not find a smoking gun in the tax return, but you could notice something suspicious that could lead you to further investigate the matter.
Hidden Assets Divorce FAQ
The notion that your spouse is hiding property can be frustrating, if not devastating. We’re here to help by answering a few of the most frequently asked questions, such as:
Can There Be Hidden Assets Found After Divorce Is Finalized?
Yes. Just because the divorce is over doesn’t necessarily mean that a spouse will get away with hiding property. If you find concealed assets after the divorce is finalized, the judge can reopen the case and fix the problem.
What if I Forgot to Disclose an Asset During My Divorce?
You should do your best to disclose all property during your divorce, but people are not perfect, and honest mistakes do happen. If you forgot to disclose an asset, notify your attorney immediately and try to document how the mistake occurred. Your attorney may be able to work out a stipulated post-judgment agreement with your spouse on how to distribute the asset.
Most judges will approve these agreements, which may help you quickly resolve the issue without serious repercussions like sanctions.
Will I Lose Everything if I Am Caught Hiding an Asset?
Although it is unlikely that you will lose all marital assets distributed to you (including the ones that you disclosed), you could lose an entire asset that you tried to hide. The courts have statutory authority to distribute 100% of a concealed asset to the other spouse.
However, depending on the circumstances of why and how you hid the property, and how difficult it was to locate, the judge may decide to adjust the entire distribution of all marital assets. While you may not lose “everything,” you may lose a lot more than had you been honest.
Talk to a California Divorce Attorney About Proper Asset Disclosure
Divorce involving hidden assets is emotionally challenging and, in some cases, downright intimidating. You may be concerned that you will never get the property back or get a fair judgment from the court.
Let the seasoned Orange County divorce attorneys of Pinkham & Associates advocate for your best interests and fight for the property division that you deserve. You can contact us today to schedule your consultation.
