When you start hiding things, that’s when darkness creeps up.
Steve Kazee
At the time two parties are divorced, a court will divide your marital assets in some fashion. In Montana, the court is charged with making a “fair and equitable” division of the marital estate, i.e., the assets and liabilities acquired during your marriage. The issue of inherited, gifted or premarital property is a subject for an entirely different post, but suffice it to say there are some different considerations for the division of these types of assets. While much has been made about the difference between “community property” states and non-community property states, the truth is that the end result is really very similar in most cases.
But how can you divide what you don’t know exists? The simple answer is: you can’t and too often deceptive spouses get away with squirreling away assets that they don’t want divided.
Montana, like most states, requires that the parties to a divorce disclose all of their assets and liabilities regardless of whether or not they were acquired by inheritance, earned during the marriage or otherwise. Failing to disclose assets is unethical, unfair and illegal. Executing a disclosure statement that is knowingly incomplete or inaccurate is perjury.
Still, people do it all the time. So how do you protect yourself from a spouse determined to hide assets? First, it is wise to have a basic understanding of your finances before you are in a divorce setting. I am frequently surprised to find that one spouse has been left completely in the dark regarding finances throughout the course of a marriage. Having at least a working knowledge of your financial situation is probably a good idea for a wide variety of reasons that have nothing to do with divorce. As a collateral (and, hopefully, unneeded benefit) it will also help you know the nature and extent of your marital estate in the event that the worst happens.
If you know that a divorce is likely or imminent, begin gathering financial information as quickly as possible. If you sense that a divorce is likely, your spouse probably does as well and it is during this time that assets are most likely to be hidden. You should also know that, before a divorce filing is made, there is nothing illegal about a spouse moving funds around, selling assets, incurring additional marital debt or closing accounts. The earlier you get a bead on your finances, the less likely it is that assets will be hidden in the first place and the more likely you will be to find them later on. Once you suspect that a divorce is on the horizon, start gathering as much information as you can, including pay stubs, bank records, tax returns, credit card statements and investment/retirement account statements.
Bear in mind that some assets are not necessarily hidden but rather devalued in some way to avoid equalization in the division of the marital estate. This is particularly true where an individual is self-employed and/or operates his or her own business. For example, funds from a business may be “laundered” through a family member or close friend for phony services, then returned to the spouse after the divorce. Cash may be skimmed from the business, bonuses delayed until after dissolution or simply not reported on tax documents or financial statements. Mechanisms for hiding income and assets are limited only by the imagination and creativity of the party seeking to avoid disclosure.
There are many effective ways to uncover hidden assets and income. Often, basic discovery procedures will reveal telltale clues to the existence of hidden assets. Having financial records produced during discovery analyzed by a competent forensic accountant is typically the best way to locate missing assets. It may also be necessary to hire a private investigator to locate these assets. Sadly, if you are unsure whether or not there are hidden assets, it may cost you a significant amount just to find out. If hidden assets are located, however, the court will likely require the party hiding assets to pay those costs.
If you are considering hiding assets, my advice to you is simple: don’t. Not only is this kind of behavior illegal, wrong and unfair, but it can very likely end up backfiring on you. If your spouse discovers that you have hidden assets — even after a final decree has been entered — the court can reopen your case to divide those assets that were hidden. In addition, as a punitive measure, the Court can award the entirety of those assets to your spouse. Finally, the court will take a dim view of your behavior, a circumstance that can have disastrous results for the outcome of your case.
Christopher J. Gillette - Montana Family Lawyer 