How to Find Hidden Assets in a Divorce

In Arizona, mandatory disclosures require both spouses to disclose all assets including property, bank accounts, securities (like stocks), business interests, coin collections, etc. In reality, if a spouse is hiding money, how are you to know, and where should you look to find it?

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This blog is designed to help you recognize red flags that your spouse may be hiding money. The first question I ask a client is how involved in family finances were you? Did the bank statements come to the house? Do you have the passwords to the various accounts? Other useful questions include:

Do you have a gun safe or floor safe and do you have the combination? Do you know what your taxable income is each year or do you simply sign the returns?

If your spouse is a business owner it becomes both more likely and more difficult to determine if they are hiding money. A business owner can “hide” money by taking advantage of all of the available tax minimizing strategies. For instance, there is nothing illegal about “paying your children,” running cell phones through the business, writing off certain mileage or even vacations. The point is, you cannot simply take the taxable income as the income that should be considered when a couple is divorcing.

Unfortunately, when there is infidelity in a marriage, we are more likely to also find hidden assets. Relationships cost money. If your spouse has been carrying on a secret affair, it is likely we will be able to find hidden or wasted marital funds. Normally, all expenditures during a marriage are community expenditures and regardless of whether or not the two of you agreed, they will be considered community debt or expenditures that rightfully reduced the marital estate. The exception is marital waste. When one spouse is spending significant money on gambling, affairs or prostitutes, you may have a claim for marital waste. In this case, you will be “credited” your portion of the expenditure during the equitable distribution of your property.

Other things to consider include whether or not your spouse travels often for work. If they do, and if they spend extended periods of time away, they may have a bank account located where they travel. If they travel overseas, we should definitely be considering whether or not they may have off shore accounts, that would be subject to division. Other ways to hide money include pre-paying your taxes, contributing to a cafeteria plan account, prepaying credit cards etc.

If you suspect your spouse may be hiding money, you do have options. We can look into forensic accounting or hiring a private investigator. Assets may be hiding in plain site simply by knowing where to look on a tax return.

For other questions, do not hesitate to give us a call for a consultation.