What are Hidden Assets?
Full transparency when entering into a divorce is a must. Sometimes, people will try to hide or misrepresent assets to avoid sharing them with their partner after the divorce. Although this is likely more common than you think, it creates several issues for both parties.
As an example, one spouse may misrepresent their assets by understating the value of one of their assets or hide the asset entirely by not disclosing it. If it’s not accurately reported, the spouse may not have access to half of that asset’s value when the divorce is finalized.
Examples of Hidden Assets
One of the more common ways that people try to hide assets is through their business if they own or operate one. By not reporting accurate revenue or expenses, they can manipulate the balance sheet and report far less than what they are actually taking in from their business.
A spouse may try to overpay expenses to show less operating income, or they may even place some of their personal assets in the name of the business in an attempt to keep them from being marital property.
Some may choose to create a trust and fund it with assets, thereby removing the asset’s value from their personal estate. This option will likely fail because it can easily be researched and determine whether or not the assets within the trust came during the marriage and, therefore, are eligible for equitable distribution between the couple.
How Can I Detect if My Spouse is Hiding Assets?
It’s not uncommon to lose trust in your partner during the divorce or before, which may have been part of the decision to dissolve the marriage. How can you be sure that your spouse isn’t hiding assets? You can watch out for a few things to help protect yourself.
Did your spouse suddenly borrow money from a family member or friend? They may have said this rather than choose to disclose that the money is theirs and, therefore, should be disclosed. If borrowing money in the past wasn’t expected, and suddenly, it’s happening, you may want to dig deeper into the funds.
Have you noticed a decrease in the mail that you are getting? Specifically, statements from the bank or retirement accounts, loans, and more? Your spouse may have stopped statements from arriving in the mail and had them routed through email only, so they are the only ones with the latest account balance information.
Other Elements to Further Research to Protect Yourself
A sudden decrease in income may mean that your partner is diverting income to another location in an attempt to hide the asset. This decrease can easily be detected by checking back several months to determine what an average monthly income is and if it has changed. If there isn’t a viable reason as to why the income has decreased, it may mean they are being dishonest.
Defensive responses – if your spouse is typically laid back when it comes to discussing finances and is suddenly defensive, this may be an indication that they are hiding something. You usually know them better than anyone else, so if you see something that is out of character, it may be time to look into it further.
Business expenses – some spouses will start making unnecessary business purchases or spending more within the business to change the bottom line on their balance sheet and protect some of the business income. If there are suddenly more employees, larger payouts to the IRS, or other significant expenses, these are things to watch for.
How Can I Ensure I’m Not Hiding Assets?
If you are worried that you may be accused of hiding assets, there are a few ways you can protect yourself from unwarranted prying or research into your financials. Be transparent with your partner and show them all financially related information within your family, such as bank statements, previous tax returns, retirement account statements, any debt you have incurred, updated balances, and more. If you are providing more information than you are being asked for, it can help to assure your partner that you are not hiding anything.
Follow General Account Principles in all business-related accounting. If you haven’t always done this and are now starting to follow it more closely, explain it to your partner, as your business financials may look different than they used to.
Just as an indicator to you may be if your partner is defensive, it’s essential not to be defensive when they ask you financial questions as well. If you are open and honest, there is no reason for them to continue digging into your background.
A Hard Decision
Coming to the conclusion that it’s time for a divorce is seldom easy. It doesn’t have to be overwhelming, however. You can’t control what others choose to do. Still, you can be transparent and prompt with supplying financial information to your spouse to avoid them digging into your information, and you can protect yourself by being aware of changes that may be occurring and when to do some further research to protect your financial future.
By working with an experienced attorney, you can bolster your efforts, rely on a legal professional’s opinion and guidance, and have them as your strongest advocate throughout the process. Someone who specifically has your best interest at heart during a divorce is invaluable.
Contact our office today at (864) 689-4482 to schedule your strategy session and learn more about the best steps to take next during this chapter of your life.