For many couples, the termination of a marriage can be a difficult and contentious time. It may be tempting for a spouse to try to hide finances and assets from the court and their soon-to-be former partner if they are upset or believe they deserve a larger portion of the marital income and property. This is particularly true in jurisdictions that have community property laws, such as California.
The best course of action in this case is to hire an experienced attorney who can help you determine your assets and guide you on where to seek if you suspect your spouse is hiding assets. This is particularly beneficial if you did not play an active financial role during your marriage. This article offers guidance for dealing with a spouse who is hiding assets during a divorce.
Property Division Under California Law
Regardless of who earned it or how it was earned, California law mandates that all income generated and debts incurred during the marriage be divided equally, regardless of the disparity in earnings between spouses. In the eyes of the law, a marriage is viewed as a commercial agreement where both partners share equally in the division of property at the end of the partnership.
The assets that fall under this category are as follows:
- Income generated from commercial endeavors.
- Salaries.
- Lottery winnings.
- Profits from investments.
- Anything acquired throughout the marriage using money earned.
Many spouses have developed strong resentment towards the requirement of equal division of assets accumulated during the marriage. This has led to retaliatory and secretive actions, such as lying or concealing assets.
Items Classified as Community Property
Certain possessions and revenue streams are not considered common property. Even if an asset was obtained during the marriage, the spouse who acquired it or earned the income at the time of the divorce is the only one with rights to any assets and income that the court classifies as separate property.
Included in this, but not limited to, are:
- Property that belonged to one partner before marriage is referred to as separate property.
- Property obtained upon the couple's final separation.
- Gifts or inheritances given to one spouse, either before or after marriage.
- Gifts exchanged between spouses.
- Property obtained with separate funds and under the name of one spouse.
- Prenuptial agreements specify the assets and income that the couple has agreed to keep separate.
- Any income or rental revenue derived from the independent property of a single spouse.
On the other hand, the burden of proof lies with the spouse who asserts that the property is separate. Depending on the nature and application of the feature, the techniques for demonstrating its separateness can become quite complex.
To avoid complications later in the process, it’s advisable to consult your attorney or a qualified specialist as soon as possible during your divorce proceedings regarding any property that you or your spouse believe to be separate but are uncertain about.
What to Do If You Believe Your Spouse Is Hiding Property
It’s advisable to gather all your documents, including a comprehensive list of your assets and liabilities, before initiating any divorce procedure. This will assist both you and your attorney in identifying any missing assets and determining the value of the assets you are already aware of. Additionally, it will facilitate the filing of your financial disclosure report.
Among the documents you will require are:
- Available pay stubs.
- A list detailing the career history of you and your spouse together.
- An inventory of all known resources and obligations should be conducted.
- A list of all revenue and cash flow sources.
- Any inheritances or gifts that you or your partner received while you were married.
- Details about every item of property that you and your spouse own.
- Every tax return from the past.
- Brokerage account statements.
- Statements from banks.
- Cancelled checks.
- Statements from credit cards.
- Loan applications, including any private financial statements initially filed by your spouse to obtain a loan.
Obtaining your financial records is important, but it is also crucial to investigate any questionable behavior on your spouse's part. Some recommendations for items to be aware of are as follows:
Changes to Spending
Any changes to regular spending patterns, especially if there have been significant increases or decreases, including variations in the amount or payment made towards bills.
Where Bills Go
Ensure you know the destination of your bills. It may be necessary to confirm their delivery, especially if you or your spouse no longer receive credit card bills at your residence. This also applies to other statements and bills, such as those from bank accounts, investment accounts, auto payments, retirement accounts, and more.
Examine the Cancelled Checks
Carefully assess all of your canceled checks to see if there have been any changes in your spending patterns or any unusual transactions that you may have made. If you don't usually receive copies of your canceled checks, you can request them from your bank. In case you don't write checks, it's advisable to review your bank statements and take note of any significant cash withdrawals or any patterns of smaller, more frequent withdrawals.
