While the law requires both spouses to disclose all assets and liabilities with an accurate estimation of value for distribution between spouses, it's not uncommon for someone to try to hide the actual worth of their property.
This is, of course, illegal. But if the lie isn't caught, the lying spouse gets to keep more of his or her money. The other spouse thus gets less money at settlement and also possibly less child support or alimony.
Common ways to hide property
There are many creative ways to hide money from your spouse, and those of us who have been in divorce law for a number of years have seen some surprising schemes. But most people try one or more of the following:
- Transferring real estate or other property into the name of a friend or family member
- Making large purchases to resell at a premium after the divorce
- Asking friends or family to hold onto valuables like art or jewelry, to be collected after the divorce
- Hiding cash away, either under the proverbial mattress or in an account or box in someone else's name - via a large cash withdrawal from a joint account, many small withdrawals over a period of time, or unreported income from a cash business
- Deflating one's income. A self-employed person can easily do this with creative bookkeeping, or a boss might agree to a temporary demotion or false reporting. The spouse might also add more to the 401K or inflate withholdings
- Postponing of income until after the divorce. This could be by asking the boss to delay a bonus or by not submitting reimbursement reports in a timely manner
- Depositing and then withdrawing money from children's custodial accounts
- Paying off phony debts to a friend or family member
- Understating the value of property
- Hiding money or property offshore
- Overstating debts
What to do if you suspect dishonesty
It's best to catch this sort of illegal behavior during the divorce proceedings, because the spouse who suspects cheating can petition the court to subpoena the employer for all employee records as well as the banks for all their information. After the divorce, it is difficult to reopen the case, especially in equitable distribution states, such as Pennsylvania and New Jersey.
But if the divorce is final and you have recently found out your ex lied to you and to the court, don't despair. Contact an experienced divorce lawyer. Your lawyer will help you construct as strong a case as possible. You may have to hire a private investigator and/or a forensic accountant. The investigator may use surveillance and online research to uncover evidence of fraud, while the forensic accountant will scrutinize any documentation available, looking into unexpected corners to uncover what's been hidden.
There can be stiff penalties for hiding property in a divorce case. If you're thinking of doing it, don't. But if you suspect your ex undervalued his/her worth, talk to one of our experts to see what we can do to help you.