It’s not a cliché to say that in a divorce proceeding, the higher-earning spouse often feels like he—or she—gets taken to the cleaners. This can happen whether the couple lives in a state where the judge determines a settlement based on equitable distribution, or in a community property state like Texas, where everything acquired by either spouse during marriage—earnings, property and assets—typically gets split down the middle.
But couples headed for divorce often begin losing trust in each other at some point along the way, so it is no way surprising that during the split, the suspicion of hidden assets comes up when it comes time to take inventory of the estate.
How assets are concealed
According to Forbes, when the lists of assets are being drawn up, there are four behaviors that can indicate that there are hidden assets:
- Denial of the existence of an asset
- Claims of a lost asset
- Transferal of an asset to a third party
- Creation of false debt
As always, a paper trail will provide the best evidence of a cover-up unless the spouse has been careful to hide it. Looking at tax returns will be an important tool for revealing discrepancies.
Looking at tax returns
As high-asset divorces have multiple financial sources, the tax returns are complex and require the help of a highly skilled legal expert to uncover red flags. Looking at the returns will reveal where there are related assets in Schedules A through E: itemized deductions, interest and dividends, any depreciation calculated from businesses, capital gains from investments, or supplemental income or loss from rentals, partnerships, S corporations or royalties.
Looking at closing mortgage documents can also show an inventory of assets, liabilities and sources of income that your spouse may not have told you about before. Other potential areas of concealment are in safety deposit boxes or safes, where there may be hidden property, deeds, stock certificates or dividends.
Divorces in Texas can a while to settle, and for high-asset ones that are quite complex, longer—particularly when litigation is necessary. Above all, taking inventory of all assets in your name, your spouse’s and in both names early and often will help keep track of assets that may suddenly disappear during proceedings.