Hidden Assets and Burying the Truth in Divorce

Hiding assets in a divorce and subsequently getting caught is an inevitability that evades many spouses who think they can outsmart the system.

If it wasn’t illegal it would almost be comical. For the reckless, it’s a time-honored tradition to try and hide assets during a divorce. They rationalize that by keeping some hidden funds or property, they’ll keep their spouse from sharing their booty.

While the benefits of hiding assets may appear to be substantial, any potential benefit is substantially outweighed by the risk of perjuring one’s self. Some of the punishments include paying fines, paying interest, is required to surrender the hidden asset, and serving time in prison.

Fortunately, with a few simple accounting techniques, these assets will usually be uncovered during the trial. Even if not disclosed initially, the hidden assets are still fair game and a spouse can take legal measure to recover the asset after a divorce is finalized.

Colorado is considered an equitable distribution state. Equitable distributions schemes seek to accomplish just that — equitable distribution of assets and debts in a divorce. Divorce in Colorado, referred to as Dissolution of Marriage (DOM) in the court system, allows for more equity than the equal share allocated by communal property states. Furthermore, while Colorado recognizes the concept of separate property and prevents a separate property from being subject to division in a divorce, this is not always true. If a separate asset increases in value during the marriage, a spouse may be entitled to an allocation of the appreciated value.

This value method alone shows that Colorado is serious about protecting the financial well-being of both spouses, and seeking to achieve a result that is fair to both individuals.

Degrees of Hiding

There are basically two variations of hiding assets. The first method involves understating the value of an asset or income. This might seem like an acceptable accounting practice during tax season, but if the discrepancy is discovered, it’s going to put all of the offending party’s assets and credibility under special scrutiny by a judge.

The second method is more blatant, and it usually involves some form of non-disclosure or improper transfer. This second category is concerning as it’s a brazen attempt to disregard the law. Some of the creative ways to hide assets may include transferring money to a business, not disclosing assets, transferring assets to a family member or a separate account, overpaying the IRS, and delaying invoices due.

The Forensic Accountant

The forensic accountant is the asset dodger’s worst nightmare. Some high-income earners and business owners have complicated earnings, and it’s much easier for them to obfuscate property and funds. When it comes to issues like deferred payments, stock options etc. even your divorce attorney will have a difficult time making sense of everything. If it appears that a spouse is attempting to play “hide the ball”, an attorney may call upon the help of a forensic accountant to find the truth.

Unsure of what counts as an asset? Learn more about how assets are divided in a divorce.