Updated on August 27. 2024
It’s not a stretch to say that divorce tends to bring out the worst in people, and financial matters can become serious sticking points. Your divorce will directly affect your financial future, and the only way to protect your financial rights is by first determining exactly what you have.
The overwhelming emotions associated with divorce can push otherwise upstanding people to engage in unfair practices, and the higher the assets involved in the divorce, the more risk there is of financial wrongdoing, such as hiding funds. In fact, many people going through divorce are blindsided by the lengths their spouses will go to in order to skew property division in their favor.
If your spouse hides assets and gets away with it, he or she could cheat you out of what is rightfully yours. Being aware of the tell-tale signs of hiding assets and knowing the basic strategies that spouses are most likely to employ can help you spot any fancy but unfair financial footwork in your own case.
If you’re facing a high-asset divorce, don’t delay reaching out for the skilled counsel of an experienced Round Rock high-asset divorce attorney.
High-Asset Divorce
Just because you are facing a high-asset divorce doesn’t mean that your spouse is going to engage in unfair financial practices, but it is important to be proactive and protect your financial rights throughout the legal process. As such, you’ll need to employ considerable scrutiny when it comes to your marital estate, no matter how much you trust your spouse.
When high assets are involved, there is more property and more financial bookkeeping to assess, more valuations to acquire, and more opportunities for asset hiding. If your spouse is more involved with your family’s assets than you are, it puts you in a more challenging position.
Regardless of the situation, it’s time to roll up your sleeves and determine what your marital assets are before you can get down to the important task of a just and right division of marital property.
Property Division in Texas
In the State of Texas, the division of marital assets in a divorce tends to be complex. While Texas is one of the nine community property states in the nation, this doesn’t mean that your assets will necessarily be divided evenly between you.
Community Property
Anything of value that you and your spouse – or either of you separately – acquired during your marriage is considered community property, or marital property, and it is owned by both of you. In the event of divorce, these assets must be divided between the two of you fairly based on a range of factors:
The length of your marriage
Any significant age difference between you
Each spouse’s level of education and employability
Each spouse’s earning power
The contributions either spouse made to the other’s career
Wrongdoing by either spouse – even in a no-fault divorce
The dissipation of marital funds, such as hiding assets
Each spouse’s mental and physical health
The tax considerations for the various property division proposals
Often, these factors lead to an equal division, but they don’t have to.
Separate Property
Any separate property that either of you owns prior to marriage will remain the original owner’s, but only if the asset was kept strictly separate during the marriage. The higher the assets involved, the more challenging it can be to disentangle separate assets from marital assets.
Keep the following points in mind when considering separate property during property division in Texas:
Any intermingling of a separate asset with marital assets can weaken its separate nature.
Any increase in value of a separate asset is likely to be treated as a marital asset, such as the amount a retirement account increases in value over the course of a marriage.
The spouse claiming that an asset is separate is called upon to prove it – the court begins with the presumption that all assets are marital.
The bottom line is that you can’t achieve a fair division of marital property until you have a full and complete accounting of what you have. If gathering this complete accounting sounds daunting, enlist the help of a skilled divorce attorney.
Setting the Stage for Hidden Assets
Hidden assets are squirreled away – or artificially reduced by some other means – and are, therefore, not addressed in the divorce, which directly affects the other spouse’s fair division.
You may be surprised by the lengths that some spouses will go to in order to hide assets in a divorce. Often, this behavior is based on a feeling of entitlement that causes them to circumvent the law.
The emotional turmoil and stress of divorce can also turn up the heat and push people who wouldn’t normally cheat the system to go all in. What this means for you is that just because you have no reason to believe that your spouse would sink this low, doesn’t mean it couldn’t happen.
While there are nearly endless ways to hide assets, some of the following circumstances can make it much easier to effectively accomplish:
When one spouse has far more control over and knowledge of the family’s finances
When the couple or one of the spouses owns a business
When one spouse is the sole breadwinner
When one spouse is self-employed
When the divorce involves high assets
When the divorce involves complicated assets
The less transparent your family’s financials are, the more wiggle room there is for funny business to take place. However, where there’s a will, there’s a way, which means that a determined spouse can hide assets even when the situation doesn’t make it easy.
Common Means of Hiding Assets
People often go to considerable trouble to protect what they consider theirs – whether the law agrees with them or not – and this is never more apparent than during divorce. If the divorce involves high assets, the stakes tend to be even higher. While divorcing spouses can get very creative when it comes to hiding assets, most of their efforts fall into basic categories.
The Diversion of Funds
Suppose one spouse knows that divorce is on the horizon. In that case, he or she may slowly shift funds from joint accounts to other people for safekeeping, to accounts that are difficult to find, or into high-dollar purchases made in the names of others. In this way, spouses can funnel community property away from the marriage, If they get away with it, they’ve got more for themselves.
