How can I know if my spouse is hiding assets?
Full Collaborative Disclosure is the answer.
How can you be certain your spouse has disclosed all marital assets during a divorce? The answer depends on how you divorce. In a litigated divorce, there is no duty of full disclosure, while in a collaborative divorce, spouses agree to voluntarily disclose all relevant information. A financially complex divorce generates conflict and may produce dishonesty as each spouse tries to get what they feel is their fair share of the marital estate. The collaborative process requires full disclosure and collaborative attorneys monitor their client’s sharing of information. There is no similar obligation to disclose relevant information in a litigated divorce. Instead, litigation attorneys hide information and resist discovery of documents.
Collaborative Disclosure Safeguards
In a collaborative divorce, the parties sign a Participation Agreement that obligates them to disclose all relevant information. Upon request, the collaborative parties can be required to sign an affidavit stating they have fairly and fully disclosed all marital property. Also, a paragraph can be included in the Divorce Decree automatically awarding any undisclosed marital asset to the party who did not possess or control the property prior to divorce.
The Neutral Financial Professional
Collaborative financial professionals are trained to analyze financial information and detect missing data. By comparing information from tax returns, brokerage and bank statements, employment contracts, pension plans and analyses of cash flow and net worth, collaborative financial professionals can determine if there is missing information. For example, if a tax return shows dividend or interest income but there is no corresponding brokerage or bank statement showing assets that earned the dividend or interest, that’s a sure sign marital assets are missing. Also, you can accumulate income generated during a marriage, subtract expenses and compare the balance with reported marital assets. If the two values don’t roughly match, that’s an indication there may be missing information.
In a traditional litigated divorce, there is no duty to disclosure. Instead, litigation attorneys force the other side to submit formal discovery requests to uncover assets. Formal discovery includes requests for production of documents, requests for answers to interrogatories, requests for admissions, a request for a verified inventory and appraisement and the taking of oral depositions. Formal discovery doesn’t guarantee you will uncover all the marital assets, because there is no requirement to disclose any information not specifically requested in writing. You have to ask for the information to receive it. In a collaborative divorce, the parties voluntarily disclose everything.
Ways to Hide Assets
There are several ways to hide assets: stash cash in a safe deposit box, prepay income taxes, give cash to a friend for safekeeping or deposit funds in a numbered offshore account. It’s difficult to discover cash hidden in a safe deposit box. You can question your spouse under oath during a deposition and analyze the books to see if they balance, but these methods are not fool-proof. Prepaid income tax is easy to find if you know to look. Hiding money with a friend or paramour is difficult to discover even if you take their depositions. And, finding money hidden in a numbered offshore account is nearly impossible. Even the IRS has difficulty discovering the existence of these accounts.
Trusting Collaborative Disclosure
The most common question asked by couples considering a collaborative divorce is: how can I be certain my spouse isn’t hiding assets? It’s natural to be concerned that your spouse may have been hiding money. The collaborative process contains several safeguards to ensure that all assets are disclosed, while there are no guarantees in a litigated divorce. Collaborative attorneys make certain their client discloses all significant information; litigation attorneys force the other side to search for assets. If a collaborative attorney believes his client is hiding assets, he will order his client to disclose the asset or he must withdraw from representation. This usually convinces a collaborative client to cooperate and if they don’t, you are aware there is a discovery problem. Litigation attorneys have no such duty.
The Benefits of Collaborative Disclosure
Discovery disputes during a litigated divorce are costly and encourage hiding assets, because there is no contractual obligation to disclose relevant information. By contrast, collaborative clients agree to full disclosure and engage a single financial professional trained to spot discovery problems. Most important, by agreeing to a collaborative divorce, you and your spouse have signaled you want to reach an amicable settlement of your dispute without court intervention. The Participation Agreement guarantees you are getting the fullest disclosure possible during a collaborative divorce.
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