Key takeaways
- You must disclose your assets during divorce.
- Concealing assets subjects you to penalties, whether the concealment is discovered during or after the divorce.
- The most common penalty for hiding assets in a divorce is awarding more assets to the other spouse.
Divorce can bring out the worst in some people. On top of all of the emotional tension and fighting that can occur, some spouses hide assets. Though this may be unintentional at times, other spouses purposely put money in secret accounts or waste money (a practice called dissipation), often by spending money on gambling or a mistress or destroying marital property.
If you suspect your spouse is being dishonest, you can fight back. Every state authorizes judges to impose a penalty for hiding assets in divorce. These penalties may include the non-hiding spouse receiving more of the hidden asset and the concealing spouse receiving fines or even jail time.
Below, we explore asset concealment during divorce in detail. We discuss how the court might penalize the concealing spouse and what happens if you discover the concealment after the divorce. We also explore how people might hide assets, how you can discover hidden assets and what assets each spouse is entitled to in a divorce.
What happens if a spouse hides assets in a divorce?
If you discover your spouse has hidden or dissipated assets during a divorce, what happens next depends on the circumstances. Hiding assets changes nothing about the underlying legal rights of each spouse but may affect how a court weighs who should get what.
What can you recover?
If your spouse has concealed or dissipated marital assets, you’re still entitled to your fair share. Specifically, you’re entitled to your part of those assets had they been properly disclosed and managed.
What penalties may the court impose?
The penalty for hiding assets in divorce depends on the circumstances. If one spouse inadvertently concealed assets, the court may simply evenly redistribute the assets according to state law.
But if the spouse deliberately concealed or dissipated assets, the court may penalize them. The court may award the non-concealing spouse more than it would have otherwise, absent improper conduct, even if the court officially divides assets 50/50. As a result, the concealing spouse may forfeit some or all of the concealed or dissipated assets.
For example, assume you and your spouse have $100,000 in marital assets. Your spouse hides $10,000 of that $100,000. Before discovering the concealed assets, a court awards each of you $45,000. After discovering the assets, the court may award you $6,000 and your spouse only $4,000 of the $10,000.
Along with redistributing assets in favor of the non-concealing spouse, the court may go further in egregious cases. In particular, where the concealing spouse lied to the court or on official forms, the court may hold them in contempt. Being found in contempt of court subjects you to potential fines and jail time, depending on the state.
Pro tip: If you know your spouse has lied to the court, you may draw attention to their lies on official forms. You may include an explanation of their lies as part of another motion, such as a motion to produce information during the discovery pre-trial phase. Or their lies may form the basis of a separate motion, such as moving for contempt or for compelled disclosure of concealed information. Either way, attempt to be as matter-of-fact and impartial as possible when discussing their lies. Using emotion-heavy language like “outrageous” or “shameless” may distract the judge from the valid point you’re making.
What if you discover the assets after the divorce is finalized?
If one spouse hides assets and the other doesn’t discover it before the divorce is finalized, they may think they’re off the hook. They’re not.
Generally, you may file a motion for the court to redistribute assets if you later discover your former spouse concealed or dissipated them during the divorce. The court typically redistributes assets according to what the non-concealing spouse should have received.
Pro tip: If you discover assets years after the divorce is finalized, the court may factor how much assets could have grown if invested into its award calculation. You may offer a proposal of how much growth you think is fair. Typically, the more thorough and well-supported your proposal, the more likely a court is to agree.
An exception to this rule may arise if the non-concealing spouse or their attorney should have discovered the hidden assets through reasonable diligence but didn’t. For example, if bank statements available to the non-concealing spouse during the divorce showed large withdrawals of cash made by the concealing spouse, that would generally be a red flag for an attorney to investigate possible dissipation. If the attorney disregarded that red flag and their client missed their opportunity to claim dissipation, the non-concealing spouse may have a legal claim—legal malpractice—against the attorney.
Pro tip: Determining whether an attorney committed legal malpractice typically requires consultation with another attorney. Many attorneys focus on malpractice and list it among their practice areas. You may find success hiring a malpractice-focused attorney even if they don’t also practice divorce law. However, finding an attorney or firm that takes both malpractice and divorce cases is usually ideal.
How do people hide assets?
There are more ways to hide assets than you might imagine, including through direct concealment, indirect concealment and dissipation. Even if you don’t intend to deprive your spouse of assets, limiting access to or removing marital property before divorce may cause a court to award your spouse proportionally more than it might have otherwise.
Direct and indirect concealment
One spouse may directly conceal assets by failing to disclose them, actively hiding them or some combination.
To deliberately hide assets, one spouse may:
- Temporarily transfer funds to a friend or family member
- Intercept communications about the assets to keep the other spouse from discovering them
- Tie up assets
- Place assets into a trust
- Convert assets into cryptocurrency
- Sell property before a divorce settlement is finalized
Pro tip: Some people may wonder, Can I empty my bank account before divorce? You can, but you should probably consider how the transfer would look from an outside perspective. If it may seem like you’re trying to hide your assets, you may have to justify your actions to a court.
In the most innocent case, one spouse may forget to disclose certain assets or assume the other spouse knows about them when they don’t.
Dissipation
Dissipation is a step removed from concealment, resulting from one spouse wasting or misusing assets. Dissipation may take many forms, such as:
- Buying gifts for an affair partner
- Gambling money away
- Making frivolous purchases
- Intentionally decreasing the value of assets
Generally, a court will only adjust its award based on dissipation that occurs during the breakdown of the marriage.
Pro tip: You may need to offer specific facts indicating the marriage was already breaking down during the dissipation, like one spouse discovering that the other was unfaithful or misused funds. Creating contemporary records detailing specific incidents often proves invaluable to establishing the timing of the marriage breakdown. Even if you didn’t write anything down before, consider writing out a marriage breakdown timeline as soon as possible. Generally, the closer to an event, the more reliable your memory is.
How do you find hidden assets?
Finding hidden assets may be as simple or complicated as hiding the assets. You may stumble upon hidden assets when you pick up the mail, or you may have to subpoena records through the court.
You may search for hidden assets on your own by:
- Speaking to your spouse
- Investigating accounts you have access to
- Cross-referencing what should be in accounts with what’s actually there
- Noting suspicious correspondences from financial institutions
Without the force of law, however, your investigation may be limited. Consider consulting a family lawyer experienced with tracking down hidden assets. Your lawyer can help you:
- Subpoena records
- Send interrogatories asking about assets on penalty of perjury
- Consult experts in securities and international law
A lawyer may also help you understand your rights, get and stay organized, and ease the pressure of investigating on your own.
What rights do spouses have to property during divorce?
Despite variations in state law, spouses generally have the right to an equitable (though not necessarily equal) share of all marital assets. Marital assets typically include all property acquired during the marriage, with limited exceptions such as inheritances. Separate property typically includes property you acquired before the marriage.
When you get divorced, you must generally disclose all your assets and debts. While your spouse is not entitled to a share of your separate assets, you still must disclose them.
How a lawyer may help
By law, your spouse must disclose their assets to you during a divorce. You have legal options if you suspect your spouse may be hiding assets.
Hiring a lawyer to help you identify and find assets offers you access to unique resources, legal guidance and practical direction.
- Your lawyer may help you determine where to look for assets and connect you with professionals experienced in tracking down assets in foreign countries.
- If you discover assets months or years later, your lawyer can help you request the court redistribute assets.
- And, if applicable, they may guide you through bringing a legal malpractice claim against the lawyer who represented you in your divorce.
