Why hide assets in a divorce case?
The answer is simple, to prevent sharing the assets with your spouse.
WARNING: Do not hide assets in a divorce case! – “Don’t do the crime, if you can’t do the time” – Baretta. Hiding assets in a divorce case may be illegal and the consequences will likely far outweigh the gain. In Michigan, lying under oath is perjury and is punishable by imprisonment in the State prison for not more than 15 years. (The Michigan Penal Code Act 328 of 1931, Section 750.422). Simply put, just don’t do it!
The five most common ways to hide assets in a divorce case.
It is important to understand how to hide assets in a divorce case so you know how to find the assets. After all, how can you ensure a fair outcome if a spouse is hiding assets?
1. Cash is king. The proverbial saying: “Cash is king” is significant when someone is trying to hide assets in a divorce. Cash is fungible and not easily traceable. Of course, the problem with holding cash is spending it. Once cash is spent, it becomes traceable and can more easily be discovered during a divorce.
Remedy: If you suspect a spouse is hoarding cash, in addition to basic discovery, examine the expense side of the balance sheet. After all, what good is cash if you can’t spend it?
2. Defer compensation. In this situation, the deviant spouse will try to hide assets by requesting his/her boss to defer compensation. Typically, a bonus or raise, until “after the divorce”. Deferring compensation denies the other spouse from sharing in the money or obtaining a higher alimony or child support award.
Remedy: If you suspect your spouse may be deferring compensation, ask questions directly to the employer. Rarely does an employer want to become a witness in an employee’s divorce case, regardless of how wonderful he/she is.
3. Transfer assets prior to filing for divorce. In this instance, the deceiving spouse will hide assets by transferring a business or property prior to filing for divorce to a friend or relative. Since the asset is no longer part of the marital estate, the other spouse cannot share in the asset.
Remedy: Follow the money. Typically, the deceiving spouse cannot provide verification that the transfer was made for fair market value. In addition to verifying the amount paid, ask for copies of checks and bank statements to verify the money actually changed hands. In may cases, a fraudulent transfer can be undone. In Michigan, the Uniform Fraudulent Transfer Act MCL 566.34 can be used to set aside the transfer.
4. Incur debt. Since both assets and liabilities incurred during the marriage are typically equally divided. Another way to hide assets in a divorce is to incur debt. The share of the assets awarded to the innocent spouse is reduced by the debt. In this instance, the deviant spouse will incur a debt that is “forgiven” after the divorce. When the parties divide the assets and the liabilities, the innocent spouse receives the asset minus the debt. The deviant spouse only receives the assets.
Remedy: This case presents itself as a loan or promissory note owed to a friend or a family member. Following the money trail usually unravels this sham. Request copies of checks and bank statements to verify the money actually changed hands and request verification of the debt.
5. Pull the wool over eyes. Deception is built on trust. Build trust with your spouse to “save money” or “remain friends”. Once trust is built, you hide assets with deception. Some common examples include representations like:
- “We don’t need an appraisal on the home – we both know it is worth X dollars.” When in fact you know it is worth much more.
- “We don’t need to value my business, without me, it is worth nothing.” or “the business is failing.” When in fact, the business has value without you or you are closing a lucrative business deal.
- “I am probably going to lose my job” when your job is secure.
Remedy: The Russian proverb “doveryai no proveryai” was adopted by Ronald Regan as his signature phrase: “Trust but verify” which is the remedy to the deception. There is nothing wrong with trusting a spouse provided you verify the facts. Facts can be verified with discovery. In divorce cases, discovery typically includes written questions under oath and subject to the penalties of perjury, orders to produce documents (subpoena) and live testimony (depositions). Most importantly, do not rely on your spouse for legal advise. I lose count on how many times I repeat this phrase a week. Your future ex spouse is not your lawyer.
Understanding how to hide assets in a divorce case is the first step in understanding how to protect against fraud, ensuring a fair result. When a party divorces and money is at issue, every dollar counts.
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By: Daniel Findling
About Findling Law:
I have been in practice for almost 20 years and practice exclusively in divorce and family law. My practice includes several attorneys who share the core value of practicing law to help people navigate change in their life, without compromising principles. We have extensive experience in high socio-economic, high profile and high conflict cases which has nurtured a skill set applicable to all divorce and family law cases regardless of socio-economic status. We recognize that it is the application of the law that is most important aspect of practice. That is why we provide more free information on divorce and family law than any other Michigan law firm.