When going through a divorce in New York, you are entitled to an equitable distribution of all marital property. In theory, the process of tabulating your marital property ahead of divorce proceedings should be straightforward, but the unfortunate reality is that some spouses will resort to unsavory tactics to conceal assets they do not want to share.
Some spouses, in anticipation of potential divorce in the future, may begin the process of concealing assets long before the topic of separation is even broached. This premeditated strategy is designed to avoid any abrupt changes in wealth that might arouse suspicion during divorce proceedings. This behavior, while illegal, can unfortunately go undetected and result in significant financial consequences if not diligently pursued. Consequently, it is not enough to have a complete understanding of your family’s financial situation – you also need to be aware of indicators that your spouse may be acting dishonestly. Below, we review 5 warning signs that suggest your spouse may be hiding assets in a divorce.
Sign #1: Sudden Financial Secrecy
If your spouse has suddenly become secretive about your family’s finances, it might be a sign that they are hiding or misrepresenting the true value of marital assets. These changes in behavior might include a sudden reluctance to share details about finances, a refusal to allow access to joint accounts, or a sudden change in passwords for online banking and investment accounts. Such behavior can raise red flags and should prompt you to take action.
A spouse who is concealing assets might start to control conversations around money, evade questions, and show a heightened sense of defensiveness. They might also begin to receive mail from banks or financial institutions that you were previously unaware of, potentially indicating the opening of new accounts. Any unusual financial activity warrants a closer look.
Sign #2: Intentionally Overpaying Creditors or the IRS
Overpaying creditors or the Internal Revenue Service (IRS) is a sophisticated tactic that can be used to obscure assets during divorce proceedings. This method involves deliberately overpaying either a creditor or the IRS with the intention of receiving a refund after the divorce has been finalized. The excess payment effectively reduces the apparent wealth by temporarily reallocating the funds to a seemingly legitimate channel. The refund comes back to the payer after the divorce, thereby allowing them to reclaim the hidden assets.
When a spouse overpays a creditor, the extra money paid can be seen as a temporary loan. The spouse informs the creditor of the overpayment after the divorce and requests a refund or a credit toward future expenses. This tactic works best with creditors who have a history of financial transactions with the spouse and are willing to cooperate.
In the case of overpaying the IRS, a spouse may choose to overpay their estimated taxes or intentionally have too much withheld from their paycheck. The spouse essentially provides an interest-free loan to the government with the expectation of receiving a refund when they file their next tax return, presumably post-divorce. By doing this, the spouse is able to temporarily hide assets without arousing suspicion, as overpayment of taxes can be easily dismissed as a miscalculation or an error.
Detecting overpayments can be difficult, but there are still several red flags you can watch out for. An unprecedented or unexplained increase in payments made to creditors or toward taxes could be a clue. Keep an eye out for payments that are significantly higher than what is typically owed. Similarly, changes in tax withholdings or estimated payments that can't be explained by known changes in income or financial status may indicate an attempt to hide assets. Review tax documents for unexpectedly high payments or withholdings. Additionally, if a creditor who regularly interacts with your spouse seems to be behaving unusually, it might be worth investigating.
Sign #3: Unexplained Disappearance of Valuables
The unexplained disappearance of valuables can suggest that a spouse is attempting to hide or obscure assets ahead of divorce proceedings. This concealment strategy often involves tangible assets such as jewelry, art pieces, and expensive furniture. This tactic can be subtle and gradual, making it hard to detect. You may find that items begin to disappear from your home without a plausible explanation, or you may come across receipts for the sale of valuable items that you were unaware of. Sometimes, a spouse may claim that these valuables were lost, stolen, or given away, but in reality, they have been sold or are being kept elsewhere until after the divorce. You should always carefully investigate claims made by your spouse that potentially valuable items were misplaced or stolen.
Sign #4: Large Gifts or Loans to Friends and Family
If your spouse starts giving away large sums of money or valuable items as gifts to friends or family or making loans to them, they might be trying to reduce their own apparent wealth. These "gifts" or "loans" are often given with the understanding that they will be returned or repaid after the divorce.
While these transactions may appear legitimate on the surface, they are often marked by unusual circumstances or irregularities that can raise suspicions. For example, a sudden or drastic increase in the number or value of gifts or loans given to friends or family could indicate ulterior motives. Similarly, if these gifts or loans are being made despite financial hardship or if the spouse is using joint funds for these transactions without your knowledge or consent, it may be indicative of an attempt to hide assets.
A lack of formal loan agreements, unrealistic repayment terms, or the absence of interest on loans could also suggest foul play. In the case of gifts, if you notice that the recipient is not using the gift (a car that sits unused or property that remains vacant, for example), it might suggest that the asset is expected to be returned after the divorce.
Sign #5: Unexplained Increase in Business Expenses
If your spouse owns a business, they might try to hide assets by inflating expenses or paying salaries to nonexistent employees. Other tactics could include introducing high consultancy fees or making unnecessary purchases of equipment or supplies. In some cases, they might even defer income or delay signing lucrative contracts until after the divorce to minimize the income reflected in the business’s records.
Unusual business expenses or activities that lower the organization’s apparent profitability should always raise suspicion, especially if they coincide with marital problems or impending divorce proceedings. These could include sudden and unexplained increases in costs, expenditures on items or services that do not directly contribute to the business, or payments to entities or individuals that you are not familiar with.
When in Doubt, Turn to Arlen Law for Comprehensive Divorce Representation
While it's natural to want to believe your spouse is being truthful during divorce proceedings – especially if your divorce is uncontested – caution is always warranted, as divorce is a legal process where both parties are trying to protect their interests. This might lead to behavior that you wouldn't typically expect from your spouse, stimulated by fear, selfishness, or even desperation. Engaging an experienced family law attorney can ensure your rights are protected and that all assets are disclosed and divided fairly.
At Arnel Law Firm, our team has experience representing numerous clients in high-asset divorces, including cases that involve accurately appraising complex holdings, ascertaining the value of family businesses, and discovering hidden assets. We routinely work with trusted financial specialists, including forensic accountants, who are prepared to comprehensively evaluate your family’s financial records and uncover any property your spouse may have hidden. Our goal is to facilitate a truly equitable division of assets based on an accurate valuation of marital property.
Think your spouse may be hiding assets? Call (718) 550-3024 or contact us online to schedule a free initial consultation today.