Do you think your spouse has been acting cagey since the two of you have been considering divorce? California is a community property state, which means with some exceptions such as inheritances, income earned, and assets accumulated during the marriage are split evenly in the event of divorce. It is irrelevant that one spouse may greatly out-earn the other. This motivates some to hide assets and income, especially if they are expecting a divorce. If you suspect your spouse is hiding assets, there’s a good chance you’re right.
How Spouses Can Hide Assets
There are endless ways that a spouse can hide assets. Here are just a few of them:
- Opening a separate bank account so they have a place to stash cash. Online bank accounts typically don’t send any paper to the house, and many brick and mortar banks offer a paperless option. Some spouses even open offshore accounts.
- Direct depositing some of their paycheck to a separate bank account. Sometimes a person does not tell their partner about a raise or a bonus, and they keep the cash separate.
- Filing taxes separately, increasing their tax withholding and putting the money returned into a separate bank account.
- Asking for cashback every time they make a credit card purchase.
- Renting a safety deposit box. Nobody knows what’s in the box but them. Not even the bank knows.
- Setting up a trust or just giving the money to a trusted person who will return it. They may also transfer stocks and investments to a friend or family member.
- Just spending a lot of money so their partner doesn’t get it. In some cases, they might spend money on setting up a new life with a new partner before the divorce.
- “Paying” salaries to non-existent employees if they have a business.
- Creating fake expenses to devalue their business.
- Deferring bonuses and commissions until after the divorce.
- Buying expensive items such as art or antiques in the hope they will be undervalued in the divorce.
What Can I Do to Find Out If My Spouse is Hiding Income or Assets?
If you are considering divorce and suspect your spouse is hiding assets, you will need an experienced California divorce attorney to review your financials and discuss them with you. However, there are many things you can do to both prevent and determine if your spouse is hiding income or assets. Here are some of the actions you can take:
- Do not let your spouse handle all the finances in your marriage. You are setting yourself up to be cheated in a divorce if you do. You need to understand where all the money and assets are going at all times as well as have an understanding of your debt and financial liabilities.
- Pull together a list of all your assets and liabilities and documentation related to each, if you have them, so you and your attorney have a place to start. You will need to do this anyway for your own financial disclosure report that you must submit to the court. This list of financials can include pay stubs, employment history for the two of you, information about property the two of you own, tax returns, bank statements, brokerage statements, credit card statements, mortgage-related documents, loans, etc.
- As you are going through your financial documents, note any changes in spending.
- Check if any of your bills are being sent somewhere other than your house.
- Check your canceled checks and bank statements for anything unusual.
- Look for slow decreases in any of your accounts. Sometimes a spouse will withdraw small amounts over time hoping it will not be noticed. This adds up.
- Check stock certificates and property titles.
- If you do not know where all your financial records are, look for them if your spouse is not forthcoming.
- Look for an unusual pattern of new purchases.
- Review credit reports.
Your California Divorce Lawyer Knows How to Find More Hidden Assets
The discovery process is a formal, legal process your attorney can use to get information, evidence, and documentation from your spouse which can assist you in determining whether they are in fact hiding any assets. There are several methods including, Depositions, Demand for Production of Documents, Demand for Inspection, Subpoenas, Special Interrogatories, Form Interrogatories, Request for Admissions.
The parties are expected to work with each other in this process and Court intervention is allowed only after they have made attempts to resolve disputes involving discovery. However, a party may be subjected to sanctions, terminating sanctions, and attorney’s fees for misuse of the discovery process.
If your attorney thinks your spouse may be hiding assets, they may recommend calling in a divorce forensic accountant to analyze finances obtained through the discovery process, prepare a report in that regard for your attorney to use, and submit to the court and even testify before the court. Forensic accountants often testify in divorce cases where financial situations are complex or where the parties own a business that needs to be evaluated or requires tracing of financials.
What Happens if a Spouse Is Caught Hiding Assets?
One of the most important aspects of a divorce is the division of property. Parties can agree to an equitable division of property or the California divorce court can go through a list of income and assets and determine what is community property, what is separate property, and how community property should be divided. But when one partner is hiding income or assets, it is impossible for the court to equitably divide property under California law, which is why having an experienced family law attorney on your side is important.
When a couple of divorces, each must file financial disclosures regarding their finances, income, and assets. They must also reveal their debts and liabilities. Each party is statutorily required to provide disclosures to the other party, often referred to as Preliminary Declaration of Disclosures. The parties must also share financials towards the end of the proceedings by filing and serving their Final Declarations of Disclosures. Although the service and filing of the Final Declarations of Disclosures may be waived mutually by the parties, the Preliminary Declaration of Disclosures may not be waived. In fact, one may not obtain a judgment of divorce in the state of California without having properly prepared and served their Preliminary Declaration of Disclosures on the other party.
When a spouse attempts to hide assets, they are usually found out. This is a serious matter that may result in both criminal and civil penalties.
Then there is the matter of the divorce proceeding itself. Keep in mind that family judges have a great deal of flexibility and discretion. It’s not a good thing to incite the wrath of your family judge who has a lot of latitude in determining spousal support, child visitation, child support, and division of property. The offender may also end up paying their spouse’s legal fees and costs as well as punitive damages. Certainly, the offender will likely be ordered to pay costs their spouse incurred to discover the wrongdoing.
Call Ghazi Law Group for a Free Consultation
If you have a suspicion that your spouse may be hiding income or assets in preparation for your divorce, immediately call the experienced California divorce lawyers at Ghazi Law Group. Contact us at (818) 839-6644 or email us at firstname.lastname@example.org to schedule a free consultation. We are located in Sherman Oaks, California, close to Encino, Woodland Hills, Studio City, and other areas of Los Angeles County.