After child custody, the most hard fought battles in a divorce are over the division of assets. Often one party attempts to hide or shield assets from the divorce court in order to retain the full value of the asset for themselves. With the help of a family law attorney, clients can bring all of the hidden assets to light.
In most instances, a family law attorney can uncover hidden assets in one of four places.
Accounts In A Child’s Name
An increasingly common tactic for hiding assets is placing the assets in a child’s name. During the discovery process, all of the accounts owned by the divorcing parties must be listed before the court. Bank records and other financial statements easily reveal if a party is trying to hide money in his or her own name.
Placing the money in a child’s name shields the cash from the eyes of the court. The account does not appear on either parent’s personal financial records, so finding evidence of the account will take some detective work. The parent who opened the account may have made a large deposit out of an account he or she owned, which links the parent’s account to the child’s, and may make the hidden account eligible for asset division.
Federal Tax Withholding
A family law attorney uses bank statements and financial records as the starting point for determining income for spousal and child support. A spouse attempting to hide income will often do so through a manipulation of his or her tax withholdings, which artificially decreases the amount of money deposited in the bank, and limits liquid assets. The divorcing party may request that the IRS withhold an additional sum of money from each check, then that spouse reclaims the money on his or her next tax return.
To uncover assets hidden in this way, a family law attorney will compare several years of returns to the latest return. If the refund is noticeably higher than previous years, or the attorney can prove the withholdings were considerably higher than normal, the court may find the spouse guilty of hiding assets.
Shady Side Deals
When a divorce is imminent, one party may arrange for shady side deals with family members or business partners to hide assets. With family members, the party might create a fake loan agreement, where the divorcing party pays back the “loan” to the family member during the divorce proceedings. After the divorce is finalized, the family member returns the “loan” money as a gift to the divorcing party.
Business partners or bosses may also become accomplices to hiding assets through shady deals. The most common way to do so is through an agreement to withhold bonus money or commissions until after the divorce is final. Because the money was not “earned” during the marriage, it is not considered joint property.
Subpoenas of family members and business associates can reveal unethical practices. The threat of forcing the accomplice to testify under oath that the agreement had nothing to do with hiding assets in the divorce is often enough to crack the arrangement.
Division of assets is about more than just money; it includes all of the physical property that the couple obtained during the marriage. Some divorcing spouses attempt to hide assets through investment in physical property. For instance, a wife purchases an antique vase for $10,000 in cash. The husband, assuming the value is much lower, assigns a value of $1000 during the asset division. Art, antiques, collectibles, and jewelry are often used in this manner.
The only way to uncover the true value of physical assets is with the assistance of an auditor who works with a family law attorney. The auditor will complete a full inventory of all property, assigning the correct full market value to each piece.
The penalties for hiding assets during a divorce in Illinois are steep. A divorce attorney who proves a spouse hid assets may seek damages by:
- Asking for a large share of the property distribution. The equitable distribution of property statute does not require the courts to split property evenly. Depending on the size of the hidden assets, the judge may punish the spouse who hid the asset by awarding some or all of the hidden property to the other spouse.
- Seeking fines. The judge may punish the spouse with a charge of contempt of court and a large financial penalty.
- Requesting jail time. A spouse hiding property committed perjury in the eyes of the court, and may face serious jail time for the crime, and may have a criminal record as a result.
All money and assets leave a paper trail, and a family law attorney can work with a client to uncover hidden assets. Given enough time, hidden assets can be found.