During a divorce, especially when the couple has significant assets, one party may be inclined to understate their assets or income so as to avoid distributions or payments to their spouse. This can, not only greatly complicate the divorce proceeding, it is also illegal. Parties to the divorce proceeding report their income to the court via a Domestic Relations Financial Affidavit. The affidavit is signed under oath. While an unintentional mistake on the DRFA can be modified, any intentional financial discrepancies on the affidavit constitute perjury.
How can I tell if my spouse is hiding assets?
Successfully hiding assets requires a great deal of secrecy and planning. There are some behaviors that are common in cases where one party is attempting to defraud the other. Some red flags may include:
- One spouse has total control of or is secretive about the family’s finances
- Spouse often has large amounts of cash
- Spouse currently or in the past abused drugs or alcohol
- Spouse has bank accounts in foreign countries
- Spouse has large amounts of debt
- Spouse uses business accounts to pay for personal expenses
- Spouses gifts significant property or assets to a relative
- The lifestyle of the spouse does not match financial documents
If your spouse exhibits any of these behaviors, discuss it with your attorney. The attorney may deem it necessary to bring in an expert and investigate further.
How can I protect myself if I suspect my spouse is hiding assets?
The court will not simply accept one party’s testimony that the other party is hiding assets. This must be proven. Proof is best obtained through the use of experts. One method to uncover potentially hidden assets is to employ a forensic accountant. A forensic accountant investigates and analyzes financial data. The accountant traces the source of the income to all of the expenditures, looking for discrepancies that may demonstrate hidden assets. Forensic accountants can be expensive but most people find the one time expense to be valuable in the divorce proceeding. The forensic accountant will need all available financial documents including, but not limited to: bank statements; tax returns (these should be copies from the I.R.S. not the copy before the document was submitted); social security numbers to pull credit reports; pay stubs; receipts; mortgage statement; credit card statements; and IRA statements. It is highly recommended that you seek a referral through your attorney. Most attorneys have a forensic accountant that they trust and employ regularly.
Another safeguard is to have your attorney incorporate a provision in the settlement agreement addressing potential hidden assets. For example, the settlement agreement may contain language stating that any hidden assets uncovered after the court issues the divorce decree are to go directly to the non-offending spouse. Such a provision provides an incentive for all parties to be honest.
If a divorce is already finalized, there may still be a legal remedy available where one spouse has hidden assets. An attorney can assist with filing a modification to the settlement agreement. Modifications are appropriate when one party has a material change in circumstances. Courts will qualify the discovery of hidden assets as a material change. Furthermore, Georgia law allows the courts give a larger award to the non-offending party in order to penalize the party that hid the assets.
What are the legal consequences of hiding assets?
Perjury is lying to the court under oath. Perjury may be committed by giving an affidavit or testimony to the court that is intentionally incorrect or misleading. Georgia law punishes perjury with steep fines or imprisonment. O.C.G.A. § 16-10-70. In addition to legal penalties for hiding assets, the activity is likely to flag the offender’s tax return resulting in an I.R.S. audit.
Parties may seek to hide assets by transferring title to a relative. An example would be transferring real estate or a trust into someone else’s name with the intention of retaining control of the asset for oneself. If a court finds a transfer of title to be an intentional attempt to keep the asset from a spouse, it will likely be declared a fraudulent conveyance. O.C.G.A. § 18-2-74. The court has the ability to void a fraudulent transfer.
Hiding assets during a divorce is never a good idea. This course of action has detrimental consequences for all parties. The non-offending spouse and the children are deprived of what rightfully belongs to them and the offending spouse, once caught, is punished criminally and financially. If you suspect your spouse is hiding assets, discuss with your attorney the remedies available to you. If you have already hidden assets from your spouse, immediately disclose this so your attorney can help mitigate the damage.
If you are facing divorce in Georgia and have questions about your assets or the marital assets in your case, call us at 770-609-1247 to speak with one of our experienced divorce and family law attorneys.