Recognizing Strategies Spouses Use to Hide Assets: Part One

Divorce has been around for a long time. The all-too-human passions of greed, fear, and self-preservation have existed even longer. Part of the turmoil of divorce is emotional, but a large part is also, understandably, due to financial fear and strain. In the best of cases, a divorce will likely mean a change in the way you live. In more drastic cases, one or both spouses may have genuine concern over how they can move through and beyond the divorce and remain financially secure.

In the face of fear and the real financial implications that divorce can cause, sometimes people fudge the truth and hide assets in a divorce.. While it might be understandable that people react in fear, it is never an excuse for improper – and, at times, even criminal-level – behavior. If you are facing the prospect of your own divorce, you can take advantage of the lessons learned from other couples who have gone through this before. Over the years, divorce attorneys and forensic accountants have encountered many methods that people use in order to attempt to hide assets. Paying attention to the items below could help you assess whether there might be something you need to look into more closely in your own circumstances.

Common Strategies for Hiding Assets

• Hiding marital property:
  This is a broad statement and covers a vast number of things that people might do. A person could attempt to hide marital property by storing an asset at a different location in an attempt to hide it, claim it is lost, or try to bank on their spouse not knowing or remembering that it exists. Spouses could take out a bank deposit box and begin placing cash or other items there, etc.
• Understating property value:
  Think of all that goes into the value of an asset or property. For example, a rental property in California can be very valuable. However, the value of the property will be somewhat dependent on the condition of the property. If a person allows it to fall into disrepair, this will obviously lower its value. If the property is purposefully allowed to sit vacant, then the rental income the property generates will also appear to be lower although the true value of the property and its potential for profit is actually higher than it may otherwise appear.
• Reporting higher expenses than actually incurred
  Did one spouse really need to purchase all-new appliances for their catering business right before the divorce? Did they have to purchase top-of-the-line items? DID they spend as much as they claim on these items? Does the company intend to actually keep and use the items purchased? These are dubious strategies which have been used by divorcing couples in the past.
• Making suspicious loans to friends and family
  It is not uncommon for a spouse attempting to hide money in a divorce to make a fake loan to a friend or family member. The spouse may attempt to place cash outside of the spouse’s hands during the divorce, with the full expectation of the money being returned to them once the divorce is finalized. Unfortunately, when this tactic is discovered, the consequences can be devastating to an absconding spouse.

Dire Consequences for Hiding Assets

• California law considers hiding assets as a “breach of fiduciary duty” to the other spouse. The penalties can be severe and could include requiring the offending spouse to provide a detailed (and sometimes expensive) accounting, a change in title of discovered assets, and/or an award of 50% of the asset to the aggrieved spouse plus attorney’s fees.
• In extreme situations, where one spouse can prove the offending spouse acted with “malice, oppression or fraud” in hiding assets, in some situations, a court may award 100% of the concealed asset or assets to the aggrieved spouse and mandatory attorney’s fees.
• Criminal consequences are also possible, depending on the circumstances.

Contact Cardwell, Steigerwald Young

Our experienced San Francisco divorce lawyers are standing by to assist in your divorce. Contact Cardwell Steigerwald Young LLP today to see how our team can get to work for you.

Sources

forbes.com/sites/jefflanders/2012/11/14/what-are-the-consequences-of-hiding-assets-during-divorce/?sh=f2d3d34190cd

theguardian.com/money/2022/apr/11/financial-infidelity-can-hurt-more-than-affair-anxiety-distrust

leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=FAM&sectionNum=1100.

leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=FAM&sectionNum=1101.

leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=FAM&sectionNum=721.

leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=3294.&lawCode=CIV