Most divorcing parties hate the idea of handing half their estate over to their soon-to-be ex. Unsurprisingly, when it comes time to divide the marital estate, some try to cheat by concealing assets. If your divorce is imminent and you suspect this may be the case, an experienced family legal matters attorney can help you examine your options.
What Is Equitable Division?
Before you can determine how to uncover hidden assets in a divorce, it helps to first understand exactly what property you are entitled to when your marriage ends. If you lack a valid prenuptial agreement, a Tennessee court will award the property to you and your spouse through a process called “equitable division.” Equitable division is based on principles of fairness. It does not necessarily mean 50/50.
To begin the process, the court first classifies the parties’ assets as either marital property or separate property.
What Are Marital Assets?
Only property classified as “marital property” is subject to equitable division. Marital property generally includes all assets and debts acquired from the date of marriage. This includes cash, income, retirement accounts, jewelry, condos, cars, asset appreciation, and stocks.
What Are Separate Assets?
Separate property is not subject to equitable division. Under Tennessee divorce law, the following typically constitutes separate property:
- Property acquired before the marriage;
- Property excluded by valid agreement, such as a prenup;
- Property acquired through inheritance or gift; and
- Property acquired after a judgment of legal separation.
In addition, the appreciation of a business asset acquired before marriage may constitute separate property if the other spouse contributed nothing (neither directly nor indirectly) to the enterprise.
How Do I Identify Marital Assets?
During a divorce in Tennessee, both you and your spouse will have an opportunity to ascertain and value the extent of the other’s assets. Courts call this process “discovery.” You will then determine whether all or a portion of each asset constitutes marital property. If marital property, an asset will be subject to equitable division.
Discovery lets the parties determine the value of a fair settlement. In addition, an accurate inventory and valuation of the parties’ assets is necessary when calculating child support and determining any alimony award. In the event the parties cannot agree on a settlement, the discovery provides your attorney with the information necessary to litigate the case before a judge. There are two primary methods of discovery: requests for interrogatories and requests for production
What are Interrogatories?
Interrogatories are a fancy way of saying “written questions.” The other party must answer these in writing and under oath. Interrogatories generally inquire into the other party’s financial life. However, in Tennessee, any question reasonably calculated to lead to the discovery of relevant evidence is permissible. For example, an interrogatory may request the opposing party disclose the existence and nature of all purchases over $5,000 since the filing of a divorce. Expensive purchases, especially right before divorce, tend to point to an asset acquired with marital funds.
What Is a Request for Production of Documents?
During the discovery process, you have the right to request documents from the other party. These may include electronic financial statements, business records, cell phone records, and sometimes even copies of hard drives and other physical things.
Under new Tennessee Rules of Civil Procedure, any opposition to the request by the other spouse must disclose whether any responsive materials are being withheld. For example, if a party believed the other spouse was using a secret email account, that other spouse would have to effectively disclose its existence to object to a discovery request for copies of its contents.
What Are Common Methods of Hiding Marital Assets?
The answer to how to uncover hidden assets in a divorce varies with the nature and value of the assets in question. For substantial assets, it’s not uncommon for a spouse to use offshore bank accounts or creative trust arrangements. In some cases, it may be necessary to hire the services of a forensic accountant. For those of ordinary means, asset concealment is much less complex.
This is perhaps the most common way to conceal assets. When one or both parties foresee a divorce, it is easy to go to the bank and simply start withdrawing cash. If you suspect your spouse may be socking money away in anticipation of divorce proceedings, check your bank statements for any activity such as an unusually high dollar value or a number of withdrawals.
Buying New Possessions
Has your spouse recently outfitted their office with new furniture or other expensive items? Once the divorce is imminent, it’s not uncommon for a spouse to conceal their income or net worth by suddenly purchasing high-value items like cars, jewelry, and the like. During the divorce, the value can be underreported. The spouse then sells them off after finalizing the divorce.
Paying off a Family Loan
Sometimes a spouse will suddenly claim that they owe a close friend or family member a large sum of money. However, in reality, the family member is simply safeguarding the funds until the divorce concludes. If you suspect this, you should demand the other spouse explain what the loan was for and provide you with any documentation.
Not Reporting or Underreporting Cash Income
This is common when one or both spouses work in the service industry and makes a substantial percentage of their salary in the form of tips or bonuses. It’s also common where a spouse owns their own business. If you suspect the other spouse is intentionally reporting lower income than they really make, look for their bank records to reflect a sudden drop in income around the time the divorce became imminent.
This occurs when the other spouse works with their employer to put off a salary increase until after the divorce so their child support and alimony obligations will be lower. If this is the case, a lawyer can subpoena the employer and question them on the matter. A lawyer can also compel the employer to disclose relevant documentation.
What Happens If I Catch My Spouse Hiding Marital Assets?
Lying during a divorce proceeding about the amount and value of one’s assets is wrong and unfair to the other spouse. Not only does it shortchange the other spouse, but it also potentially deprives children of the marriage of adequate child support. For these reasons, severe penalties attach to those caught concealing assets.
For starters, courts may award a disproportionate share of the discovered hidden asset to the other spouse. You may lose more of the asset than you would have had you been honest from the start.
In addition, hiding assets in a divorce proceeding is grounds for contempt. A court is likely to impose sanctions on the offending spouse. The sanctions typically take the form of an award of attorney fees to the non-offending spouse.
Those caught hiding marital assets in a divorce lose great credibility with family law judges. A judge may take such fraud into consideration when dividing property or even when making child custody determinations.
You Are Entitled to All of Your Share of Marital Property
It’s not uncommon for parties in a divorce to hide valuable assets from the other spouse. This is especially the case at the beginning of the divorce. If the breakup is imminent and you suspect your spouse is socking away assets, contact us today. The experienced lawyers at Batson Nolan PLC can help you discover—and recover—what is yours. Since 1860, we have been providing exceptional legal services to clients in Middle Tennessee, Southern Kentucky, and beyond. With hundreds of years of combined legal experience, we pride ourselves on our exemplary track record of providing excellent legal representation. Contact Batson Nolan PLC today for a consultation.