Concealed assets in divorce

Do you suspect your spouse has more financial assets than they claim?

Divorce is a one of the most difficult life events many people will experience. Only bereavement is harder to bear. Admittedly, some people seem to sail through a relatively amicable and pain-free divorce, but they are the exception and not the rule. Divorce marks the end of something that was meant to be lifelong, and brings with it the breakdown of the family unit and the untangling of a merged financial life. Divorce is also when people can act out of character, or behave in unexpected ways. One such behaviour might be attempting to hide assets, to reduce the impact of the divorce financial agreement or maintenance award. How can you tell if your spouse has concealed assets in divorce?

Matrimonial regime

A party in a divorce case is most likely to conceal assets when: 1) the marriage is in community of property and 2) one party is a significantly higher earner than the other. When couples are married in community of property, all assets are split 50-50 on divorce. Many couples now opt to be married out of community of property, either with or without accrual. This requires an antenuptial contract (ANC) and allows both parties to list their assets prior to marriage and retain them intact on divorce. “Accrual” means that assets acquired after marriage are owned jointly and divided equally on divorce…or not, depending on which option is chosen.

Why would someone conceal assets?

Maintenance, or spousal support, may be awarded in a divorce agreement if one spouse – usually but not always the wife – will find it difficult to maintain an equivalent standard of living after the divorce due to a significant difference in income relative to the other spouse. During the discovery phase of the divorce process, when both parties are required to disclose their financial position, it is important to be open and honest. Not only is misrepresentation fraudulent, it can have serious consequences later on. But because maintenance is an ongoing commitment, long after the marriage is over, the higher-earning spouse may seek to reduce their maintenance liability by understating their income or assets. Or, if one spouse feels that they put much more time and effort into their joint financial status than their partner, and it is unfair for their spouse to get half of what they have worked so hard for, they may try to place certain assets out of reach of the courts and their spouse.

How are assets concealed?

Concealing assets in the context of divorce negotiations can be done in a number of ways. The individual may simply not declare them, may depreciate assets beyond their current value, or may conceal the extent of the assets. They may also overstate debts to appear insolvent, report income to be less than it really is, and/or claim expenditure to be higher than it is. Financial transactions should be easily traceable, making it difficult to over- or understate the reality. But for a business owner, or anyone with complex finances – which is most people these days, with multiple credit cards, loans, online accounts, etc. – it is actually quite easy to cover their tracks. Many couples maintain separate bank accounts, with a joint account just for shared expenses, so a spouse does not necessarily know the full extent of their partner’s financial situation.

Warning signs

Indications that a spouse is hiding assets include:

• Defensiveness when the issue of finances is raised
• Receipts from ATMs or credit cards for accounts the other party doesn’t recognise
• Large withdrawals from a joint account without discussion

Specifically, there are some red flags that must not be ignored. The following are the main ones:

• Claiming that a computer containing crucial financial records has crashed and can’t be restored.
• During the discovery phase of the divorce, reporting a decline in the value of marital and/or business assets and investments. They have probably transferred these assets to family or friends and will reverse this after the divorce.
• Acting shiftily about banking details or taking control of bank accounts, where historically there has been openness. They open several new accounts, possibly in the name of a child.
• If they are a business owner, failing to reimburse their own business expenses, overpaying creditors or pre-paying suppliers. This money can be refunded later. Family or friends are put on the payroll or paid for fictitious services rendered, which will also be refunded later.
• Making extravagant purchases, which can be sold for cash, or which reduce the amount of cash in the marriage. A new cellphone with a different number is highly suspicious, as it may be used for transaction notifications and other illicit interactions, though they are likely also to hide the existence of a supplementary device.
• Suddenly experiencing a decrease in income. This is harder to feign on a fixed salary but a tactic a business owner or self-employed person might use. They appear to stop receiving commissions or bonuses, whereas these have in fact been delayed until after the divorce.
• Pressuring the other party to sign legal documents quickly, without the time to become fully aware of what they are signing.
• Complaining about money or debt, being vague or circumspect about their financial affairs, or claiming their business has suddenly failed.
• Submitting false, under-reported tax returns and paying more than they owe to SARS. This will be rebated to them later.

Any one of these actions should set alarm bells ringing. Anyone truly intent on disguising their true wealth is probably smart enough to conceal their actions. But some of these will be deliberately apparent, such as a drop in income. If any of these signs are present, the divorce attorney must be informed immediately. No one, in any context, should ever sign something they are not comfortable signing. An attorney should go through it with them to be sure they understand what they are signing.

Seek the advice of an excellent divorce lawyer  if you suspect concealed assets

SD Law is a firm of experienced divorce attorneys based in Cape Town, with offices in Johannesburg and Durban. If you are considering divorce and want to discuss your options, or if you think your spouse is being less than honest with you about their finances, call family lawyer Simon Dippenaar on  086 099 5146 or email  sdippenaar@sdlaw.co.za for a confidential discussion.

Further reading:

• Spousal maintenance post-divorce
• Financial uncoupling after divorce
• 11 points to consider when considering divorce

Divorce Attorney Cape Town

http://divorceattorneycapetown.co.za/

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