How to Find Hidden Assets During a Divorce in Illinois
The first step to finding hidden assets during a divorce is to document all assets owned by each spouse. You'll want to document tax returns and financial accounts, and do a business cash flow analysis and a lifestyle analysis. You can also use “discovery” tools during your divorce to find hidden bank accounts, income, or other assets.
What to Do If You Suspect Your Spouse Is Hiding Assets
When you suspect your spouse is hiding assets, you need to find proof and file your claims with the court at the right time.
It would be nice to be able to trust the other party in a divorce, but hiding assets is all too common. The National Endowment for Financial Education (NEFE) reported in 2018 that of the US adults who have combined assets, two in five (41%) admitted to hiding money from that spouse. There are certain situations where a spouse is more likely to hide assets:
- When one spouse was in charge of the finances.
- When the divorce has been coming for a while.
- When the divorce is a high asset case.
In the beginning of the divorce, spouses provide financial information regarding any assets, income, and expenses, so an equitable property division can occur.
Penalties for Hiding Assets
If a spouse tries to hide an asset and it is later found, there will be legal consequences. They may have to pay any attorney fees for the work it took to find the assets. Or, they could have to give you a significant portion of the hidden asset.
For example, there was a case in California where a woman won the lottery a couple of weeks before filing for divorce–she then successfully hid the money through the entire divorce. After the divorce, her ex-husband found out, took her back to court for it, and they gave the ex-husband the entire lottery winnings. Most cases of asset hiding are not this dramatic, but they do have consequences.
Where To Look for Hidden Assets
The first step to checking for hidden assets is doing some of your own research. You can also get professional help later on if necessary.
Get Copies of Your Tax Returns
Examining the last two to five years of tax returns may reveal sources of income you didn’t know about. Inconsistencies in returns should also be flagged for further inspection.
Carefully Review Your Bank Account and Credit Card Statements
Look for transactions you were not aware of and track where the funds went. A spouse trying to hide money may put cash into a new personal account or “gift” money to a friend or relative. Bank records can often be subpoenaed when necessary.
Check Public Records
Your local county’s court records often have public information that can be helpful such as judgments, bankruptcy claims, tax assessments, or business records. If the information is not available online, there are usually physical records at the county courthouse or city hall.
Consider Hiring a Forensic Accountant
If you are confident the other party is hiding assets, it may be time to call the professionals. Forensic accountants compile financial information to investigate deeper into assets and income. They are not necessary, but they offer the expertise needed to find well-hidden assets.
How Are Assets Hidden in Divorce?
Deciding to hide assets could have been a spur-of-the-moment decision or something they planned for an extended period of time. No matter the reason, they take a risk that could lead to jail time for perjury if caught, but they aren’t thinking about that.
People who hide assets are looking to save themselves money or financially harm the other party. There are many methods these people use to hide assets–below are some of the common ways to look out for.
Hiding or Undervaluing
When it comes to splitting art, antiques, collections, tools, or other items like these, some people claim they are worth less than their actual value. These same assets are often easier to hide. As long as the assets are known about, an expert can be used to assess their value.
In Plain Sight
Another method is what we call the “in plain sight” method where one spouse uses liquid funds like cash or savings accounts to pay off a mortgage or other debt. This negatively affects the other spouse because it’s harder to evenly split physical assets like a house or a car and the funds take longer to actually have in-hand. This is most often used by a spouse that earns more than the other.
The use of marital assets to pay off marital debts does happen regularly in a divorce, so proving that it was done to hide assets can be difficult.
In this scenario, a spouse pays off an “old debt” to a friend, but there never really was a debt, and the friend simply gives the money back after the divorce. Or, it’s a legitimate debt, but the lying spouse overpays and gets the overpaid amount back later. If you suspect your spouse of this, address it with your attorney and keep any evidence such as texts or bank records with inconsistent amounts.
Similarly, a spouse can work with their employer to hide funds by delaying bonuses and/or raises until the conclusion of the divorce. This delay of payment from an employer can be difficult for individuals to prove in court because evidence of this is hard to come by.
Children's Bank Accounts
An even more unethical method of hiding assets is establishing a joint bank account using a child's social security number to store funds. This can be hard to find and is a method some individuals use to their advantage during a marriage or divorce.
Are you ready to move forward? Call (312) 757-8082 to schedule a strategy session with one of our attorneys.
How Can Hidden Assets Be Uncovered?
Hidden assets often leave a paper trail, so an in-depth analysis of financial documents can reveal their location or at least their existence. Below are four possibilities where assets could be found.
1. Income Tax Returns
Begin looking through tax returns because they provide a roadmap to finding hidden assets. Here are some specific places to pay attention to
- W2s – W2 forms detail received salary information as well as any of the deferred compensation packages or executive benefit plans.
- Form 1040 – 1040 forms have a lot of information. They outline all forms of income from wages to investments to social security.
- Schedule A – Schedule A reflects deductions of interest which indicates the existence of loans. Loans not known about may have been used to purchase undisclosed assets that should be split.
- Schedule B – Schedule B shows interest and dividend income on lines 11 and 12. These are typically used to hide assets in offshore accounts or trusts. Entries on Schedule B could be the only indication of an offshore foreign trust account.
- Schedule C – Schedule C indicates profits or losses from a business. Schedule C can help find evidence of a business used to fund a Keogh plan to increase retirement deductions.
- Schedule E – Schedule E details income-generating assets such as real estate, royalties, and trusts.
Another way people try to hide assets is through overpaying federal taxes so they get that money back later.
2. Bank Accounts and Checks
Reviewing savings, checking, and investment accounts for inconsistencies can show evidence of hidden assets. For example, large deposits could point to hidden stocks paying a dividend, or large withdrawals could point to the creation of a new account.
