Protecting Your Rights & Advocating For Your Interests
We’ve all seen reports of Hollywood blockbusters that report no income leaving actors, writers, cameramen and the rest of the crew with no residuals. “Creative accounting’ it’s called and it’s infuriating because of the pure unfairness of it all: everyone knows there’s money but a trick of accounting is keeping it from the rightful recipients.
It’s a sad fact that this sometimes happens during divorce. It is, obviously, an extremely emotional time and it is hardly unusual for couples to argue over a favorite kitchen utensil, never mind a house.
Sometimes, though, people resort to hiding an asset or assets in an attempt to simply keep it from the other through the divorce process. There are a great many reasons people do this. The one thing to know is this: it is illegal.
Assets Must Be Reported
According to Colorado law, spouses must affirmatively report all their assets, debts, expenses and income. Marital and separate property [RH1] must be accounted for – in full and completely. When it is submitted to the court each of the spouses are attesting to the truth of the filing.
Falsifying the value of an asset, hiding an asset, and/or simply omitting an asset is, in effect, perjury. This is not a gray area, it is the law.
It should be noted that when hidden assets are found, the court will may assign greater benefits to the other party and the person who hid the assets could be found in contempt – which could result in a fine and/or a jail sentence.
How Assets Are Hidden
As you can imagine, there are innumerable ways for a motivated person to hide assets, These are some of the more common methods:
- Overstating expenses and debts and understating income.
- Real estate offers many opportunities for hiding assets and it’s frequently the place where people are caught ‘cheating the system.’ Loans can be taken out; deeds retitled or signed over to partners or relatives; rental properties devalued or allowed to go vacant during the divorce; much more.
- Overpaying the IRS. This may seem counterintuitive, but it is hardly uncommon and can have real value down the road. The IRS is overpaid on purpose and a 1040 box is ticked off – the one that asks that the overpayment be applied to future tax bills.
- ‘Repaying debts’ to family and/or business associates.
- Maintaining individual banking/brokerage accounts and keeping the statements hidden.
- Hidden credit cards.
- Lending or giving money to friends, relatives, and/or business associates.
- Making big-ticket purchases and undervaluing them. For example, buying an expensive item (or more) and then promptly acting as if they are far less valuable than they are, all while knowing they will be able to resell the items later and get their money back or even make a profit.
- Digital Assets. Cryptocurrencies are no longer new and untried. They are far more prevalent if not less volatile. They do not involve accounts in an individual's name. Instead, they utilize blockchain records for transactions.
Finding Hidden Assets
It may seem, especially as you read through the list above, that the odds are stacked against you if your spouse decides to not play by the rules. They are not. Halligan LLC has a great deal of experience working with forensic accounting firms to uncover any assets that have been hidden from the judicial process during a Colorado divorce.
Halligan LLC has had great success for their clients finding and presenting hidden assets to the courts so that they could and were fairly adjudicated. Sometimes a spouse will not find hidden assets until after a divorce is final. Colorado allows a five-year window to seek relief if hidden or undisclosed assets are discovered.
It’s important, of course, to begin any search for assets you believe may be hidden as soon as you feel you have a reasonable suspicion it may be happening. Talk to us.