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How Spouses Hide Assets During Divorce

Tue 31st Jan, 2023 Family Law

California is a community property state, which means that a couple’s marital estate is divided 50/50 between the spouses when they divorce unless there is a prenuptial agreement that says otherwise. Generally, property acquired by either spouse during the marriage is presumed to be community property and thus owned equally by both spouses. While some couples can negotiate their own property division outside of court, many can’t. It is also not uncommon for spouses to resort to unscrupulous methods to hide assets to prevent them from being divided equally, particularly in high-asset divorces. If you suspect that your spouse is hiding assets, you should consider speaking with a Stockton divorce lawyer

Common Tactics for Hiding Assets 

High net-worth individuals often have tools available to them that make it fairly easy to hide assets in a divorce. They also tend to use sophisticated methods that cause those assets to be more difficult to find than they would be otherwise. In many cases, spouses hide assets from each other because they feel that they have worked harder to obtain them or otherwise feel entitled to them. Some of the most common tactics high net-worth couples use to hide assets from each other include: 

  • Hiding cash by skimming it off a bank account and storing it in a different account (perhaps even an off-shore account)
  • Placing bank accounts in the name of family members, friends, or business partners
  • Transferring assets to a business, whether real or fictitious 
  • Physically removing valuable possessions, such as jewelry, art, collectibles, clothing, etc. 
  • Understating or undervaluing assets
  • Reporting lower income than actually earned
  • Reporting higher expenses or losses than actually incurred
  • Making “loans” to family members, friends, or business partners 
  • Purchasing “gifts” for friends and family members
  • Overpaying tax bills and then requesting a refund the following year
  • Colluding with employers to delay raises, bonuses, or stock options until after the divorce is finalized 
  • Making salary payments to fictitious employees
  • Establishing a custodial account for a child using the child’s Social Security number
  • Creating and paying fake expense accounts 
  • Forging acquisition dates on property ownership documents to a time before the marriage
  • Exchanging fiat currency for difficult-to-track cryptocurrency 

Any of these tactics can be used to hide assets either in anticipation of divorce or once the divorce process has already begun. 

Legal Penalties for Hiding Assets

California divorce law requires each spouse to make comprehensive financial disclosures so that the community property can accurately be divided. As such, the penalties for hiding assets are severe. Under California Family Code § 1101 (g), the penalty for hiding assets is…an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and court costs. The value of the asset shall be determined to be its highest value at the date of the breach of the fiduciary duty, the date of the sale or disposition of the asset, or the date of the award by the court.  

While the standard penalty for hiding assets is 50% of the asset hidden, that is merely the floor; California courts have awarded up to 100% of the value of the hidden assets in certain cases. 

Contact a Stockton Divorce Lawyer if You Suspect Your Spouse Is Hiding Assets

If you suspect your spouse is hiding assets, you should consider contacting an attorney who can advise you on the best methods of discovering them. For more information, please contact a Stockton divorce lawyer at McKinley, Conger, Jolley & Galarneau by using our online form or calling us at 209-477-8171.

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