Checks detail the account and financial institution in use which could show a hidden account or accomplice. Uncashed traveler’s checks are also a place people hide cash.
3. Cash Flow in a Business
Analyzing how money flows through a business indicates whether there are good or bad internal controls. These controls detail whether the person receiving and recording deposits are the same person. Poor internal cash flow controls could mean one spouse is hiding assets or conducting business for future favors or payment.
4. Lifestyle Analysis
Looking at and analyzing a lifestyle while keeping the income being reported in mind may reveal inconsistencies. Lifestyle analyses are usually done by forensic accountants.
Dissipation of Assets
Dissipation is an overarching term that includes the hiding of marital assets. Dissipation is when a spouse wastes, destroys, or hides property or money after a divorce is evident. This is an illegal act and there are very specific legal steps that need to be taken if you believe this is happening.
Whether a spouse is losing money gambling or spending it on an extra-marital relationship, the court needs certain information.
- Identify when the marriage became “irretrievably broken,” and separation was inevitable.
- Identify the property that was dissipated.
- Identify the period of time the dissipation occurred.
With this information, you are able to file. However, there are time constraints. To claim dissipation, the claiming party must file no later than 60 days before the trial or 30 days after discovery ends, whichever comes later.
Once this information is established, the burden of proof is on the other party to show where the money went.
How a Divorce Attorney Can Help
An individual representing themselves can do most things an attorney can do, but an attorney, such as one from Sterling Hughes, can offer in-depth knowledge and a practiced eye. A skilled family law attorney is familiar with the techniques used to hide assets and has the knowledge to help you look for and find proof of any hidden assets.
This is probably the spouse’s first or maybe even second time trying to hide assets in a divorce, so the attorney has far more experience finding than they do hiding. An attorney also knows the details surrounding filing and the court process to make sure your case goes smoothly.
Attorneys Demanding Production of Documents
Several discovery tools can be used in the discovery phase of the divorce. The first step is requesting further details or documents. An attorney knows which documents are necessary and which ones will be helpful for later stages in discovery such as interrogatories and depositions.
Subpoena to a Third Party
You and your lawyer can send a subpoena to banks where you suspect your spouse has an account. The bank is then obligated to produce all records associated with your spouse's name. If the bank fails to do so, they can be found in contempt of court.
Should You Confront Your Spouse When You Have Suspicions of Hidden Assets?
Do not confront your spouse about missing assets or accuse your spouse of hiding assets. Confronting them could lead to a confrontation or them hiding those assets better. It is best to discuss the next steps with your lawyer if you suspect your spouse of hiding assets.
Should I Hire a Forensic Accountant?
Even attorneys sometimes work with experts like forensic accountants to trace hidden assets. If you don’t have the time or if the assets are hidden well, it might be necessary to hire a forensic accountant. Speak with your attorney and they should have one they can refer you to.
Should I Worry About Offshore Bank Accounts?
This type of asset hiding is most common in people who have a significant amount of liquid assets. Also known as offshore asset protection trusts (OAPTs), offshore accounts take advantage of other country’s laws that are not as strict on fraudulent transfers.
These accounts can be set up online or in-person, so watch for trips to known tax havens. If you discover these assets during a divorce, they can be considered in property division.
Frequently Asked Questions
How do you uncover hidden assets in a divorce?
To uncover assets in a divorce, diligently review all financial records that may lead you to inconsistencies or unreported capital. For physical assets, try to be aware of unusual activity and consult with an attorney or look into hiring a private investigator.
How do I find hidden money in a divorce?
Research and review any bank accounts and tax information to find hints and proof. Even if cash has been hidden in a safety deposit box, there may be a record of the money being withdrawn or received.
How do I find hidden bank accounts in a divorce?
An individual or an attorney can subpoena bank records to discover unreported banking information. Off-shore bank accounts are harder to track down, but you may be able to find evidence of them in their taxes.
How do I find out if my spouse is hiding assets?
Hold on to your suspicions, be aware of your spouse's actions, and dig deep during the discovery process at the beginning of the divorce. In discovery, each spouse may have to provide financial documents, answer questions under oath, and more.
Is it illegal to hide money during a divorce?
Yes, the person who is hiding assets is hoping to keep marital property for themselves rather than getting the fair settlement both parties are legally entitled to.
What assets are protected in a divorce?
The only property that is exempt from equal property division in Illinois is property obtained through inheritance or as a gift. There are some other rare exceptions.
Can you hide money before divorce?
Once the divorce process starts, each party will have to provide financial disclosure documents. It is not necessarily illegal to hide money in a marriage, but once the divorce begins any hidden assets need to be reported.
How do husbands hide money before divorce?
There are many ways people try to hide money, from overpaying taxes to temporarily transferring stocks to hoarding gift cards. Different options are open to different people, so each situation is addressed individually.
How can I find out if my wife has a hidden bank account?
While someone could look for clues such as money transfers to new accounts or checks with unfamiliar account numbers, a hidden bank account should arise through either the financial disclosure statement or the discovery process. If need be, a bank can be subpoenaed for the necessary information.
Do you have to provide bank statements in a divorce?
More detailed statements are required if there are issues concerning charges or account usage. Issues could be arguments of marital waste or accusations of asset hiding.
References: 1. Celebrate Relationships, But Beware of Financial Infidelity. NEFE. (2018). | 2. In re Marriage of Rossi, 90 Cal.App.4th 34 (Cal. Ct. App. 2001). | 3. 750 ILCS § 5/503 (d)(2). Disposition of Property and Debts.