What if My Spouse is Hiding Assets During our Divorce?
Sometimes spouses fear that their spouse will hide assets while a divorce is pending. There are multiple ways that Connecticut addresses this during the divorce — the first by preventing it from happening in the first place via the automatic orders, the second by requiring disclosure on the financial affidavits, and the third by providing a way to reveal any hidden assets via the discovery process.
Read on to learn more.
Automatic Orders & Hidden Assets
We refer to the court orders go into effect automatically at the beginning of a divorce, legal separation, custody, or visitation action as the “automatic orders.” The automatic orders prevent both parties from selling, hiding, or transferring any marital assets without written permission from the other spouse or until a court order is established.
How the Automatic Orders are Enforced
When a spouse violates the Automatic Orders, you need to affirmatively bring it to the court’s attention. This is typically done by filing a Motion for Contempt of the Automatic Orders. To hold your spouse in contempt, the court must find that your spouse willfully violated the terms of the Automatic Orders when they were in effect.
Hiding Assets & the Financial Affidavit
Financial affidavits are required in all types of divorces: litigated, collaborative, and mediated. Financial affidavits are designed to give a clear, comprehensive, and accurate picture of the finances of the marriage, which sets the stage for negotiations and discussions about property division, alimony, and child support. It may lead to an additional exchange of documents or discovery.
All assets — including real estate, personal property, and brokerage, retirement, and bank accounts, must be disclosed on the financial affidavit. Once this signed and sworn document is filed in court, the court may consider it “fraudulent concealment” when a spouse fails to include assets on the financial affidavit.
In other words, concealing information about assets and debts in a divorce is against the law. When spouses sign financial affidavits, they swear that the information in the document is accurate. There are serious legal consequences for concealing information.
What Assets Need to Be Disclosed on the Financial Affidavit?
Unlike many other states, Connecticut does not distinguish between “marital property” and “separate property.” Connecticut is an “all property equitable distribution” state. In other words, everything is on the table and can be distributed between the parties without regard to when the property was acquired, by whom it was obtained, or whose name it is in.
Methods Spouses Attempt to Conceal Assets
In the vast majority of divorces, spouses are upfront about their assets and follow the rules. In cases where a spouse doesn’t follow the rules, here are some of the ways they might attempt to hide assets:
- Underreport income on tax returns
- Arrange for their employer to delay raises, bonuses, or stock options until after the divorce
- Fail to deposit bonus checks until after the divorce
- Coordinate “under the table” cash compensation
- Manipulate income from businesses
- Transfer money from a joint account into an individual account unknown to the spouse
- Move assets into trusts
- Convey assets to offshore entities
- Acquire art, collectibles, or other illiquid property
- Purchase insurance policies
- Buy cashier’s checks, traveler’s checks, or savings bonds
Revealing Hidden Assets Through Discovery
Financial discovery is the process by which the parties exchange the “backup” information for what’s contained on their financial affidavits. It is also an important tool for unearthing any hidden assets. This can include everything from tax returns to business records to depositions of outside people with knowledge of a spouse’s financials, to the use of experts, such as forensic accountants, to delve into any potential hidden assets.
What if My Spouse is Spending Assets?
Sometimes a spouse’s fear isn’t that their ex is hiding assets, but that their ex will spend, retitle, or move assets while a divorce is pending. Others fear that their spouse will incur large debts. There are two main ways that Connecticut addresses this — the first by preventing it from happening in the first place via the automatic orders, and the second by taking it into account when the property is divided at the end of the divorce.
What Happens if I Don’t Discover that My Ex-Spouse Hid Assets Until After the Divorce?
When a spouse discovers that their ex hid assets during the divorce, they may have what we call a Post Judgment “fraudulent concealment” claim. It’s more complicated to “unring the bell” after the divorce when property was already divided. To that end, if you have a suspicion that your spouse is hiding assets, it’s important to address it during the divorce.
The Comprehensive Connecticut Property Division Guide
How to divide property is one of the most important issues in divorces. And, it’s one of the most confusing. There are no set formulas or rules on how property will be divided. The good news is that creates tremendous flexibility for experienced divorce attorneys to craft an individualized approach. In order to prepare to make solid and informed decisions, you need to understand how property division works. Our Comprehensive Connecticut Property Division Guide tells you everything you need to know about property division in Connecticut.
Freed Marcroft’s divorce lawyers know what to look for and how to locate hidden assets. To start making a plan for your divorce, reach out. Our first step at Freed Marcroft, the Goals & Planning Conference, is designed to get to the heart of your problem and unveil your true goals. We analyze those goals, plus the facts of your case, and present you with recommendations and options to move forward.