Seek Out Slow Drains
Take note of any gradual decrease in the amount of money in your accounts. It is not uncommon for spouses to slowly drain funds from accounts over an extended period.
Track Account Activity
Monitor the movement of your funds and accounts throughout your marriage, paying close attention to any patterns or deviations from those patterns.
Observe a Shift in Behavior
Make sure to take note of any unusual changes in your partner's behavior, such as a sudden increase in control or secrecy regarding bank accounts and other expenses.
Type of Assets and Property to Look For
If you suspect that your spouse is hiding assets or finances, it is important to carefully examine any assets and property that could be considered marital property. Marital property generally includes anything acquired during the marriage that has not been designated as separate property. To ensure your financial security, it is crucial to be vigilant about how you use your marital finances for purchases. This situation may necessitate additional investigation.
It is important to be aware that any property acquired during a marriage, except for separate property, is still considered community property. This holds even if one spouse purchased or owned the property solely in their name or is unaware of its existence.
Common Types Of Marital Assets
The assets acquired during a marriage can amount to a significant sum. However, many couples are unsure about what constitutes a marital asset. It is not uncommon for couples in various marriages to accumulate and develop complex and diverse financial portfolios.
In a typical marriage, the following can be considered assets:
- House.
- Vacation property.
- Revenue from a business.
- Life insurance.
- Several other kinds of financial assets.
Furthermore, assets and inheritances that were previously considered separate property can merge with marital property and become community property. In the absence of a pre-marital agreement, if a marriage ends, the court typically distributes all assets and debts equally between the parties. While preparing a financial statement for your divorce and providing your lawyer with a general idea of your financial situation, it is important to consider some typical marital assets.
These may include:
- Any money you or your spouse receive from your business.
- Any equity that has grown in the house, regardless of the amount.
- Earnings from pension funds.
- Interest received from financial investments or bank accounts.
- Any purchases made using money received during the marriage, regardless of whether the title bears the name of the buyer or not.
- Vehicles that you or your partner owns.
- Anything acquired while the couple was married.
- Investments such as stocks, bonds, and artwork.
- Expensive antiques or jewelry.
To maximize your financial outcome, it is crucial to provide an accurate representation of your marital estate to the court and your counsel. Additionally, your lawyer needs to have access to all potential marital assets to help uncover any hidden assets your spouse may have.
Careful Discovery Is Essential To Uncover Concealed Assets
The most suitable approach to determine whether your spouse is hiding assets during your divorce is to be well-informed about all your assets and responsibilities throughout the marriage. However, if you're like the majority of people, you probably didn't plan on getting a divorce, so you might not have paid close attention to your finances during the marriage. Assistance is still available in this situation.
A marital relationship is regarded as a private bond according to California law, necessitating the utmost standards of fairness and good faith. Consequently, under California law, both spouses are obligated to disclose their assets and provide equal access to all financial records in the event of a divorce.
Utilizing the comprehensive discovery tools available to divorcing couples is one of the most effective methods to ensure that your spouse fully shares all relevant financial information.
Does A California Divorce Require The Disclosure Of Bank Statements?
Under California law, each spouse is required to submit a comprehensive financial disclosure report at the start of the divorce process. This report encompasses the disclosure of bank statements and other assets. It is important to note that throughout the divorce proceedings, it remains the ongoing responsibility of each spouse to disclose any significant changes to their assets and liabilities. California places great importance on the duty of disclosure and imposes severe penalties for providing false information to the court.
The disclosure report requires the following information:
- Full disclosure of all obligations.
- All assets are disclosed.
- Full disclosure of all relevant financial information.
California law requires both preliminary and final disclosures. In preparation for a divorce, it is the responsibility of each spouse to create a thorough and accurate financial account of all their assets and liabilities.
Common Techniques Used By Spouses To Hide Assets
Lawyers and forensic accountants have observed several typical strategies used by spouses to conceal assets over the years. Some of the most popular techniques include:
- Overstating financial obligations.
