Myth # 4 I have to worry about Hidden Assets.

hidden moneyMany people getting divorced are worried that their spouse, typically the husband, is hiding money to avoid having to share it. Many would be advisors warn about this and many lawyers worry that if they don’t do an exhaustive search they open themselves to malpractice suits later when the hidden asset becomes visible. The result is extensive and expensive discovery to ferret out the hidden money. Invariably the inference that a spouse is being dishonest generates indignation and the general tone of the divorce becomes sour. The Reality: Hidden assets are seldom a problem. This is not necessarily because most people are honest, but because few people have the means to hide assets or the assets to hide. Hiding assets requires that you leave no paper trail. There is no opportunity to hide money unless you are extremely wealthy or if you receive large parts of your income in cash. Retail businesses used to be a great place for cash, however, most purchases today are made by credit or debit cards and there is a paper trail. deposit boxA second problem for those who would hide the money is that in order to fool your spouse you also have to fool Uncle Sam. If you want to avoid creating a paper trail by putting the cash in your safe deposit box you have to engage in tax evasion and it better be a great deal of money to risk going to prison just to cheat your spouse. In order to hide a lot of money you need to start way in advance of the divorce. I have found that couples who have a lot of cash income and hide it generally act in concert and both are acutely aware of where it is kept. In these cases neither can publicly accuse the other because each has conspired and when judges become aware of the tax evasion they refer such cases to the IRS. Discovery is expensive. I recall a case in which the wife felt that her adulterous husband must be hiding money because if he betrayed her sexually then he must be generally dishonest. She confided this to her lawyer who hired an accountant to do a detailed audit of the husband’s finances. The accounting bill was over $30,000. And in the accountant’s report he found that the husband had $100,000 LESS than he had reported. Be skeptical of notions about hidden assets because they seldom exist.

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