Every divorce involves money. There may be a little or a lot, but Texas divorce law requires the identification, classification, and division of marital property. To divide things fairly, each spouse has to know what property is out there. Therefore, it is tempting to hide assets because rather than splitting the hidden asset, the spouse successfully hiding it gets to keep all of it.
The most common ways assets are hidden include:
- Transferring the asset to another person (family member, mistress, etc.)
- Moving the asset overseas; and,
- Converting to cash, gold, or other easily hidden assets.
There can be severe consequences to hiding assets, though. If hidden assets are discovered during the divorce process, a court can punish the spouse doing the hiding in many ways. This punishment includes awarding:
- Attorney fees against the spouse doing the hiding;
- All or part of the hidden asset to the other spouse; and,
- Additional other assets to the other spouse.
Of course, if the hiding spouse gets away with it, then there is a great benefit to him or her. It is a lawyer’s job to search for hidden assets to protect their client, assuming the client authorizes them to do so. Searches are expensive, and many clients opt not to incur that expense. That may be a bad decision by a spouse, but they are free to make it.
Let’s look at the most common types of hiding in more detail.
Transferring to Another Person
A spouse may decide to transfer marital property to another person to try to keep it from his or her spouse. This is most commonly done with transfers to family members since they can usually be relied upon to transfer it back to the spouse when the case is over. Another common person to transfer assets to is a person they are having an affair with. Either way, these can be difficult assets to recover. The lawyer working for the cheated spouse will usually have to sue the person to whom the property was transferred or attempt to get it back into the marital estate. Common examples include buying a vehicle for a mistress or selling part of a business to a family member at a ridiculously low price.
Assets that are moved overseas can be difficult or impossible for a Texas court to get control over to divide in a divorce. Since the overseas asses are nearly impossible to gain control over, the divorce court cannot divide it or practically award it to anyone. So the spouse moving the assets may be able to keep it. This tactic is often combined with transferring the asset to another person who is overseas. A typical example would be using community property funds to purchase a piece of farmland in India under the name of a parent.
The most manageable assets to hide are the untraceable kind: cash, jewelry, gold/silver bars, and negotiable instruments (cashier’s checks, bearer bonds, etc.). We often see these assets disappear out of safe deposit boxes at the beginning of a divorce, with the hiding spouse claiming there was no such thing. Another common example of this is when a spouse runs a business that handles a bunch of cash during the divorce. Then suddenly, the business is not making a profit anymore, and the money is being pocketed. This particular method of hiding funds is the most difficult to recover.
I wish I could say that hiding assets in divorce never works, or is going to backfire on the spouse doing the hiding, but the truth is that neither statement is true. Hiding assets is common enough, and often it does work. It takes an excellent lawyer on the other side, armed with the funds and client permission to investigate, to find and punish the spouse hiding the funds. This does not always happen, and most of the time, the spouse being cheated out of marital property never even knows it happened.