Can I Hide Assets from My Spouse During Our Divorce?
Getting a divorce is never easy, and there are a number of important details that need to be resolved before the divorce can be finalized. Custody and child support are likely at the top of this list if you have children. However, whether you have children or not, your assets will need to be divided according to your state’s rules and how marital property is divided.
If you and your spouse are getting a divorce, and you have a considerable amount of cash or assets that you want to protect, you may be tempted to try to hide some of those assets from your spouse, particularly if you are going through a bitter and contentious divorce. While your feelings towards your spouse may be justified, hiding assets during a divorce is simply not worth the risk. If your attempts to hide assets are discovered, you could face serious legal consequences. A skilled divorce lawyer can assist you with every step of the divorce process and ensure that your financial assets are protected.
How Are Marital Assets Divided in New Jersey?
Depending on where you live, your marital property will be divided in one of two ways:
If you live in a community property state, all marital assets must be split 50-50 between you and your spouse, including any assets or property that was acquired by you or your spouse over the course of the marriage. However, any assets that you or your spouse owned before entering into the marriage will not be considered marital property, which means it will not be subject to the community property split, unless steps were taken to mix them in with the marital assets. Examples of assets that may be considered separate property include inheritances, gifts received during the marriage and money judgments from personal injury claims.
If you live in an equitable distribution state, the assets are divided equitably and fairly based on the unique circumstances of the marriage. New Jersey is an equitable distribution state, so you and your spouse are entitled to share half of your assets, although the exact percentage will depend on the details of your case. The courts will review your case and consider a range of factors, including how long you were married and each of your financial and domestic contributions to the marriage. The following are additional factors that will be considered when determining how to equitably distribute the marital assets:
- Standard of living established by the marriage.
- You and your spouse’s economic circumstances when the division of property becomes effective.
- If there are written agreements made by you or your spouse regarding the arrangement of property distribution.
- You and your spouse’s earning capacity, educational background, work experience, number of years away from the workforce, custodial responsibilities of the children and expenses associated with obtaining additional training or education in order to obtain a job that allows you to enjoy a standard of living comparable to the one you enjoyed pre-divorce.
- Present value of the property, and the tax consequences of the property distribution to you and your spouse.
- Any debts and liabilities you and your spouse may have.
- Any other factors that the court considers relevant.
How Are Assets Hidden During a Divorce?
During the divorce process, both spouses must submit a comprehensive list of assets to the court, including marital and separate property so that the estate can be divided fairly and equitably. If the divorce is somewhat amicable, the couple can usually negotiate a division of assets with guidance from a mediator or their separate attorneys. However, if the divorce is contested, one or both parties may attempt to hide assets from the other spouse.
There are a number of steps that spouses take to hide assets that they do not want their spouse to have access to, even if they are legally entitled to a percentage of the marital assets. For example, your spouse may conceal bank accounts, investments and other sources of income, jewelry, artwork or other valuable objects. Your spouse may also try to “gift” certain assets to a family member, with the understanding that the “gift” is returned once the divorce has been finalized. Other times, if your spouse is in a new relationship, he or she may use marital assets to pay for travel expenses, living expenses and other expenses, which will impact the assets that are subject to equitable distribution. The following are examples of other ways that spouses may try to conceal assets from their spouse during a divorce:
- Purchasing items that may be overlooked or undervalued. Examples can include deceptively expensive antiques, or stamp or art collections.
- Hiding cash or other valuables in a safe deposit box.
- Underreporting income on tax returns or other financial statements.
- Overpaying the IRS in an effort to get a refund after the divorce is final.
- Hiding income by deferring salary or holding commissions or bonuses so that his money is not “on the book” and subject to the equitable distribution of assets.
- Establishing phony loans, expenses and other debt, with the intention of collecting that money when the divorce is final.
- Transferring stock or investments.
- Creating a custodial account using a child’s social security number. If the spouse is in a new relationship, he or she may use the partner’s social security number, which will make it difficult to locate the account.
What Are the Most Common Signs that My Spouse is Hiding Assets?
Despite the fact that it is illegal to hide assets during a divorce, spouses may resort to a range of tricks and questionable behavior in order to prevent the other spouse from having access to income, property and other assets. The following are examples of common signs that your spouse may be trying to hide assets from you:
- You no longer receive bank and other financial statements in the mail.
- A sudden decrease in salary, which could indicate that your spouse is deferring a percentage of his or her salary, commissions or bonuses so that it is not subject to the equitable distribution of assets
- Intentional overpayments to the IRS or other creditors, which will lower his or her bottom line
- If your spouse owns his or her own business, he or she may pay employees that do not exist, or wait to sign a new client until after the divorce is final. Ultimately, the less the business is worth, the less you are eligible to receive in a settlement.
- Your spouse becomes defensive, secretive or controlling about money.
How Can Hidden Assets Be Discovered?
Whether you are concerned about your spouse hiding assets, or you have been accused of hiding assets, the discovery process is a formal, legal process that ensures that all of the necessary financial information and documentation is obtained from both parties. The process of securing this information may vary from state to state, but the discovery process generally includes the following steps:
- Request documents. Your divorce lawyer will obtain copies of tax returns, loan applications, financial statements and other documents from your spouse.
- Written questions that must be answered. These are called “interrogatories” or “requests for admission.” These questions must be answered in writing.
- Inspection demands. You may ask to inspect property that is of significant value that your spouse may be trying to hide. Examples include safe deposit boxes, wine collections and valuable art.
- Testimony given under oath. This is also known as an oral deposition. You, your spouse and your lawyers will appear before a court reporter, and your spouse will be sworn in and must answer all questions truthfully.
The discovery process will ensure that an uncooperative spouse complies with the rules of the court and provides the financial information that is required. If your spouse fails to do so, you can ask the judge to order your spouse to provide this information. If he or she continues to disobey the court order, the court may impose a sanction which can include steep fines and a judgment against your spouse.
What Are the Penalties for Hiding Assets?
If you are going through a particularly bitter divorce, and you are tempted to try to hide assets from your spouse, keep in mind that not only is it illegal, but it could impact your case in the following ways:
- Your divorce lawyer may resign from your case.
- You will likely lose credibility in the eyes of the judge and the court overseeing your case.
- You may be required to pay all of your spouse’s legal expenses.
- You could face steep fines, jail and/or imprisonment.
Somerville Divorce Lawyers at Lyons & Associates, P.C. Protect Client’s Assets During the Divorce Process
If you are concerned that your spouse may try to hide assets during your divorce, our knowledgeable Somerville divorce lawyers at Lyons & Associates, P.C. can help. To schedule a free consultation, call us today at 908-575-9777 or contact us online. With offices in Somerville and Morristown, New Jersey, we assist clients throughout Somerset, Woodbridge, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, and Morris Plains.