During the pre-divorce or divorce processes, a situation may arise in which one spouse is under reporting income or hiding assets from the other spouse. There are many reasons why one spouse would hide income or assets from the other: he or she may want to avoid paying what that spouse should pay in support, does not want to share in the community pot, or simply would rather have anyone else other than his or her spouse have the asset. Here are some methods and techniques that you can use to uncover hidden assets in divorce.
What Happens Once You Have Uncovered Hidden Assets in Divorce?
Before you embark on a venture to uncover hidden monies and assets, you should have an idea of your spouse’s responsibilities. Essentially, spouses have fiduciary duties to each other of the highest fair dealing and good faith. This includes the full disclosure of all separate and community monies, both at the time of separation and the actual divorce. If your spouse does not disclose all assets to you, you could have a favorable case. California Family Code § 1101(a) permits you to have a claim against your spouse for breaching this fiduciary duty if such breach results:
- In impairment to your present undivided one-half interest in the community estate, including but not limited to a single, pattern or a series of transactions; and
- Such transaction(s) have caused or will cause a detrimental impact to your undivided one-half interest in the community estate.
If you can prove your allegations, the Court has the authority to add your name to an asset, require further accounting and disclosures, as well as a host of other equitable remedies. The most notable powers that the Court has are outlined in California Family Code §§ 1101(g) and (h), which sets forth remedies for breach of fiduciary duty by one spouse:
- Award to you of 50%, or an amount equal to 50%, of any asset undisclosed or transferred in breach of fiduciary duty, plus attorney’s fees and court costs.
- When the breach falls within the scope of Civil Code 3294 (your spouse is guilty of oppression, fraud or malice), your award is 100%, or an amount equal to 100%, of any asset undisclosed or transferred in the breach of the fiduciary duty.
Professional Help Uncovering Hidden Assets in Divorce
It is highly recommended that you have the assistance of an experienced family law lawyer and a good forensic accountant to assist you with this process. Do not do this yourself or you could tip off your spouse or miss important evidence. You should also consider the time and expense involved in this process.
Methods for Gathering Evidence
Some examples of the methods you can use to uncover hidden assets in divorce include:
The Lifestyle Audit
This refers to an evaluation of the other spouse’s lifestyle. A spouse will often say that he or she has no money, yet are living well beyond his or her stated means. This could mean that your spouse is living off gifts, pay advances or loans, perks, exchanging favors or bartering instead of receiving cash, or has agreements with third parties to otherwise support him or her during the divorce process and until things cool down. Some examples of the ways to prove this are witness testimony, description and a valuation of your spouse’s lifestyle, third party documents, and a comparative lifestyle analysis.
A Review of Tax Returns
A review of your spouse’s tax returns could yield helpful information. For example, if your spouse owns or is involved with a business or corporations, these entities are often a tool used to hide or shield income and assets for a divorce. Review the individual and business’ tax returns for indications such as losses, entertainment, depreciation, use of a company assets, disbursements to other employees (if shown), overpayment of taxes or bills to receive a refund, evidence of employee compensation, and interest and dividends.
The Lifestyle Analysis of Your Spouse’s Business Associates, Friends, and Family
An analysis of your spouse’s lifestyle compared to that of the people your spouse socializes with could be a good indicator of what kind of lifestyle your spouse is really leading or where your spouse is hiding money. Privacy laws could prevent you from conducting an in-depth analysis of other people’s records without good cause but if you can uncover evidence of concealment or collusion by a third party, the Court may make an exception and allow you to review third party financial records.
A Review of Your Spouse’s Accounts
Debits or disbursements from one account to another could be evidence of a hidden account in another bank or under your spouse’s or a third party’s name.
Public Records Check
This can be done for any individual or business entity.
A Review of Credit Accounts
A quick check for accounts opened in your spouse’s name or in his or her business interests and his or her credit reports could lead to helpful evidence.
Loan Applications
A review of personal or professional loan applications could lead to direct or what could be helpful evidence to present your case. People requesting loans are often more candid with banks than with their spouses. They want to look good so that the bank will approve their loan.
State and Local Records Searches
This could yield useful information about your spouse, individually, or their business interests.
Contact a Divorce Lawyer Today
If you are going through a divorce, contact attorney Rick D. Banks today
(559)222-4891. He can answer your questions regarding uncovering hidden assets in divorce, as well as address any other concerns you may have.