- Hiding marital property can take various forms, including diverting payroll checks to a postal address instead of the shared residence, securing loans solely in one's name, storing assets elsewhere, or depositing money in bank safe deposit boxes.
- Undervaluing or understating the value of marriage property can be achieved by allowing investment properties, like rental flats, to deteriorate or remain unoccupied for an extended period.
- Declaring a lower income than what one has earned.
- Reporting inflated costs compared to actual expenses, especially in cases where family or personal matters are at stake.
- Concealed billing statements.
- When it comes to transferring assets to a different account, the typical process involves moving funds from the family checking account to a personal account that is exclusively accessible by the spouse in question.
- Couples who are trying to hide assets during a divorce frequently use false loans to friends or family. They may provide a fictitious loan to a friend or relative, to be reimbursed once the divorce is finalized.
- Overpaying tax bills is a common strategy where one spouse deliberately overpays the IRS. After the divorce is finalized, they then claim a refund the following year and keep the entire amount for themselves. It is important to thoroughly review your spouse's tax returns to ensure transparency and accuracy.
- Using a credit or debit card to withdraw cash.
- False expense reporting frequently occurs when one spouse runs a business. In such cases, the spouse may fabricate expenses to manipulate the true value of the company or create the illusion of greater debt than what exists.
- Spouses often spend a significant amount of money on expensive gifts such as artwork and antiques, hoping that their value will be overlooked or downplayed in the event of a divorce.
- Postponing bonuses, commissions, or salaries can significantly affect divorce settlements. Income that is deferred until after the divorce is typically not considered in the settlement. In some cases, spouses may opt to withhold their income claims or ask their employers to postpone payments, stock options, or salary increases until after the divorce proceedings are completed.
- Protect your child's identity: A spouse may try to open a fraudulent account using your child's social security number and transfer funds from the marriage into it. It is crucial to conduct a thorough investigation of any bank or credit accounts opened in your children's names, especially if they are too young to have access to their social security numbers.
- Ensure you review your finances and company accounts for any instances of money, stocks, or investments being paid out or transferred to your spouse's friends or family. Be cautious of any attempts to transfer money, stocks, or investments into family members' accounts. It is not uncommon for spouses to give money or valuable assets to friends and family with the expectation of reclaiming them after a divorce. Additionally, there are various methods through which this kind of asset concealment may occur, including payments for services that were never rendered, personal loans, or even the repayment of a fabricated debt.
- Expensive purchases made for or under the name of your partner: It's a good idea to keep an eye on bank statements, financial statements, and other receipts for large-ticket expenditures, as well as any significant amounts of money that might be missing from your joint accounts.
- When it comes to hiding cash, it is important to note that during the discovery process, you can generally question your spouse about the contents of personal safes or safe deposit boxes. However, it is crucial to keep in mind that the safe may belong to a friend or relative instead of yourself.
Under California law, it is illegal for one spouse to sell or give away any marital property without the signed approval of the other spouse. Therefore, if your spouse has sold marital property below its market value intending to repurchase it later, they may be in breach of California law. This action could also be seen as an attempt to conceal assets.
Find a Professional Divorce Attorney Near Me
The National Endowment for Financial Education has reported a surprising statistic. Nearly 58% of couples admit to hiding money from their spouses, and over one-third of spouses confess to lying about money. This revelation may come as a shock to many. Unfortunately, a significant number of couples are unaware of the true value of their shared assets and would not even realize if money or assets went missing. It is crucial to remain vigilant and conscientious about your financial situation, especially if you suspect that your husband may be hiding something.
Our attorneys at San Diego Divorce Attorney are skilled at advocating for the rights of our clients. During the discovery process, we will closely collaborate with financial accountants and professionals to uncover any hidden assets that your spouse may be concealing. We are here to provide you with the much-needed support and legal guidance you require at every stage of the divorce process. Call us now at 858-529-5150.
