finding hidden assets in the divorce process

Finding Hidden Assets in an Illinois Divorce – Top 7 Questions Answered

As high asset divorce attorneys, we regularly field questions about finding hidden assets in an Illinois divorce. When it comes to the breakup of high assets or high net worth couples, this is almost always a concern. The divorce process is supposed to entail full disclosure of assets by each party. In high asset divorces, it seems that one party often engages in deceptive practices, like hiding their assets, all in an attempt to avoid sharing parts of the marital estate with their partner.  A forgotten asset is one thing, but when there is a deliberate attempt to avoid disclosure, what can a person do to guarantee that all the assets are disclosed?

Here are the top seven questions answered about finding hidden assets in an Illinois divorce:

1. Should I waive the discovery process in my divorce?

First, don’t tell your attorney to waive the discovery process. People are in such a hurry and are so impatient that they often will skip the most important part of the case to get it over with NOW! We understand that the discovery part of the case can take time, and some people even describe it as painful, but it is a necessity. Each party has to accumulate three years’ worth of every kind of paper that has entered their home and it is time-consuming. People are already too busy, and now the thought of trudging up three years’ worth of bank statements, credit card statements, and other financial documents is just is too much. But when you waive discovery, you risk missing some vital piece of information.

First, if your spouse “forgets” about the asset, the first inquiry from the court years after your divorce will about the formal discovery answers. Did your spouse lie on the formal answers? If so, you could potentially have a good case to re-open the judgment and re-allocate that asset. But what if you didn’t ask for formal discovery? The court may refuse your request to divide that asset because you could have discovered it and you did not. Why take the chance?

2. How do I find hidden assets during my divorce?

A determination has to be made if you’ll use a forensic accountant or not. An expert in this field may be costly, but a forensic accountant who knows what she is doing will find the answers you need quickly. Your divorce attorney will work with many professionals whose knowledge can be utilized in such a situation. The expert will guide the discovery process by informing your lawyer as to what documents need to be gathered and what types of business reports will be the most useful.

3. Is it possible marital assets are being hidden inside a business?

Assets are easily manipulated, especially in a high asset divorce. Business owners are always suspect since assets and/or income are easily hidden in a person’s business. Businesses that were once lucrative, suddenly start losing revenue during the divorce. There have been cases I’ve handled where I’ve asked the court to intervene and appoint a receiver to manage the business, just to make sure the accounting and money management were being done correctly.

Business Expenses

People also write off a lot of their personal expenses and call them business expenses, which lowers the revenue stream. Business owners will have payroll records for people that do not exist or might be paying their girlfriend an exorbitant amount of money for menial tasks. Businesses are a gold mine for questionable practices.

Shielding Income

For senior-level executives at a company, there are many ways to shield income. It is possible to carry over income into the next year or put the money back into the business for distribution later. They can delay a bonus or a raise.

Hiding Assets with Family and Friends

Oftentimes friends and family help out with hiding assets or “buying” an asset for a much lower price than the asset was worth. After the divorce, the asset is bought back and money is essentially hidden from the unsuspecting spouse.

When your spouse is invested in the process of hiding their assets, you will need professional help to either find it or prove to the court what has happened. An expert is likely needed to explain the scheme to the court so that the asset can be put back into the marital estate.

4. What will the Court do if I’ve conducted formal discovery and I later find out about a hidden asset?

Google all the stories about the man who won the lottery, didn’t tell his wife, but then divorced her, and how the lie unraveled. It is really interesting what people will try to get away with. In most cases that I’ve handled where an asset wasn’t disclosed, the court will divide the asset between the parties. The person responsible for hiding the assets can also be ordered to pay attorney’s fees and other expenses associated with finding the asset. In settlement agreements, it is not uncommon for a provision to be inserted into the agreement that addresses hidden assets. Most of the time, the person who hid the asset would get less than half of its value, with the lion’s share going to the injured spouse. But that only happens when you actually find it later.

