While it can happen in any divorce, spouses with a lot to lose may try to hide property right before and during a divorce so they do not have to share it.
While there are exceptions, California is a community property state, so most, if not all, of a couple’s property will get divided 50-50. For various reasons, a spouse may try to get around this by hiding some of their wealth only to take it for themselves later.
There may be some situations where a person does something relatively simple like hiding assets in a safe deposit box or squirreling away cash. Often, though, the person who wants to conceal assets will resort to some crafty financial practices that can be hard to track.
- A person may use hard-to-find accounts to store funds. Common tricks may include putting an account in someone else’s name or using prepaid debit cards. A spouse may even use apps like Venmo or PayPal to hide money or even buy tangible items like clothes or jewelry with the thought they can return it later or re-sell it for about the same price they paid.
- Bank accounts aside, there are other ways a person can set aside money for themselves without detection. A person may invest in cryptocurrency, which is harder to trace. They may even use the IRS as their bank by deliberately paying additional taxes with the thought that they can recover the money through a refund later.
- Those that own a business may use it as a front to hide wealth. It is relatively easy for someone who makes discretionary income, including a business owner, to manipulate their books so that, on paper, they look much poorer than they are.
- People may give gifts or even purport to sell property to friends or relatives knowing that they can get it back. On a related point, they may also repay supposedly loans to friendly creditors understanding that their creditor will pay the cash back.
- People may undervalue their assets or, by contrast, overvalue their debts. To give one example, many debts can be settled with a lump sum payment that is a fraction of what a couple owes. A person to have a different opinion on what property is worth, but the other spouse needs to make sure they understand the calculations and the reasons behind them.
What can I do to avoid getting taken advantage of in a divorce?
Hiding assets during a divorce can make the whole process unfair. Also, if a spouse gets away with this sort of scheme, they can leave the other spouse in a difficult financial position.
The best defense a Californian has against this sort of behavior is making sure that their divorce cases get thoroughly investigated and that they have a detailed knowledge of their rights and options. This is especially true when a divorcing couple has a lot of assets between them.