How Can You Discover if Your Spouse is Hiding Assets in Divorce?

It’s not unusual for people to think that their spouse is hiding assets in divorce. Oftentimes that fear is just normal divorce paranoia. (You find out your spouse is having an affair, so you file for divorce. Then you start wondering if your spouse is hiding money from you too. After all, if s/he lied about one thing, maybe s/he is lying about everything!)

But sometimes, the fear that your spouse is hiding assets in divorce is very well-founded.

Take for example, the Colorado man who drained his retirement account and the joint investment account he shared with his wife during his divorce.  He claimed that he converted all the money into gold and threw it into a trash bin, just so that his wife couldn’t get it.

Not surprisingly, legal expert’s (as well as the man’s wife) were skeptical.

While it’s not clear whether the gold was ever recovered or not, this case illustrates the lengths that some people will go to in order to hide assets in divorce.

The question is, if you think YOUR spouse is hiding assets during divorce, what do you do?

Telltale Signs that Your Spouse is Hiding Money in Your Divorce

While lots of people think their spouse is hiding money in their divorce, that's not always true. ... but sometimes it is.

How do you know?

You start by looking for clues. Here are some common red flags that can tip you off to the fact that your spouse might be hiding money.

• Your spouse is claiming that he/she suddenly took a pay cut, didn't get a bonus, or lost a big client. Yet, s/he just bought a new house, car, boat, motorcyle, (insert other expensive thing you can't buy without money here.)
• Your spouse is claiming that s/he is not making a lot of money, but s/he is living a lifestyle that requires way more money than what s/he claims to be making.
• No matter how much you (or your lawyer) tries to get financial information from your spouse, s/he is stonewalling. S/he simply won't produce the financial documents you're looking for.
• Expensive pieces of art, jewelry, or collectibles have suddenly disappeared.
• You notice an increasing number of cash withdrawls from your bank account.

While none of those behaviors necessarily proves that your spouse IS stashing money aside, they all should make your antennae go up. If you see your spouse doing any of these things, you're going to want to pay even closer attention than ever to your finances.

The Most Common Places Spouses Hide Money in Divorce

People hide assets in all kinds of places. Some of them are common. Others are crazy.

Here are a list of ways spouses hide money in divorce. They:

• Put money or valuables in safety deposit boxes you don’t know about;
• Give money or valuables to their family members or friends to hold for them;
• Buy physical assets that can easily be missed or undervalued (gold, jewelry, art, antiques). They may also hide those physical assets;
• Put money in bank accounts at some bank that you’ve never banked at before. They list the address on the account as a friend’s address or a P.O. Box so that nothing from that bank ever goes your home;
• Hide money in 401(k) accounts you don’t know about;
• “Sell” a car, boat, trailer etc. to a family member or friend who will sell it back to them after their divorce;
• Quitclaim real estate that they own into a trust or to a relative;
• Purposely prepay/overpay the premiums on various insurance policies while the divorce is going on. Later, the insurance company will refund the overpayment to your spouse.
• Overpay their taxes and use that overpayment to pay their income taxes in future years after they’re divorced;
• Have their employer refrain from paying out certain bonuses or commissions during their divorce;
• They will create phony debt (e.g. They will create loans, notes etc from friends who they really don’t owe any money to at all;
• Put money into cryptocurrency or EFTs;
• Transfer physical stock certificates to friends or family;
• Hide money in their business. (There are so many ways to do that, I can’t even list them all here!)

5 Steps to Take if You Think Your Spouse is Hiding Assets

Step #1: Do a Risk/Reward Analysis

Finding hidden assets costs money. Sometimes, it costs a lot of money.

Conducting a search for hidden assets usually requires a team of forensic accountants, lawyers, and investigators. Those professionals have to locate, process, and analyze small mountains of data. That work can take an enormous amount of time. Since you pay those professionals by the hour, their fees can quickly run into the tens or hundreds of thousands of dollars.

