When going through a divorce, or if you are anticipating a divorce in the future, you may start thinking about all of the money, retirement accounts, and other assets that you have acquired during the marriage and how those assets will be divided between you and your spouse during the divorce process. How much will you receive? How much will your spouse receive? Will you be able to keep the car? The home? The vacation home? The unknown financial future often causes stress and anxiety which sometimes causes a person to contemplate hiding assets. Men and women often believe that they need to start stashing away money or other assets in an attempt to keep those assets from the other spouse.
Pennsylvania law prohibits one spouse from taking or hiding marital assets from another spouse. This is a good reason why it is important to hire divorce lawyers in PA in order to help you understand what you and your spouse can and cannot do with marital property and perhaps even help you uncover assets that your spouse may be hiding from you.
What Property is Subject to Division and How is it Divided?
In Pennsylvania, the divorce law requires that “marital property” must be equitably divided between the parties. This is known as “equitable distribution.” This does not mean that property is divided 50/50, but in a more equitable fashion based on a number of factors including the length of the marriage, the standard of living, the age, health, amount and sources of income, skills, employability, estate, liabilities and needs of each of the parties.
Now, what exactly is “martial property” which is subject to this division? Simply stated, marital property includes all property acquired by either spouse during the marriage and prior to the date of separation. Marital property also includes the increase in value of any non-marital property during the marriage. For example, this may include an asset that one of the parties owned before the marriage such as a 401(k). The increase in value of the 401(k) is marital property even though the balance of the 401(k) at the date of marriage is not marital property. While there are a number of exclusions in the law, for the most part, any property that both parties to a marriage have benefited from is considered marital property.
Since martial property includes the vast majority of your assets, it is not uncommon for one spouse to want to hide certain assets during the divorce with the intention of shielding those assets against the equitable division process explained above. He or she may believe that the money is theirs, that he or she rightfully owns it, or simply wants to be spiteful during this adversarial process. The fact is that financial deception can dramatically affect the assets, alimony, and child support you receive pursuant to your divorce and it is therefore important to be aware of how assets are typically hidden and the red flags that are raised by doing so.
Common Ways Assets are Hidden
Divorce lawyers in PA commonly identify the follow four common methods of hiding financial assets.
1. Transferring Assets to a New Account- This is the simplest way assets are hidden. One spouse simply takes money from a joint bank account or brokerage account and transfers it into a new account in their name only.
2. Making Cash Withdrawals- Without raising much suspicion, one spouse can, over time, make cash withdrawals (typically on a debit card) and keep the cash. Hiding assets this way can take an extremely long time to be impactful to the divorce, as minor withdrawals of $20 or $40 at a time are but drops in the bucket in the overall divorce. However, this is still fraudulent and is not allowed.
3. Overpaying Taxes- With a little planning, this is an interesting way to shield assets for a divorce. If one spouse is aware that a divorce is imminent the following year, overpayment of taxes due may allow that spouse to use the refund for the following year’s taxes, after the divorce is done.
4. Offshore Bank Accounts- While typically seen in movies, offshore bank accounts are a real way to hide money. Offshore banks abide by strict secrecy laws, making it nearly impossible to discover these accounts. One tactic to deal with this issue is to check the passport of the party suspected of hiding assets.
Red Flags to Watch For
Common red flags of hidden assets include depositing paychecks into a separate account, credit card statements mailed to the party’s work address, prior dishonesty by the party in dealing with reporting income to the IRS, and a large disparity between the married couple’s assets and spending compared to their reported income.
How to Prevent or Discover Hidden Assets?
The best strategy for dealing with the issue of hidden assets in a divorce is to simply be proactive during your marriage. It is important for you to be aware of your financial situation and openly address areas of concern with your divorce lawyers in PA. Likewise, it is important to provide your lawyers with concrete and reliable financial and familial information in determining whether assets are hidden. It is a good idea to make copies of all financial documents relevant to the marriage and divorce and to keep the copies outside of the marital residence.
Spouses with cash businesses (such as bars or restaurants) should also be examined closely, as it is much easier to hide money through the business. It may be beneficial to retain the services of an accountant and/or a private detective to determine whether assets are being hidden. An accountant can perform an in-depth analysis of the business’s financials to determine the cash flow running through the business. A private detective can personally observe how many cash transactions are taking place.
Photo Credit: Stuart Conner