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Hoge Partners, PLLC
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200 South Fifth Street
Louisville, Kentucky 40202
Fax:  (502) 583-1223
Phone:  (502) 583-2005

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Finding Hidden Assets in a Divorce

On our webpage, "Protecting Marital Assets in a Divorce", we talk about the need to tell the difference between Marital Property versus Non-Marital Property.

But what happens if you don't know certain assets exist or if you don't know what has become of them?  For instance, the houseboat or vacation home you've owned for a couple of years was sold but you don't know what happened to the proceeds.

First and foremost, we recommend that ALL married parties keep themselves thoroughly informed about the family's assets and liabilities.  Whether you're going through a divorce or not, you need to know what things are owned, what debts are owed, what the family's monthly expenses are and so forth.  What if your spouse becomes incapacitated?  Would you know what bills have to be paid each month, where to find the disability insurance policy or healthcare directive, or what income you can expect to come in during that period?  You owe it to yourself to know all of these things.

But sometimes (more often than you might suspect), one spouse will have a hidden asset or more than one, completely unbeknownst to the other party.  It could be a winning lottery ticket, collectibles or something more complex such as secret business earnings or hidden cash.

By the same token, sometimes a spouse will keep debts, bills and liabilities a secret from his/her spouse.  This could include undisclosed credit card bills, loans that have to be repaid or even gambling addiction.  These are important but will be discussed another time.

For now, let's focus on hidden assets.  Anyone getting a divorce in Kentucky is required to file and exchange with the other spouse a Verified Disclosure Statement, which is a detailed explanation of all income, assets, liabilities, special circumstances, etc. that impact the equitable division of the marital estate.  "Equitable" does not mean "equal" but unless an asset can be proven to be non-marital in nature, then it is presumably going to be divided.

If you have suspicions about hidden assets, tell your attorney right away!

Your lawyer is going to closely examine all of the documentation that is required to fully evaluate the marital estate.  The tax returns, for instance, may include important clues about secret assets or earnings and it's often necessary to compare last year's return to the one for the year before and the year before that.

Schedule B of a federal return relates to dividend or interest income.  Schedule D covers capital gains or losses.  Schedule E discloses income from rental property, estates, trusts, corporations and partnerships.  Your attorney or financial consultant may even need to review returns from much earlier to get the full picture, including tax loss carried forward or backward.

Have excess tax payments been made to shield income from the other spouse?  Has money been put into a child's account without the other spouse's knowledge?  Have fake debts been created?  Does the spouse have a secret PayPal account, maybe an investment in Bitcoins or other online financial systems?  Is there a possibility of a secret out-of-town or out-of-country bank account?

Beyond tax returns, there are many, many other records that may need to be obtained and examined.  If the parties or either one of them have an ownership interest in a business, then those records will have to be reviewed.  A forensic accountant may have to be hired to do a full investigation of the business earnings and status.  Deferred compensation will have to be examined as a possible means of hiding income until after the divorce.

Other documentation and sources could include deeds, mortgages, loans, UCC filings, business and personal banking records, safety deposit boxes, etc.  Employment contracts may have to examined and there's even a possibility of deposing the spouse's employer as most are reluctant to lie under oath.

What can you do to protect yourself?

Be as informed as possible about the money coming into the marital estate, the assets owned by the parties and the money going out as well.

Run a credit check from time to time to see if any unexpected credit cards or other debts show up.

Ask your accountant to explain the tax returns to you before you blindly sign them.

Discuss your situation with your Family Law attorney if you have concerns about hidden assets.

Finally, make sure your investigation is worth the cost.  Look first for a knowledgeable lawyer who knows what smoking guns look like, especially if you believe they have been hidden by a clever spouse.

 



The attorneys at Hoge Partners, PLLC would be happy to talk to you about uncovering hidden assets in a divorce or support action.  Give us a call today!