Of course, you can reduce some of those costs if you can find the necessary financial information yourself.  The problem is, the spouse who is allegedly hiding money is usually the only one who has access to the financial information which could prove it. That makes finding documents a challenge.

So step number one in deciding whether to start searching for hidden assets in divorce is to figure out how likely it is that they exist in the first place. That means that you have to analyze two things:

• Your spouse’s opportunity and ability to hide money; and
• The amount of money that is potentially hidden.

Having the Opportunity and the Ability to Hide Money

Hiding money when you own your own business is easy. You can overpay your expenses. You can hide cash. Depending on your business, you may be able to delay billing your customers or bringing money in.

You can put off signing new contracts or getting new jobs. Or, you can invest in capital improvements so that you lower your business’ profit while you’re going through a divorce.

The bottom line is that if your spouse owns his/her own business, the potential that s/he can hide money during your divorce is pretty good.

On the other hand, if your spouse is a W-2 employee with a relatively consistent income, then s/he has a much smaller opportunity to hide money during your divorce.  There’s a paper trail showing his/her income. If you pay your bills through a bank account or credit cards, there’s also a paper trail showing your family’s expenses.

Hiding money in that circumstance becomes much more difficult.

Hiding money is also hard when both you and your spouse were involved in the family finances. After all, if you know how much money you and your spouse typically earned and spent in your marriage, you’ll immediately recognize when those numbers change during your divorce.

Finally, you need to assess whether your spouse had the ability to hide money in your marriage or divorce.

If s/he was earning a fat salary, had an expense account and a fancy benefits package from his/her job, then your spouse might have had enough money that s/he COULD hide some of it. But if you and your spouse have been living paycheck-to-paycheck for years, it’s way less likely that there was any money available to hide.

How Much is at Stake?

Because trying to find hidden money is expensive, it only makes sense to do it when the amount of money at stake is substantial.

For example, if you think you’re missing less than $5,000, it makes no sense to spend $10,000 in expert fees to try to find it. It doesn’t matter that $5,000 is a lot of money to you. If you have to pay more to find hidden money than what you stand to gain if you find it, then going on a search for hidden assets makes zero sense.

Personal Financial Information

• Federal and state income tax returns (including W2s, 1099s, K1s, and all the schedules and back up documentation that go with the returns);
• Bank statements;
• Retirement and pension statements;
• Social security benefits statements;
• Investment account statements;  
• Information about your spouse’s job benefits, including copies of employment contracts, bonus plans, stock, stock options, ESOP plans, deferred compensation plans, and any other employee benefits information you can find;
• Deferred compensation statements;
• Health Savings Account statements;
• Documentation regarding the purchase or sale of cryptocurrency or EFTs;
• Copies of all trust documentation for any trust in which your spouse is an owner, trustee, or beneficiary;
• Deeds to property or real estate;
• Complete copies of all the closing documents for any real estate that has been bought or sold in the past 3 – 5 years;
• Title to any vehicles your spouse owns, or has his/her name on.

Business Information

If your spouse owns his or her own business, you will also want to gather copies of these documents as well.

• Federal and state income tax returns (including all the schedules and back up documentation that go with them);
• Sales reports;
• Profit and loss statements;
• Cash flow statements;
• Buy/sell agreements;
• Corporate records, including the articles of incorporation and bylaws;
• Stock certificates if your spouse’s business is a corporation;
• Any business valuations that have been done for any purpose in the past;
• Documentation regarding any business loans that have been taken out in the last 3 – 5 years;
• Any other business records you can locate.

Finally, don’t forget to gather information about debts as well as assets. At a minimum you want to collect the following documents.

Debt Information

• All credit card statements for any credit card in your spouse’s name, or his/her business’ name;
• All credit card statements for any employer expense accounts your spouse has access to;
• Mortgage statements for any property your spouse owns, either alone, with you, with anyone else, or in trust (NOTE: Loan applications can be a goldmine of information. So don’t just look for current payment information. Get the original loan application if you can find it.);
• All loan documents for any loan that your spouse has, or has taken out, in the past 3 – 5 years including car loans, personal loans, business loans etc. (NOTE: Again, get loan applications too, if you can find them.)

