Hidden Assets in a  Divorce – How a Legal Paraprofessional Can Help

Handling a divorce is already a challenging and emotionally taxing process, but it becomes even more complicated when one party suspects the other of hiding assets.

In Arizona, a community property state, all assets acquired during the marriage are typically considered joint property and should be divided equally in a divorce settlement.

However, some spouses resort to deceitful tactics in an attempt to keep assets hidden from their soon-to-be ex-partner.If you suspect that your ex-spouse is concealing assets in your Arizona divorce, it is important to take action immediately. 

Additionally, it is important to note that hiding assets during a divorce is not only unethical but also punishable by law.

In some cases, individuals who are found guilty of hiding assets may even face criminal charges. 

We will cover the following topics

• What are Assets in a Divorce
• What if My Spouse Has Undisclosed Assets 
• Signs Your Spouse is Hiding Assets 
• What To Do if You Suspect Your Spouse is Hiding Assets in Divorce 
• What are the Penalties for Hiding Assets 
• How De Novo Law Can Help 

What are Assets in a Divorce

In the context of an Arizona divorce, the term “assets” encompasses a wide range of property types that may be subject to division between spouses.

Assets in a divorce can be broadly categorized into two types: marital assets and separate assets.

Marital assets, also known as community property in Arizona, include all property and income acquired by either spouse during the marriage.

This category typically encompasses:

• Real Estate: This includes the family home, vacation properties, rental properties, and any other real estate acquired during the marriage.
• Bank Accounts and Cash: All checking, savings, and other bank accounts that were filled or accrued during the marriage fall into this category.
• Investments: Stocks, bonds, mutual funds, and other investment vehicles acquired during the marriage are considered marital assets.
• Retirement Accounts: Pensions, 401(k)s, IRAs, and other retirement accounts accumulated during the marriage are subject to division.
• Personal Property: Furniture, art, jewelry, vehicles, and other tangible items purchased during the marriage are included as marital assets.

Separate assets, on the other hand, refer to property that belongs solely to one spouse. This typically includes:

• Property Owned Before Marriage: Assets owned by one spouse prior to entering the marriage remain separate, provided they were kept distinct from marital assets.
• Inheritances and Gifts: Property inherited by one spouse or gifts given specifically to one spouse, even during the marriage, are generally considered separate assets.
• Personal Injury Awards: Compensation received for personal injury, except for loss of wages, is typically seen as separate property.

Under Arizona Revised Statutes §25-318, the court seeks to divide marital assets equitably, though not necessarily equally. This means the division is based on fairness, taking into account factors such as each spouse’s financial situation, contributions to the marriage, and future needs.

It’s also important to note that the distinction between marital and separate assets can become blurred, especially when separate assets are commingled with marital assets. For example, if one spouse owns a home prior to the marriage but both spouses contribute to the mortgage payments during the marriage, this can create a situation where the home becomes part of the marital estate.

What if My Spouse Has Undisclosed Assets 

Addressing undisclosed assets in an Arizona divorce involves different approaches before and after the divorce is finalized.

Before finalization, it’s important to inform your legal representation about any suspicions of hidden assets.

 They can utilize legal discovery tools, such as subpoenas and depositions, to uncover these assets. Hiring a forensic accountant may also be beneficial for analyzing complex financial situations. If undisclosed assets are found, this information can significantly impact settlement negotiations for a more equitable division.

If the divorce is already finalized and undisclosed assets are discovered, you may need to file a post-judgment motion to reopen the case.

This requires proving the existence of hidden assets and that they were not identifiable with due diligence before the divorce concluded. While this process can adjust the settlement to reflect the newly discovered assets, it is more complex and less certain than addressing the issue before finalization.

In both scenarios, proactive legal strategy and thorough documentation are key to ensuring a fair resolution. 

Signs Your Spouse is Hiding Assets 

Here are some red flags that could indicate your spouse is concealing property or finances:

1. Sudden Decrease in Income: If your spouse suddenly reports a significant decrease in income without a legitimate explanation, such as job loss or a pay cut, they may be attempting to reduce their financial obligations or the perceived value of their assets.
2. Overpaying on Taxes or Debts: By overpaying the IRS or creditors, a spouse can create a situation where they appear to have less available income, while actually setting up a scenario where they’ll receive a refund or credit after the divorce.
3. Unusual Financial Transactions: Watch for unexplained withdrawals from bank accounts, large purchases made without reason, or the transfer of money to family members or friends. These could be attempts to temporarily move assets out of sight.
4. Reluctance to Provide Financial Information: If your spouse is unwilling to share financial documents or provide clear answers about financial holdings, this could indicate they are trying to hide assets. Transparency is typical in honest dealings; evasion is not.
5. Creation of New Accounts: The opening of new bank or investment accounts in their name only, especially if done secretly, can be a sign your spouse is trying to divert funds.
6. Changes in Business Practices: If your spouse owns a business, they may start to pay nonexistent employees or delay signing new contracts or collecting payments until after the divorce, thereby reducing the business’s apparent value.
7. Physical Assets Disappearing: Items like art, jewelry, or collectibles suddenly disappearing from the home without explanation can signify an attempt to undervalue the marital estate.
8. Use of Cryptocurrency: Cryptocurrencies can provide a relatively easy way to hide money due to their less traceable nature. If your spouse suddenly shows an interest in Bitcoin or other cryptocurrencies, it could be a red flag.
9. Defensive Behavior: If asking about finances leads to unusual defensiveness or anger, it may be a sign that your spouse has something to hide.
10. Documents with Missing or Incorrect Information: Inaccuracies in financial documents, such as tax returns, bank statements, or investment accounts, can be a sign of manipulation or concealment.

