Whether you settle or go to trial, a divorce is a legal proceeding. That means that each party has a legal duty to honestly and fully disclose all information material to the case. That includes being honest about your assets and debts. Unfortunately, as many as a third of U.S. adults who have combined assets with a spouse or partner admit they have been dishonest about money.
All-too-often, that carries through to financial disclosures during a divorce. It’s all too common for a divorcing spouse to under-report income, overstate debts, inflate expenses or hide or undervalue marital property that the other spouse is not aware of. It occurs in all types of divorces, but it is especially pernicious in high-asset divorces.
Common examples of how marital assets are hidden include:
- Understating the amount received in tips, cash wages or payments
- Buying valuable personal items just before the divorce
- Understating the value of a business or professional practice
- Failing to mention some investments
- Pretending to pay off false debts to inflate expenses
- Claiming a higher rent or mortgage payment
- Transferring assets to friends or relatives before the divorce is final
Hiding assets in a divorce is illegal and can have major consequences
Regardless of whether you go through a court trial or negotiate a settlement, your divorce is ultimately put before a judge. When you sign your financial affidavit, you are swearing to the court that everything listed on that affidavit is accurate to the best of your knowledge.
In Michigan, getting caught hiding assets can have a number of negative consequences. For example, once a divorce decree is finalized, the parties typically have limited rights to reopen questions of fact. This changes if one party has evidence that the other party was not truthful. This is definitely true for up to a year, but in certain circumstances that timeline can be extended, or a non-divorce lawsuit can be filed.
Furthermore, if the spouse hiding assets is found to have acted egregiously, the courts may award the up to the entire amount in hidden assets to the innocent spouse instead of dividing the hidden asset equitably.
How are hidden assets discovered?
As you can imagine, secrets have a way of coming out in a variety of ways. However, experienced divorce attorneys play an important role in discovering hidden assets. If a potential for hidden assets exists, your divorce lawyer may examine public records such as deed transfers, audit financial statements and income tax returns and compare verified information to what was reported on your spouse’s financial affidavit.