Step #3. Organize and Analyze the data.

After you have gathered all the financial information you can find, you need to read it, organize it, and figure out where you stand.

It doesn’t matter if you’re not a financial expert. It doesn’t even matter whether you understand the information you’ve found. You can still organize the information yourself.

Start by grouping the information into folders (if it’s digital) or piles (if you’re working with paper.) Put documents of similar types together. (i.e. All the statements from bank account X are here, etc.) Put each type of document in reverse chronological order. Make a note of any documents you’re missing.

Then, make copies (digital or physical) of all the documents you’ve obtained. You’re going to need copies of the documents for your lawyer as well as any other financial expert you use to help you discover the hidden assets you’re looking for.

After you’ve done all that, LOOK at the documents! Even if you feel like you don’t know anything about finances, look at the documents! You may be surprised at how much you DO know. 

For example, you will know, better than anyone else, whether your spouse always carries around lots of cash. If s/he does then regularly withdrawing hundreds of dollars in cash might be normal. But if your spouse always uses debit and credit cards to pay for purchases, then withdrawing large sums of money is fishy.

Make a list of the current value of all your assets and the current amount of all your debts. Highlight any large withdrawals of cash or sizeable unknown purchases you find.

If you’re financially savvy enough to create a spreadsheet with the information in it, do that. If not, don’t worry about it. Do what you can.

Step #4. Follow the breadcrumbs.

Finding hidden assets is like looking for lost treasure – only you don’t have a map! In order to discover the treasure, you have to follow the clues. … ALL the clues! Even a single bank account entry for a small amount of money can put you on the path of finding much more.

For example, I know a woman who is going through a divorce. Her husband was self-employed. She KNEW he was hiding money. But she didn’t have the documents to prove it.

She scoured her family’s financial documents. She found one entry – for $ 0.57 – from a bank account she’d never seen before. So she tried to get her attorney to subpoena those bank records for her.

Her attorney said, “No.” It seemed ridiculous to subpoena records for fifty seven cents. The woman persisted. Eventually, the attorney sent the subpoena.

The records she received led her to find well over $1,000,000 in assets.

So, paying attention to every detail in the records you receive is fundamental.

Not sure what to look for?

Look for things that don’t belong. For example, if money is being transferred from your joint bank account into a different bank account, make note of the bank account numbers. If (like the woman in the story) you see a bank account number you don’t recognize, follow up on that. Get your lawyer to subpoena those records.

If you happen to find a random receipt in the house, look at the credit or debit card number on it. Again, if you don’t recognize the account number, follow up.

Step #5: Hire an expert.

No matter how adept you are at finding and reading financial documents, you’re probably going to need expert help finding money when your spouse is hiding assets.

The first person you may need to hire is a financial private investigator. That’s because if your spouse is hiding assets, it’s almost guaranteed that s/he will be hiding the information that you need to find them!  

If you know where to look for the information, your lawyer can subpoena documents from the company or organization that keeps the records. But your lawyer can’t subpoena every bank in the country, hoping to find SOMETHING that relates to you! That’s why you may need a private investigator, too.

The second person you’re going to need is a forensic accountant. S/he can really dig into the documents you find.

If your spouse has a business, you’re also going to want to make sure that your forensic accountant is used to working with businesses and business records and reports.

Finally, if you have a large marital estate or a complicated financial situation, you’re probably going to need to consult with a financial planner, too. Again, if your situation is complicated, you need to make sure that the financial planner you hire is used to working with high-end, complicated situations.

Will all these professionals cost money? Absolutely! Finding hidden assets is expensive. But that’s why starting with Step #1 is so important. If you have a lot of money at stake, going through a financial forensic evaluation can be the key to finding that hidden money.