During divorce when emotions are careening out of control, one spouse often believes that the other party may be hiding assets.
In 2011, The National Endowment for Financial Education (NEFE) released a study finding that 31% of people who combined finances with their significant other have been deceptive with their spouse/partner about money. Of those who committed a financial deception:
If these statistics indicate what happens on a regular basis, then in divorce – when trust is already damaged – financial deception could be more prevalent. Whenever you have one party continuing to delay or refusing to turn over financial documentation, that could signal they may have something to hide, or that they are trying to control the flow of the information. One thing is for sure, money usually leaves a trail, so if you are looking for possible hidden assets, you should follow the money trail.
A complete copy of the tax return should always be obtained. If your spouse is only showing you the first few pages, it could signal that there might be information they don't want you to see. A thorough review of all of the various tax schedules and forms could provide significant information on certain types of income, interest/dividends earned, and various deductions. Look for any over-payment of taxes, which could be a source of funds to be refunded post-divorce.
Occasionally when one party is intent on hiding information, they may prepare a "dummy" tax return and try to pass it off as the original that was submitted to the IRS. If you question the validity of the tax return supplied, you can always request a tax transcript from your local IRS tax office to be sure that what was submitted to the IRS matches the tax return you have been supplied. This is also a way to find out if any amended returns were filed.
It is not enough to have an online screen printout of investment/retirement/bank accounts, because in today's day and age of technology, it is easy for one spouse to alter documents to have them appear valid. In addition, when one party only supplies a one-page screen print it may not contain all the relevant information needed.
Before a lender approves a loan, they will ask for detailed financial information. If a personal or business loan was obtained, the party would have been required to submit personal financial statements to the lender. A review of these statements can determine the assets, debts, income, and expenses disclosed when the loan was obtained.
This is especially important If one spouse has a business. Look for checks written but never cashed. This could be in the form of salary paid to ghost employees, or in collusion with a friend or family member in which the money will be returned to the individual after the divorce. Look for expenses paid for a paramour such as gifts, trips, gift cards, rent/utility payments, or invoices paid to non-existent vendors. Business bank statements should always be reconciled with income/expense statements in an attempt to discover discrepancies.
This is a great way for a spouse to keep money off the marital radar since everything happens online. Third-party payments are received into the account and then products or services can be purchased with the balance. Checking the browsing history on the family computer may help identify whether an account exists. In addition, if there are visits to other unfamiliar bank or financial websites, this could indicate the existence of other accounts.
Although it is not the smartest idea, many people will hide cash in their home to keep it close and accessible. Contrary to popular belief, putting it “under the mattress” is not the obvious choice. Some of the more popular places used are in drop ceilings, air vents, envelopes taped to the back of wall decorations, in a folder in a file cabinet, inside books on a bookshelf, or in DVD cases. Money can be rolled up and hidden in hollow drapery rods, small containers in the garage, or inside pill containers.
If you suspect your spouse may be hiding assets, you need to alert your attorney and Certified Divorce Financial Analyst (CDFA®) as early as possible in your case so they can take the proper steps to investigate and put measures in place to prevent any further deception.