The end of a marriage is a painful and contentious period for many couples. If one partner is angry and believes that they are entitled to more money of the marital income or property, the other could be tempted to hide the asset from their soon to be ex-spouse.
The best thing to do in this situation is hiring a knowledgeable attorney to determine your assets’ value and whether your spouse is hiding assets and money you are entitled to have. This is a practical option for spouses who were not active participants in their finances throughout their marriage. Allow San Diego Family Law Attorney to help you discover your spouse’s hidden assets and have you awarded the compensation you deserve during your divorce.
A Brief Overview of California Divorce Entitlement
In California, all incomes and debts incurred in marriage are split equally between spouses regardless of who earned it, how they were earned or incurred, and whether one spouse earns higher than the other. In short, marriage is viewed as a business arrangement that after its conclusion, each partner takes an equal share of the property.
The term used to refer to any property earned during a marriage is community property. However, any other property acquired before marriage is referred to as separated property and remains yours upon marriage dissolution. Community property can include tuition fees and other related expenses obtained while your spouse obtained a professional degree or license during the marriage.
Other community properties in California include:
- House
- Clothing
- Banking accounts and cash
- Furniture
- Patents
- Pension plans and retirement accounts
- Business
- Cars
How Residences Are Divided in California Divorce Process
When it comes to dividing residences, the law requires that property acquired during marriage to be considered community property. Therefore, the net value of each spouse's share should be equally divided unless you agree otherwise. In most cases, one spouse is being awarded the vacation property while the other is awarded the family residence if they are of equal value.
If the spouses have minor children, the primary custodial parent can be awarded the permanent house. However, the spouse that takes over the permanent residence should pay the property taxes, upkeep expenses, and mortgage unless otherwise agreed by both parties.
Dividing Accounts and Pension Plans
Similar to residences, pension and retirement pension benefits obtained or funded during a marriage should be equally divided between spouses during divorce. For a couple to divide retirement plans, they must prepare a qualified domestic relations order.
The court will oversee the division of the property plans as a cash-out or reservation of jurisdiction. Under the jurisdiction reservation, the court might order one spouse to receive a particular pension after the employed spouse’s retirement. The court will calculate this percentage by dividing the number of years that the spouse has lived together with the total amount of years the employed spouse participated in the plan.
Under the cash method, the court will determine the pension plan's community share’s present value. Upon cash out, the employed spouse might receive the pension entirely while the other spouse gets the community property asset with an equivalent value.
Various Ways People Hide Money from their Spouses Before Divorce
Both divorcing spouses should disclose their financial assets as part of the divorce process. However, some spouses might fail to reveal some of their properties because they do not want to share those assets with the spouse they are divorcing. This is common in high net worth divorces where both individuals own businesses.
Taking an Active Role in The Finances
Taking an active role in finances is your spouse's first step in hiding money from you. Therefore, your spouse will take charge of all money-related tasks like investing money, checkbook, or paying bills. If your spouse has taken an active role in your finances, he or she can be able to hide as much money as possible away from you.
Depositing New Income in a Different Account
Those who use direct deposits can decide to deposit new income in a separate bank account or another bank entirely. They usually instruct their company's human resource department to split their earnings and deposit it in a different account. Those who do not have direct deposit setups take their account number and bank's routing number to human resources. This will allow both incomes to appear at the bottom of their paper checks.
Overpaying Taxes
95% of married couples file their taxes together but can file their taxes separately if they wish. However, particular situations might prompt spouses to separate their accounts. These situations include:
- When both spouses are working and have similar incomes, separate filing and want to avoid a higher tax bracket
- If adjusted gross income must be under a particular threshold to qualify for specific deductions like out-of-pocket medical expenses to keep the AGI down
- To avoid being liable for tax debt or child support payments
- When spouses are considering divorce or own separate property
Once your spouse convinces you to file separately, he will ask the Human Resource manager to increase his tax withholding. At this point, he should fill out a new W-4 form, similar to the one he filed while being hired. This will make more money from your spouse's paycheck and help him get a bigger refund later, which will be sent to the separate account stated above.
Getting Lots of Cash Backs
Another popular method used by spouses to hide money from their partners is cashback. In this process, one spouse, supposedly supposed to suffer from the divorce, usually amass decent stockpile cash by paying an extra amount using his debit card. This might take time, but taking out at least $10 every time he goes to the grocery store or pharmacy might add up to a decent amount after a while.
This approach would have a lot of cash going under the radar since the total charges usually show in his debit card statement. Therefore, as long as you do not collect his receipts, this would hide a good chunk of money from you.
Opening a Separate Online Bank Account
For your spouse to hide money from you, he or she can open an online bank account and safely hide a fair amount of money away from you. Opening an online bank account does not require the bank to offer this service to mail anything to your home address. Therefore, spouses who prefer to use this option do not have to worry about their statements ending up in their partner's hand.
Obtaining a Separate Credit Card
Obtaining a separate credit card could be challenging since the billing could be sent to your home address and through your bank account. However, your spouse can solve this problem using a different home address from the U.S Postal Services. This allows him to have a separate credit card and put away a lot of money before the divorce.
Stashing a Separate Prepaid or Gift Cards
If your spouse has a separate credit card and an online account, he can use the credit card to buy a prepaid debit or gift card. These are often sold in pharmacies and are usually reloadable. These can make sense if your spouse intends to spend or save money in secret. He or she can load several cards all at once and stash them later on. Any money kept in prepaid cards can be risky, mainly when someone stays too long without using the cash or reloading them. However, if the debit card has enough money, there is less risk in the charged amount.
Renting a Safe Deposit Box
The final hidden destination for all your spouse's prepaid debit card, credit cards, and cash is a deposit box. A safe deposit box is available for rent in most banks, and no one should know what's hidden inside unless you are the owner. Renting a safe deposit box can cost around $15 to $25 per year, which is quite affordable for someone who intends to hide away a lot of money.
