During a divorce, both parties are required to be open and transparent about their finances. Unfortunately, some spouses use the opportunity to try and conceal assets in hopes of keeping them after a divorce. If you have concerns about your soon-to-be ex trying to deceive the courts during your divorce, you may be wondering, “What are hidden assets in a divorce in California?” These are some of the more common forms of hidden assets that are seen in divorce cases.
Undisclosed Bank Accounts
One telltale sign that your spouse is using an undisclosed bank account is if you receive unexpected bank notices from a bank you are not familiar with. Or you may find that your house stops receiving bank notices. A more sophisticated attempt to hide assets could involve opening an offshore account. Moving money to an undisclosed bank account can allow one party to conceal marital funds, but those actions could ultimately backfire if they are caught.
Transferring Money to Friends of Relatives
Your spouse may ask trusted friends or relatives to hold on to assets. They may say they are repaying a debt, but this is a common tactic used to create the illusion of a legitimate expenditure. In these cases, there is often an agreement that the relative or friend returns the funds following a divorce.
Underreporting Business Income
If your spouse is self-employed, they may substantially underreport their business income to make it appear that they are in financial straits. This tactic could also reduce the income that can be used to calculate spousal support or child support. In some cases, they may even underreport their income on tax returns to “prove” that they had a lackluster year financially.
Overpaying Taxes
By overpaying taxes, your spouse could effectively be preparing for a large tax return after the divorce. This is one tactic that is commonly used to conceal money that should be included in the marital estate. Fortunately, reviewing tax records can reveal those tactics.
Hiding Cash or Valuables
Spouses sometimes withdraw cash and store it in safes or safety deposit boxes. If they were planning to stow away assets in case of a divorce, they may have done this months or even years before the divorce, which can make locating these hidden assets difficult. Other types of assets that can be easily hidden include jewelry, art, or collectibles.
Failing to Report Stock Options of Bonuses
High-earning individuals often receive compensation through stock options. If they do not disclose these assets, that could constitute an example of deceiving the court. They may also have the option of voluntarily delaying bonuses until after a divorce. These tactics effectively prevent important financial assets from being included in the marital estate.
Purchasing Assets in Another Person’s Name
When one spouse purchases a car, real estate, or valuable items under someone else’s name, this can allow them to buy assets without detection. It would appear that the asset was owned under someone else’s name, but the original purchaser would retain control over those valuable assets.
Using Offshore or Shell Companies
Wealthy individuals may move funds into offshore accounts or establish shell companies to hold assets. These businesses serve no real purpose other than disguising ownership, making it difficult to trace hidden wealth during the divorce process. Offshore accounts often exist in jurisdictions with strict privacy laws, making it harder to subpoena financial records.
Some spouses transfer ownership of properties or businesses to these entities, falsely claiming they no longer own them. Uncovering these tactics typically requires forensic accounting, international asset tracing, and court-ordered financial disclosures.
FAQs
Q: What Assets Cannot Be Divided in a California Divorce?
A: In California, separate property is generally not divided in a divorce. This includes assets acquired before marriage, inheritances or gifts received individually during the marriage, and assets protected by a valid prenuptial or postnuptial agreement. However, if separate assets are mixed with marital funds, they may become subject to division.
Q: Does Hiding Assets Lead to Consequences?
A: Yes. The courts consider hiding assets to be a serious offense, and they often act swiftly to discipline the party that engaged in the deception. A judge has the discretion to award the hidden assets to the deceived spouse if they request that remedy. There may be disciplinary action taken against the party that hid assets, such as fines or being found in contempt of court.
Q: Which Assets Are Protected From Division in a Divorce?
A: Separate property is protected from division in a California divorce. This includes assets acquired before marriage, inheritances, gifts, personal injury settlements (excluding compensation for lost wages), and property designated as separate in a valid prenuptial or postnuptial agreement. Keeping these assets separate from marital funds helps maintain their protected status.
Q: Is My Spouse Entitled to Half of My 401(k) in a California Divorce?
A: Yes, but only the portion earned during the marriage. California follows community property laws, meaning retirement funds accrued during marriage are split equally. Any contributions made to the 401(k) before marriage are considered separate property. A Qualified Domestic Relations Order (QDRO) is typically required to divide a 401(k) without tax penalties.
Q: How Can I Prove That My Spouse Is Hiding Assets?
A: Signs of hidden assets include sudden financial changes, undisclosed accounts, or suspicious business dealings. To uncover them, review bank statements, tax returns, business records, and credit reports. If you suspect your spouse is concealing assets, a forensic accountant or divorce attorney can help trace hidden funds and request court orders for financial disclosures.
Schedule Your Hidden Asset Divorce Consultation Today
If you believe that your spouse is hiding assets during property division, you have the right to get to the truth by working with a family law firm that understands how to investigate these serious allegations. The Dorie A. Rogers, APC can represent you during your divorce to ensure that your spouse does not get away with hiding anything from the court.
We understand the options available to confirm whether or not your spouse is being open and honest about their finances. Trust us to get to the bottom of it and to demand disciplinary action if warranted. Contact our office today to schedule your consultation.