What To Do if You Suspect Your Spouse is Hiding Assets in Divorce 

Suspecting your spouse is hiding assets during a divorce can be distressing and challenging. However, there are specific steps you can take to uncover the truth and ensure a fair division of property. If you find yourself in this situation, consider the following actions:

1. Gather Documentation: Start by collecting as much financial documentation as possible. This includes bank statements, tax returns, investment account statements, property deeds, and any other relevant financial records. The more information you have, the better.
2. Monitor Bank and Credit Card Statements: Keep an eye on all financial statements for unusual transactions, such as large withdrawals or transfers to unknown accounts. This can help you trace where the money is going and identify any hidden assets.
3. Hire a Professional: Consider hiring a forensic accountant or a financial investigator who specializes in uncovering hidden assets. These professionals can scrutinize financial records, track down undisclosed accounts, and evaluate business records for any signs of manipulation.
4. Legal Intervention: Work with your legal professional to utilize legal tools available in divorce proceedings, such as subpoenas and depositions, to compel your spouse to disclose financial information. Your lawyer can also request court orders to freeze assets, preventing your spouse from hiding or dissipating them further.
5. Review Tax Returns: Tax returns can be a valuable source of information in uncovering hidden assets. They can reveal inconsistencies, undisclosed income, or investments that your spouse may not have disclosed otherwise.
6. Check for Overpayments: Look for any overpayments to creditors or the IRS, which might indicate an attempt to hide money that could be returned after the divorce settlement.
7. Consult with Your Legal Representation: Regularly communicate with your family law proffesional about your concerns and findings. They can provide legal advice tailored to your situation and help strategize the best approach to uncover hidden assets.
8. Stay Organized: Keep detailed records of all your findings, communications, and steps taken. This documentation can be crucial in legal proceedings and in ensuring a fair division of assets.
9. Consider Court Action: If there’s evidence of hidden assets, your attorney may recommend court action. The court can issue orders for asset disclosure and, in some cases, can sanction a spouse who is found to be hiding assets.
10. Negotiate Strategically: If hidden assets are discovered, this can significantly impact divorce negotiations. Your representation can use this information to argue for a more favorable division of assets on your behalf.

Remember, in Arizona, both parties are entitled to an equitable division of marital assets under Arizona Revised Statutes §25-318. Taking these steps can help protect your financial interests and ensure that you receive a fair share of the marital property.

Do not attempt to hide assets yourself or retaliate against your spouse, as this can negatively impact your case and lead to legal penalties.

What are the Penalties for Hiding Assets 

The law mandates full and honest disclosure of all assets and liabilities by both parties in a divorce. When a spouse intentionally conceals assets, they not only breach this legal obligation but also undermine the integrity of the judicial process.

The penalties for hiding assets can vary based on the extent of the concealment and the specifics of the case but generally include:

Monetary Sanctions

In cases where one spouse has hidden assets, the Arizona courts may impose monetary sanctions as a penalty. These sanctions can include fines or requiring the offending party to reimburse the other spouse for additional legal fees incurred while uncovering the hidden assets. These financial penalties serve as a deterrent against the concealment of assets and compensate the non-offending spouse for the extra costs involved.

Compensatory Division of Assets

If hidden assets are discovered during the divorce proceedings, the court might order a compensatory division of assets. This means the non-offending spouse may receive a larger share of the marital assets than they would have otherwise. This adjustment aims to rectify the imbalance created by the concealment and ensure a fair distribution of property.

Contempt of Court

Hiding assets can be considered contempt of court, a legal offense that disrespects the court’s authority. Penalties for contempt can include additional fines or even jail time, depending on the severity of the concealment and the judge’s discretion. This measure emphasizes the seriousness of full financial disclosure in divorce proceedings.

Criminal Charges

In extreme cases, hiding assets during a divorce can lead to criminal charges, especially if the act involves fraudulent activities like forgery, perjury, or other forms of legal deception. These charges can result in more severe consequences, including criminal records and incarceration, highlighting the legal system’s stringent stance against asset concealment.

Revised Settlements

If hidden assets are discovered after a divorce settlement has been finalized, the courts can reopen the case to adjust the terms of the settlement. This can lead to a revised division of assets more favorable to the non-offending spouse. Such actions ensure that justice is served, even post-judgment, and reinforce the importance of honesty in the disclosure process.

By understanding these potential penalties, spouses can grasp the serious repercussions of hiding assets in an Arizona divorce. Full and honest disclosure is not only a legal requirement but also a critical component of achieving a fair and equitable division of assets.