When the spouse doing the hiding does so incrementally over time, the other spouse is far less likely to notice. In a high-asset divorce, the practice may not set off any red flags and may be completely lost in the shuffle. In fact, moving money around isn’t necessarily a form of financial wrongdoing and isn’t uncommon, which may embolden your spouse.
The Siphoning of Cash
Simply siphoning off cash is one of the most common ways of hiding assets because, if there is a paper trail at all, it is much more difficult to track. If you own a business that brings in cash, this can be an especially effective weapon.
Getting Creative with Taxes
Another specific form of diversion is paying bills ahead of time, and taxes are a prime example. Paying the IRS considerably more than they’re owed will eventually lead to a refund, but the lag time is significant. Overpaying taxes now, during the buildup to divorce, isn’t likely to be rectified until after the divorce is over, and your spouse may clean up nicely.
This is especially effective when it comes to paying business taxes, which tend to be high. If your spouse receives the business in divorce, you may never be the wiser. Working closely with an experienced Round Rock high-asset divorce attorney in situations like these is always to your advantage.
Self-Employment
A spouse who is self-employed has plenty of opportunities to fudge the numbers to show an artificially low income, which can directly affect the division of your marital property, child support, and even alimony or spousal maintenance – as applicable. If your spouse is self-employed, you should pay special attention to bookkeeping.
Business Ownership
If you own a business together, but your spouse runs it, he or she is similarly well positioned to skew the numbers. Doing so can artificially decrease the overall value of the enterprise and your spouse’s income, which translates to a financial double whammy for you.
Another common tactic related to business ownership is funneling family funds into keeping the business running or making improvements. If the books are sloppy or if your spouse sticks to cash transactions, it can make pinpointing this movement of funds much more difficult.
Business ownership is one variable that should always garner special attention in a divorce.
Spending Streaks
Another form of hiding assets is if your spouse spends an outlandish amount of money on frivolous pursuits or purchases in the buildup to your divorce. The end result is diminishing the overall size of your marital estate, which goes against standing rules intended to limit spending to expenses that are relevant to supporting a normal lifestyle while your divorce is pending.
If your spouse is having an extramarital affair and is spending a ridiculous amount of money on the other person, such as for dinners out, gifts, trips, and hotel rooms, it is yet another form of fraud on the community. This behavior can affect how the court divides your assets, support a fault-based divorce, and improve your chance of receiving alimony.
The Misrepresentation of Assets
If your spouse is far more involved in the business end of your marriage, it affords him or her considerable leeway to hide assets from you in the divorce process. If you don’t know what you have, it’s far more difficult to fight for what’s rightfully yours. In these situations, forensic accounting is generally called for.
The misrepresentation of assets refers to downplaying their value, which may not be difficult to do if you’re not privy to the financial circumstances involved. For assets of high worth, valuations can become a challenge. Your divorcing spouse may present you with valuations that you presume are legitimate. However, your own valuation may tell a different story.
One solution is to come to a mutually acceptable agreement to use a specific professional for your valuation needs. However, if your spouse is actively involved in hiding assets, they might be difficult to pin down, and thorough forensic accounting and asset tracking are likely called for.
Not Disclosing Changes in Separate Assets
A spouse can also get ahead by not disclosing changes in separate assets that could be considered marital property.
For example, if your spouse has a collection of watches, jewelry, or art, you may think of it as strictly belonging to your spouse without giving it much thought. If, however, the asset has increased in value over the course of your marriage or if your spouse added to it during your marriage, it is – as least in part – a marital asset that should be addressed as such.
Destroyed Records
If your spouse chooses to take a scorched earth approach, he or she may completely destroy all the records needed to assess your marital estate, leaving you in a very difficult position. While this will slow down your divorce, there are ways to recreate books and access old records, and your savvy divorce attorney will help ensure that all the pieces get put back together accurately.
Additionally, you can count on the court to frown on your spouse’s antics, which may be reflected in a more beneficial property division for you.
Pretend Debts
Your spouse could also put on a big show about paying down pretend debts that never existed in the first place. This goes back to funneling funds to friends and relatives, but this money can actually go anywhere that your spouse chooses – and if you’re not especially familiar with your household’s debts, you may be none the wiser.
Overt Nondisclosure of Assets
It’s one thing to get tricky with assets, but it is another to simply not disclose them. Generally, financials leave a paper trail, but overseas accounts can be difficult to track, and Bitcoin can make things more challenging. If you don’t know an account or transaction exists, it makes them difficult to look for – and find.
Bank-Related Tactics for Hiding Assets
Certain foreign banks make it especially easy to keep all financial transactions strictly private, and it can be very difficult to prove that your spouse is secreting marital funds into these private overseas accounts. Foreign investments can have the same effect.
Another bank-driven trick is depositing money in a child’s account without drawing attention to it. When the divorce is over, your spouse will likely intend to swoop in and take back the funds.
Hiding Assets with Cryptocurrency
While bank accounts can generally be tracked down, cryptocurrency is stealthier. Transfers to crypto brokerage houses are one of the few clues, but funds that disappear and can’t be accounted for have to go somewhere, and Texas courts take this fact into careful consideration. Divorce discovery now tends to include language requesting all cryptocurrency financials.
