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What Happens If Your Spouse is Hiding Assets in a Divorce?

Posted by Mariya Furman | Nov 30, 2022

When couples get a divorce, many are on an emotional roller coaster and don't always make the best decisions. For example, some spouses will attempt to hide their assets from the court during divorce proceedings. The end of a marriage is devastating to many couples.

In situations where one spouse is angry over the divorce and believes they are entitled to more of the marital income and property than the other spouse, they will sometimes attempt to hide income and other assets from their soon-to-be former spouse and the family law court during the divorce proceedings.

What Happens If Your Spouse is Hiding Assets in a Divorce?
Some spouses will hide assets in a divorce.

These attempts are pretty standard in community property states like California.

By state law, all income earned and debts acquired during the marriage must be divided 50/50 regardless of who made it or if one spouse had significantly higher earnings than the other.  

Put simply, all the property gained during the marriage becomes community property to be split 50% to each spouse.

Some examples of marital property include a spouse's salary, home, cars, investments, pension, and items purchased during the marriage. This can be a significant issue in some divorces, especially for high-net-worth individuals in long-term marriages.

In other words, the fact that everything they acquired during the marriage has to be split equally with their spouse has resulted in extreme cases of anger and bitterness. 

These strong feelings, in turn, lead to vindictive behavior, such as lying or hiding their assets. So, what happens if one spouse doesn't want to share with the other? Our California family law and divorce lawyers will examine this topic in more detail below.

What are Preliminary Financial Disclosures?

During the discovery process in a California divorce, both spouses are legally required to provide a complete and honest report of:

  • Assets and income,
  • Property,
  • Debts and liabilities,
  • Other relevant financial circumstances.

This process includes both a preliminary and final disclosure. Also, you'll need to notify your spouse of any economic changes since you first filed for divorce. You must sign a financial affidavit, meaning you swear that your disclosures are true and accurate to the best of your knowledge.

In cases where you signed the document knowing it had false information, you committed perjury and could face harsh legal consequences.

Suppose you have valid reasons to believe your soon-to-be-ex-spouse is hiding assets from you. In that case, you might have to explore hiring a private investigator, forensic accountant, or another type of investigator for help.

What If My Spouse is Lying on the Financial Disclosures?

Both spouses are expected to act in good faith during the disclosure process. This does not stop many from lying, as many feel entitled to more of certain assets.

Often, an emotional attachment gives them that feeling of more ownership, such as the marital home where the kids grew up. Other reasons for lying include the following:

  • Perhaps your spouse wants to reduce the amount of child or spousal support they must pay;
  • Perhaps they own a business or professional practice and want it to appear unprofitable;
  • Perhaps they have stock options and other investments are want to keep them concealed from the family court or under-report the actual value.

Intentionally lying to the court by deliberately failing to disclose financial information during a divorce carries both civil and criminal penalties.

Spouse Lying on the Financial Disclosures in a Divorce
Some spouses lie on the financial disclosures.

If the California family law court determines a spouse was hiding assets, they could order them to compensate the other spouse for legal fees for investigating their finances.

Further, the court can award more of that asset that was hidden to the other spouse they would have received initially.

Also, in extreme cases, knowingly lying to a court could result in fines and jail time for perjury. In cases where the spouse successfully hid their assets long enough to obtain a divorce decree, there are still legal options if it's discovered later.

The ex-spouse could file a post-judgment motion under California Family Code Section 2556, which asks the family court to adjudicate the omitted assets with penalties.

What Are the Common Ways Spouses Hide Assets?

When facing a divorce and splitting assets, spouses use a variety of ways to hide their assets from the family court. This is even more common in cases of high-net-worth people with much to lose. Some standard methods include:

  • Transfer money into a separate bank account,
  • Report lower income and higher expenses,
  • Transfer property and funds to a relative,
  • Create a bank account in their children's name,
  • Buy property using only their name;
  • Place valuables in a personal deposit box,
  • Use a personal safe to store cash,
  • Withdraw cash using joint credit cards,
  • Hide savings and investment account statements,
  • Intentionally overstate their debts,
  • Intentionally undervalue the marital home and other property,
  • Undervalue their business and profits,
  • Request deferment of bonuses and stock options,
  • Selling some marital property for less than its worth.

Often, the tactics used to hide assets in a divorce are easy to uncover, but tracking them down requires a comprehensive examination of the financial records for unusual-looking transactions.

What Should You Do If Your Spouse is Hiding Assets?

Before starting the California divorce process, it would be a wise move to start gathering financial documentation. This is especially true if you have reason to believe that your spouse might attempt to hide assets.

The documents you need to gather should include a list of all your assets and liabilities. This will help you complete the required financial disclosure report, and it will also help you determine what assets will need to be divided under the community property laws.  Some of the documents you should gather include the following:

  • Pay stubs, W-2s, 1099s,
  • Any sources of cash flow,
  • List of all assets and liabilities,
  • Employment history,
  • Tax returns for the last three years,
  • Bank and savings account statements,
  • Credit card statements,
  • Property jointly owned,
  • Employee stock options,
  • Brokerage account statements,
  • Any rent payments,
  • Annuities,
  • Retirement and pension accounts.

In some high-asset divorces, professional forensic accountants are often used to help gather crucial financial information, and they can testify their findings in a family court.

Your divorce lawyer might also use the help of a business valuation expert or other professionals when necessary.

Contact a California Divorce Lawyer for Help

If your spouse attempts to hide their wealth from you during divorce proceedings, you will need help uncovering hidden assets.

Los Angeles Divorce Lawyer
Call our divorce lawyers for help.

Some will use complex financial schemes to obscure their assets in a divorce. Many spouses are still determining where or how to start looking.

The first step is to contact an experienced high-net-worth divorce lawyer who can get help from professionals specializing in this type of work.

Some spouses were not the primary person who dealt with the finances during the marriage. Thus, they are still determining all the assets that could be potentially hidden.

While you probably want to trust your spouse to disclose all of their financial information honestly, especially when you have remained on friendly terms, you need to be aware of all the standard tactics to hide them. Your family law lawyer can help you uncover hidden assets.

The divorce and family law lawyers at Furman & Zavatsky are located in Los Angeles, California. We provide a free case consultation via phone or fill out the contact form.

About the Author

Mariya Furman

Attorney Mariya Furman is licensed to practice before all of the Courts of the State of California, the United States Court of Appeals for the Ninth Circuit, and the United States District Court for the Central District of California. After receiving a Bachelor of Arts degree from Case Illinois I...

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