Property division is one of the most challenging hurdles for most couples during divorce, and this hurdle is only made more complex if you suspect your spouse is hiding assets.
Thankfully, with today’s technology, finding hidden assets has become more straightforward. However, the burden of proof typically rests on the side of the spouse who suspects the other spouse of intentionally hiding or squandering community property. To avoid this situation from negatively impacting your finances, it is important to both understand Texas deems as a hidden asset. In addition, you must understand the step you can take if you believe that your spouse is hiding assets such as money or property.
What are Hidden Assets in Divorce?
Texas is a community property state, meaning that most income, property, and debts acquired by a couple during their marriage are usually considered joint property and can be divided equally in the event of a divorce. When one spouse willfully hides or spends assets without the knowledge and consent of the other spouse, they are hiding assets or, as is discussed in the Texas Family Code, committing “community fraud.”
Community fraud can take on many different forms, and can occur both before one of the spouses files for divorce or during the divorce process itself. According to an article by The New York Times, high-conflict divorce proceedings create the ideal environment for one spouse to attempt to hide assets out of spite. “During one of the angriest times in the divorce,” guest writer Anne Bagamery from the International Herald Tribune notes, “each spouse has a lot of leeway to dispose of joint assets — by moving them to individual accounts, transferring them to third parties or simply spending them.”
Assets that are easier to hide during divorce
Some assets are easier to hide than others, especially if you have not played an active role in your finances before the beginning of divorce proceedings. According to the legal resource website HG.org, assets that are easier to hide:
- High-value assets can provide ample opportunities to perform financial sleights of hand.
- Small business ownership can also provide the wiggle room necessary for hiding assets.
- Business partnerships can make it more difficult to get an accurate reading in relation to the value that belongs to you as a married couple.
- A thick financial portfolio overall often makes it more difficult to assess your assets and their current values accurately.
Signs your spouse is hiding assets
While you may not always be able to tell that your spouse is hiding assets, you should be aware of some of the more obvious signs and alert your divorce attorney immediately.
Perhaps the most glaring sign that your spouse is committing community fraud and squandering assets is if they begin to live an abnormally lavish lifestyle or flaunt lavish purchases or trips. In this instance, contact your lawyer at once. Another sign to watch for is if you notice that income suddenly changes. While there can be many legitimate reasons for income changes, you should be suspicious if your joint income shift coincides with divorce proceedings.
Similar to income changes, watch for any bank account abnormalities. Save all your financial records so that inconsistencies can be more easily traced by your legal team. And while this may go without saying, pay attention to any secretive, cagey behavior your spouse exhibits.
How to Find Hidden Assets in Divorce
More important perhaps than ascertaining that your spouse is hiding assets is the process to strategically find the hidden assets. If assets have been squandered, then you need to be able to prove this if you wish to seek estate reimbursement.
While you may not be able to prevent unscrupulous spending of community property, your primary role is to document, document, document. Ensure that you have the passwords to all online accounts, track income religiously, print off bank and investment statements, and don’t assume that your spouse will choose to act with integrity. Even the most friendly of divorces can escalate quickly, and you need to make sure that you have all of your bases covered. Your future finances depend upon your attention to details and documentation efforts.
As HG.org emphasizes in their legal resource article, “If it suddenly occurs to you that assets you thought you owned are no longer in the picture, do not brush the matter off. If you notice one asset has gone missing, there might be others. If your spouse has far more involvement in your family’s finances, this brand of asset hiding is easy to accomplish and can be difficult to spot.”
Your Lawyer’s Role and the Discovery Process
While it is your role to pay attention to your community assets, it is your lawyer’s role to act on your suspicions. Your lawyer will need to follow a formal process that begins with requesting financial documents and can extend to hiring a forensic tracer to dive deep into all potential nefarious financial activities.
Your divorce attorney is responsible for working with the court to initiate the discovery process. According to a DivorceNet article, “If you don’t think your spouse will voluntarily disclose all financial information in your divorce, you or your attorney will need to use a formal, legal process to get information and documents.” While seemingly straightforward, the discovery process during divorce in Texas can take time and require more sleuthing than you might think if community assets have truly been hidden or squandered.
The discovery process can include what is known as forensic accounting. In the context of a divorce’s division of assets, forensic accounting is the in-depth investigative analysis of finances (either that of an individual or business) by employing the use of software and other applications to track down even the most obscure financial details. Forensic accounting can be key to demonstrating community fraud on the part of your soon-to-be-ex and documenting your own honesty regarding finances if your spouse accuses you of wrongdoing.
Get the Legal Support You Need During Divorce
Kelly J. Capps offers 28+ years of experience in protecting the rights of clients going through a Texas divorce involving the discovery of hidden assets. The legal team at Capps Law Firm, PLLC, is driven to find the best way to move forward for clients, ensuring their financial futures.
If you would like to discuss your family law matter and any concerns that you may have that your spouse is hiding assets during a divorce, contact our office or call our office at (512) 338-9800.