5. What are the penalties for hiding assets in a divorce?

If a spouse is caught hiding assets, the court may require them to pay the spouse’s share of the assets to them. For example, if $10,000 in marital assets were hidden, the judge may order the spouse who hid the assets to pay $7,000 to the other spouse. Illinois is an “equitable state” and hiding an asset might just make the judge think that equitable means your spouse gets most of the hidden asset.

6. What if I know about the asset, but have trouble with the value?

I see this problem all the time. Litigants are familiar with evaluating some assets, like their house, but are reluctant to hire other evaluators. People are used to having their houses appraised, but rarely want to spend the money to evaluate other things, like a gun collection or car collection. In one case, a rare bobblehead collection needed to be valued. The person collecting the sports car or the rare collection usually knows its value, but when it comes time to list the asset and its value on their financial disclosure, it is valued lower than it should be.

I saw this once in a case with Precious Moments figures. The wife claimed they were worth about $20.00 apiece and anyone who sees them would likely agree. They are just a little statute of a girl or some other like-minded object, and my client (the husband) never paid attention to them. We’d almost agreed that their value was $20.00 apiece until someone else in my office pointed out that those could be worth close to a thousand bucks apiece. I couldn’t believe it, but it was true. One statute was valued at $750.00, and others were more. You should always have someone review a collection to value its worth, otherwise, you are leaving money on the table.

7. If I cannot afford an expert to find hidden assets in my divorce, what can I do?

Even without an expert, it is possible to discover hidden assets in the divorce process. A careful review of the bank accounts is essential. If you aren’t the person in charge of paying the bills on a regular basis, you’ll want to look for money that should be deposited, and isn’t, and also for withdrawals of money, particularly cash.
Bonus checks are easy to take and put into bank or investment accounts that you know nothing about. Make sure you send a subpoena to the employer to determine just how much money your spouse made. Review bank statements for large cash withdrawals or for expenditures you don’t recognize. It will get you started and you can determine if there is a problem with hidden assets or not.

Review All Personal Tax Returns and Financial Accounts

Review your tax returns critically. Although a lot can be done in cash, it is less utilized than ever before. Transactions leave a trace, but you need to know how to look for it. If your spouse purchased another home, one you didn’t know anything about, your tax return can reveal details about it. Same with investment accounts. Don’t let your spouse explain away the items you don’t understand. There is no shame in sitting down with your accountant and asking exactly what each line item means. You’ll need to learn about the IRA distributions, 1099’s and/or W-2s. There will be line items for bonds and CDs and even loans. Ask your accountant about monies that are carried over into the next year and how that impacts your bottom line. And if you are getting divorced in the middle of the year, or even the end of the year, make sure you know what deductions will be allowable to your spouse and how that will impact any refund.

Review Business Tax Returns

Business tax returns will detail how the gross income was reduced by expenses, and you’ll want to look at each and every one of them. Did your spouse write off a vacation as a business trip? What personal expenses are being paid by the business? All of these expenditures can add up, so it is important to review them.

Issue Subpoenas

Don’t be afraid to issue subpoenas. Don’t just ask for statements, but ask for the application. No one under-reports their income when they are asking for a loan on a home or their car. In fact, income can often be inflated to ensure that they qualify for the loan. Applications are great tools for cross-examination. In the subpoena, ask for all accounts in that person’s name. Oftentimes all accounts aren’t disclosed and the way you word your subpoena can impact what is received. Lastly, look for transfers between accounts. Make sure that you know all of the account numbers and questions any transaction going to an account when you don’t recognize the account number.

Finding Hidden Assets Takes Time and Patience

Searching for hidden assets can take a while. Make sure that you don’t rush the process and always conduct formal discovery. Even if you trust your spouse, going through formal discovery ensures you’ve uncovered everything. Your failure to do so during the divorce could preclude you from complaining about it later.

If you are facing a divorce and concerned you are not fully aware of all financial matters in your marriage, it is important to get trusted legal advice. Contact Anderson & Boback to speak with an experienced divorce attorney regarding your situation and get answers to questions about finding hidden assets should you divorce.

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