Finding Hidden Assets in High Net Worth Divorce Cases
November 15, 2019 | Divorce, Property, Wealth
A major component of any divorce is identifying the marital property that will later be divided. Although this sounds simple, it often is not because people are financially motivated to hide assets. If assets remain hidden they cannot be divided.
Hidden assets can be a major issue in high net worth divorces. This is especially true if one spouse controlled the finances during the marriage while the other spouse was in the dark. Consequently, having an attorney with experience in finding hidden assets can make the difference of hundreds of thousands of dollars, or more.
There are a number of techniques a divorce attorney can use to discover hidden assets. The techniques referenced in this article are not exhaustive and strategies may vary. One thing is certain, however. At the outset of the case the divorce attorney must apply a specific strategy tailored to the financial circumstances of the case to uncover hidden assets.
Each party to a divorce needs to fill out a financial affidavit. In theory, a party will list all he/she earns and spends, and all he/she has and owes. Unfortunately, all too often, a party “forgets” to list an asset or two, such as investment or retirement account. Nonetheless, a financial affidavit is a good starting point in the process of identifying assets that will be divided in divorce.
In DuPage and Cook County divorce cases, each spouse is required to provide copies of tax returns along with his/her financial affidavit. Tax returns are critical resources when looking for hidden assets. Although people may be inclined to “forget” to list assets in a financial affidavit, they are less inclined to do so on tax returns where the IRS is watching. In a 1040 tax form, you are to list all of your income in a given year. This includes income from wages, salaries, business income, dividends, capital gains, and distribution from IRA or deferred compensation plans. This is a great place to discover assets. Also, 1040 schedules can offer clues: Schedule A lists deductions and may show payments from hidden assets; Schedule C may show profits and losses from hidden business; and Schedule E may show income and losses from a hidden rental property.
Another powerful tool to uncover hidden assets is the discovery process. An attorney should issue interrogatories (written questions) to a spouse which are answered under oath. These questions should include inquiries regarding all assets he/she may have an interest in. Also, a request for production of documents should be made upon the spouse. These should include requests for bank statements or other records from financial institutions which the spouse has in his/her possession or control. Additionally, the spouse should give a deposition where he/she will testify under oath about financial assets. Moreover, the attorney should issue subpoenas for records to any third party, such as banks or businesses, which may have relevant financial records. A subpoena for loan applications may reveal a treasure trove of information, including personal financial statements which should list assets, debts, and income. Again, a spouse may “forget” to list assets or debts on a financial affidavit, but probably will not on a loan application if doing so results in bank fraud.
After the attorney receives these records, he/she can began to trace records and look for hidden assets. With proper strategy and preparation, an experienced attorney will locate all assets. At Botti Law Firm, P.C., we have been serving clients in DuPage and Cook County for nearly 50 years. If you would like to speak to an experienced attorney, please email us or call (630) 573-8585 to schedule a free consultation.