When couples divorce, their marital property is split between them. If the couple lives in a community property state, such as California or Wisconsin, their assets are divided equally; each party receives half. If they live in an equitable distribution state, such as New York or Virginia, their assets are divided in a way that is deemed to be fair. One party may receive a greater portion than the other depending on the circumstances.
Many spouses try to hide assets from their partners as divorce looms. Some do so in order to keep items they feel are rightfully theirs (e.g. a family heirloom). Others do it in an attempt to hold onto as much of the marital property as possible, even if their spouses have a right to some of it.
The article below will discuss where to look for hidden assets. While there are numerous ways in which your spouse could conceivably hide them, the tactics mentioned below are among the most common.
Are You The “In-Spouse” Or The “Out-Spouse?”
The term “in-spouse” refers to the party who controls the information in a marriage. This person is usually (though not always) the husband. He controls the cash flow, handles the couple’s investments, and has a clear grasp of the couple’s financial standing.
The term “out-spouse” refers to the party who has little knowledge about the couple’s financial picture. She doesn’t know where her husband is funneling cash each month, nor for what purposes. She is essentially in the dark about such matters.
Finding hidden assets is particularly difficult for an out-spouse. She may not know where to start her search. In such cases, consulting an experienced divorce attorney can prove invaluable.
Look Through The Previous Year’s Tax Documents
Reviewing tax documents is likely to be a daunting task, even if you were the one who prepared the previous year’s return. Most people prepare and file their taxes in a rush, and promptly forget about them once the filing deadline has passed. Going back through them is not easy, nor pleasant. If your spouse prepared last year’s return, the prospect of scrutinizing it is going to be even less appealing.
But past tax documents can provide helpful clues with regard to hidden assets. For example, some divorcing spouses hide money by deliberately overpaying the year’s tax bill. When the IRS receives an overpayment, it issues a refund. But the refund often takes several weeks to arrive, by which point the divorce has already been finalized. The party who overpaid the tax bill then keeps the refund, and his spouse is none the wiser.
If you didn’t have a hand in filing taxes during your marriage, it’s a good idea to consult an accountant. An experienced tax accountant will be able to identify areas that suggest fiscal mischief.
Investigate Where Your Spouse Has Moved Cash
Oftentimes, reviewing the flow of cash as it moves in and out of bank accounts can reveal evidence that one spouse has been hiding money or concealing its use. You already have access to statements for jointly-held checking and savings accounts. Gather them together and order copies of cancelled checks. Expand your search by obtaining copies of statements for any other accounts on which your spouse is listed. That includes trusts, investment accounts, and even retirement accounts.
Look through the statements and note large movements of cash. For example, were large purchases made at department stores? If so, your spouse may have spent the money on expensive gifts for another individual. Were large distributions made from a retirement account without your knowledge? Did your spouse write checks for significant sums to his or her family members? Are there strange transfers of cash between unrelated accounts?
The above incidents – as well as many others – suggest that your marital property is being used in inappropriate ways. They might also indicate that your spouse is actively trying to hide money from you.
Finding hidden assets is challenging for anyone going through divorce. For those who have had little control over their household finances, the challenge may seem overwhelming. If you suspect your spouse is hiding property, inform your divorce attorney. He or she can investigate the matter closely and provide practical advice for unearthing assets to which you have a rightful claim.