What You Should Do if Your Spouse is Hiding Money from You Before Divorce
Before a divorce process starts, all paperwork must be complete. This is a list of all assets and liabilities owned by a couple. The list helps you file your financial disclosure. It will also help you determine whether to look for assets that might be missing and determine the value of the properties you know.
Suppose you think that your spouse cannot voluntarily reveal all his or her financial information before the divorce. In that case, you can use a legal and formal procedure to get these documents and information. This process is referred to as the "discovery process" and involves several methods to get information. This process includes the following.
Use a Document Demand
You and your lawyer can demand your partner to produce documents such as loan applications, account records, and tax returns. Some documents like tax returns can be challenging to determine whether they are right, but with the help of a forensic accountant, you can be able to decide whether or not it reflects the actual amount that your spouse filed.
Use Request of Admission or Interrogatories
Interrogatories or admission requests are suitable when you expect your spouse to answer specific questions or admit to particular statements that you think are true. It is best used when one of the spouses has enough information about their partner's hidden money and requires a way to unveil the truth.
Give a Testimony Under Oath
Giving a testimony under oath is usually referred to as oral deposition. In this kind of approach, you and your spouse will appear in court, and your spouse should tell the truth and answer all questions asked by your lawyer.
A deposition is an ideal way to reveal information from a dishonest spouse. Lying under oath puts you at risk of being "sanctioned" by the jury. These sanctions include paying a separate monetary fee or have a judgment made against the lying spouse. This would be the best pressure that can make your spouse tell the truth about any hidden financial records.
Evaluate Your Spouse's Tax Returns
As you have learned earlier, tax returns can be ideal for your spouse to hide money from you. Therefore, examining them can be a crucial way to determine whether your spouse is hiding money from you or not. Your attorney should hire a tax advisor if things start to become complicated while evaluating your spouse's tax return. Some of the documents that your attorney should assess are as follows:
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Form 1040: Wages and Income
Form 1040 includes your wages, salaries, interest income, business income, IRA, pensions, unemployment compensations, and social security.
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Form 1040: Dividend and Interest Income
Form 1040 can also be suitable while proving your spouse's income-earning investments, such as loans made as a lender, market accounts, bank CDs, bonds, and savings accounts. If the interest or dividend exceeds $400, you should expect a Schedule B form to be attached to the tax form to determine the income source.
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Form 1040: Distribution of Retirement Plans
Distributions of money received from an IRA account or deferred-compensation are also listed on Form 1040. If you find any distributions, ask where these funds went.
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Check on Carryforwards
Carryforward is a state or IRS income tax rule that allows taxpayers to save unused deduction, losses, or credits in the later tax year. Most carryforwards are used as charitable donations that exceed 50% of the taxpayer's income and apply in another tax year. The same applies to children's 529 college savings. If your spouse exceeds the savings plan by a particular amount like $2000, he or she can use the same amount as a deduction in a later year. These types of credits can be accounted for during property division.
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Assess Your Spouse’s Refunds
You should review old returns and find out your spouse's tax refunds. This is ideal when your spouse intentionally overpays taxes for a previous year with the expectation of being reimbursed after the divorce.
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Schedule A: Itemized Deductions
A Schedule A (Itemized deductions) includes itemized deductions entered, including local and state taxes paid on income, personal property, and real estate. These payments can be related to hidden assets or income generated in a different state. For example, if your spouse paid property tax for a property that you do not know about, this document will help you learn about its name, purchase date, and source of payments made on the property.
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Schedule A: Miscellaneous Deductions
Miscellaneous deduction might include expenses for tax and a person's estate planning advice. Therefore, if you did not know whether your spouse consulted an estate planner or tax professionals, you might follow up with these individuals and uncover any additional assets like hidden trust.
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Schedule B: Foreign Accounts
Apart from the sources of interest income and dividend, Part 3 of Schedule B may contain a list of your spouse's foreign trust and accounts.
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Schedule C: Profit or Losses from Business
Schedule C is a document used to report profits or losses made by a sole proprietorship. Ensure that you review the business's expenses, reported sales, cost of goods sold, and net income to get an idea of how your spouse's business is doing.
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Schedule E: Supplemental Loss and Income
With a schedule E document, you can find income-generating assets owned by your spouse, such as:
- Royalties from literary and artistic work like books and music
- Rental real estate
- Estate and trusts
- Partnership investment and S-corporations
- Royalties from patents, software, and copyrights
Loan Application Statements
Lending institutions usually ask for complete copies of recent pay stubs, a signed declaration regarding all debts and assets, and account records while a person is asking for a loan. Therefore, you can get a copy of the loan application since it might reveal all hidden income or assets.
Your spouse might also have submitted a personal financial statement to his or her lender. A personal financial statement includes all expenses, debts, income, and assets owned by your spouse. You can get copies of these documents from your spouse's lender.
Trace all Your Spouse's Accounts and Cash Flow
Analyzing or tracing all accounts can lead to the discovery of hidden assets. Therefore, you should involve your attorney and accountant in this process and look for your spouse's record. This includes trust accounts, checking, brokerage, and other accounts used by you or your spouse during marriage.
Find a Divorce Attorney Near Me
The process of uncovering hidden money and assets by a spouse before divorce is tiring and expensive. That's why it is recommended to seek the help of a professional divorce attorney to uncover the truth behind your community property. At the San Diego Family Law Attorney, we are dedicated to offering the best legal services in all areas of family matters. We have assisted many spouses going through divorce, family crisis, and other family-related issues in San Diego and Southern California. For more information, contact us at 619-610-7425 for a free non-obligatory consultation.
