One of the first steps in separation and divorce is the financial disclosure process. Before the parties can determine how to divide assets and debts incurred in the marriage, full and frank disclosure is essential. Complete financial transparency between the parties is highly crucial.
As part of the disclosure process, both parties must provide sworn Financial Statements and supporting documentation. Unfortunately, there are some cases where people attempt to provide false or incomplete information. This may have significant impacts on the division of property, equalization, and support obligations.
Hiding assets during divorce is illegal. If uncovered, a judge can force the guilty party to pay fines or give the other party the total amount of those assets.
What You Need to Know About Hiding Assets During Divorce
You can look out for several things, such as if your spouse is hesitant in providing financial disclosure, or if what they are disclosing is different from what you remember it to be.
If you suspect your spouse is hiding assets during divorce, you should look for a change in financial habits. Check to see if your spouse has an unusual amount of cash withdrawals, or transfers between bank accounts or to other financial institutions.
Try to watch for bank statements or letters arriving from financial institutions you do not usually deal with. This may mean your spouse has financial dealings with other banks and may have money hiding in different bank accounts that you are not aware of.
Another red flag is if you find your spouse suddenly setting up trusts, lending, or gifting money to family and friends. Perhaps they are trying to disburse funds to show they have fewer assets than they do. Your spouse may also misrepresent or conceal their income to avoid paying support or paying a lesser amount of support.
If you see that your spouse is depositing their paychecks less often than they usually do, or if their deposit amounts are less than usual, this may be an indication of them hiding their actual income. Spouses that own businesses may be hiding money in the company. For example, they may wait until after the date of separation to close large deals, or pay fake salaries to non-existent employees.
If you suspect your spouse of misrepresenting their assets or income, you should immediately advise your mediator or lawyer, so this can be addressed and dealt with by requesting further financial documents, for example.
There are cases where your spouse may be required to provide a forensic accounting of their accounts. Forensic accountants can assist by tracking financial transactions over some time to determine if there has been any dissipation of matrimonial property. A forensic accountant can also help trace exempt matrimonial property back to its origin and determine whether or not there has been a co-mingling of matrimonial funds that would otherwise be exempt from equal division. Such is the case with inheritances received during the term of the marriage.
Consequences of Hiding Assets During Divorce
If a spouse is caught hiding assets during divorce, has lied, or sworn false documents during the separation and divorce to conceal those assets, they could be committing fraud. If convicted, the person could be sentenced to pay restitution to the other spouse, a fine to the Court, and/or to imprisonment.
In addition, the Court can grant an unequal division of family property, leading to the spouse who concealed assets being entitled to less property than the other spouse. The Court can also freeze matrimonial assets and prevent further excessiveness after separation or divorce.
In Cunha v. Cunha (1994), 3195 (BCSC) the BC Supreme Court stated:
“Non-disclosure has been called the ‘cancer’ of matrimonial property litigation. Non-disclosure discourages settlement or promotes settlements which are inadequate. It increases the time and expense of litigation. The prolonged stress of unnecessary battle may lead … women simply to give up and walk away with only a share of the assets they know about, taking with them the bitter aftertaste of a reasonably based suspicion that justice was not done. Non-disclosure also has a tendency to deprive children of proper support.”
To translate, being dishonest or withholding information during financial negotiations can ultimately hinder settlement, make the process more costly, cause indecisiveness and confusion, and result in an unjust settlement.
If you suspect your spouse is hiding assets or concealing income, you should take steps to contact a legal professional to get further advice.