Involving the Divorce Attorney
Some disreputable clients who engage disreputable legal counsel are in cahoots when it comes to hiding assets. This ploy generally involves the client paying a massive retainer and prepaying immense legal expenses to an attorney – only recoup them post-divorce.
While inquiring into what the other attorney is being paid can feel like an invasion of privacy, it may be necessary to weed out financial wrongdoing.
The Legal Repercussions
Texas courts generally have zero tolerance when it comes to hiding assets, dissipating funds, or engaging in other practices designed to cheat spouses out of assets to which they’re entitled. The assets that you and your spouse acquired during your marriage belong to both of you – whether you know how extensive they are or not.
Thwarting the Diminishment of Assets with Temporary Orders
If your spouse has an asset of considerable value under his or her control while the divorce is pending and you discover that he or she is likely engaging in asset hiding, you don’t have to sit back and let it happen.
Temporary orders, which are implemented while a divorce is pending, are designed to help thwart practices that hide or otherwise diminish assets. As such, if you have credible concerns, the court may shift control of the asset to you in response while you move forward with the divorce.
Proving Fraud on the Marital Estate in Court
If your divorce heads to court regarding the division of your marital assets and you and your trusted high-asset divorce attorney can demonstrate that financial foul play is afoot, you can expect the presiding judge to take the matter seriously.
Your spouse’s wrongdoing can directly affect how your marital assets are distributed between the two of you and can play out in your favor. Texas courts take a dim view when one spouse attempts to cheat the other out of a fair property division, and when this deception is brought to their attention, it’s likely to guide their orders.
When Asset Hiding Is Discovered after Divorce
Sometimes, asset hiding and other underhanded financial dealings aren’t discovered until after the divorce is finalized, but this doesn’t necessarily mean you have no recourse. If the asset in question was hidden or obscured, such as in Bitcoin form, and, as a result, wasn’t included in the division of your marital property, it is subject to an undivided asset case.
If the property was accidentally overlooked, which does happen, the court will pas down a fair division in light of the involved circumstances. If, on the other hand, the court carefully weighs the evidence and determines that your spouse engaged in fraud on the community by purposefully hiding assets, it’s a very different matter.
In these situations, Texas courts often award the entire asset – if it remains intact – to the harmed spouse. If the asset is no longer intact, the court will assign a comparable alternative. In fact, comprehensive divorce decrees for high-asset cases often include language for remedying purposefully hidden assets that are discovered post-divorce.
The Sworn Inventory
Divorcing couples in Texas are required to provide one another with sworn inventories in which each spouse discloses all of his or her assets and debts – whether they were acquired during the marriage or prior to it. The idea is to ensure financial transparency and set the stage for an equitable division of marital assets.
If you don’t take this step seriously and, for example, each of you simply keeps your own retirement and bank accounts, you could take a serious financial hit that you won’t be able to rectify with a legal mechanism post-divorce. Contact a Round Rock divorce attorney to ensure your financial rights are protected.
If You Have Suspicions
If you aren’t convinced that your spouse is being completely honest about your divorce finances, or if there is any chance that he or she is not, you’ll want to alert your seasoned high-asset divorce attorney. Being thorough about the numbers regarding property division is crucial, but if there is any hint that your spouse is less than honorable, you’ll need to fortify your efforts.
Property division in your divorce will play a pivotal role in your and your children’s financial future, and taking the time to get it right can make a significant difference in the outcome.
Steps that Can Help You Get to the Bottom of the Matter
If you have a feeling or reason to believe that your spouse isn’t on the up-and-up regarding your shared assets or if your situation lends itself to financial wrongdoing, the first order of business is working closely with a dedicated divorce attorney with experience successfully handling challenging cases like yours.
You can also turn to these methods to help get the bottom of your spouse’s financial dealings:
Confirming the accounts that your household bills are paid through to help identify any accounts you may not know about
Conducting a public records search to find any real estate that your spouse may own but hasn’t disclosed
Reviewing your joint tax returns, including any business tax returns, going back several years in search of anything that looks off
Combing through each of the accounts you’re aware of in search of any purchases or transfers that strike you as suspicious
Comparing your household’s monthly expenses to your family’s overall income to determine if there is any discrepancy between where you should be financially and where you actually are
These safeguards may sound like a lot, but your attorney and legal team are standing by to help. The more raw data you can gather about your marital finances, the more smoothly your attorney can guide your case forward.
Don’t Wait to Consult with an Experienced Round Rock High-Asset Divorce Attorney
Brett Pritchard at the Law Office of Brett H. Pritchard – proudly serving Round Rock, Texas – is an accomplished high-asset divorce attorney with an imposing reputation for skillfully protecting his clients’ financial rights through exacting documentation and investigation.
Learn more about what we can also do to help you by contacting us online or calling us at 254-781-4222 and scheduling your FREE consultation today.