Michael B. Lehner, CPA/ABV, CFE, ASA
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Uncovering hidden assets and income in divorce cases

hidden assets income divorce cases Methods of detection

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In divorce cases, spouses may have an incentive to hide assets and income to minimize support payments or skew marital asset distributions. Here are some ways spouses may attempt to conceal their wealth and techniques financial experts use to uncover it.

Common schemes

How might dishonest spouses attempt to hide assets or income? Consider these scenarios:

Hidden bank accounts. A spouse may divert cash into a new, undisclosed bank account in his or her own name.

Undervalued assets. A spouse uses cash to purchase expensive assets — such as artwork, jewelry or antiques — and downplays their value.

Understated or unreported business income. A spouse might, say, collude with his or her employer or business partners to delay the payment of bonuses, commissions, stock options or other compensation until after the divorce. Spouses who own a private business also might delay sending customer invoices or signing business contracts to make the company appear less valuable.

Fraudulent transfers. A spouse could temporarily transfer the title to an asset to a friend or family member who returns it after the divorce.

Phony expenses or debts. Another ploy is to funnel cash to a friend or family member and disguise it as payments on fake invoices for nonexistent products or services, or as repayment of a phony debt.

Methods of detection

The first step to revealing hidden wealth is to establish a baseline — typically, the point in time when the marriage began to deteriorate. Major changes after that date — such as declining income or shrinking bank balances — may indicate that a spouse is manipulating finances.

To identify unreported income, experts examine sales, payroll, tax and other financial records. They also may interview employers and customers or clients to determine whether income has been delayed or misdirected. Hidden assets are often revealed by a review of tax returns, invoices and receipts. For example, interest, dividends or itemized deductions reported on a tax return might lead to hidden accounts or assets. A document review may expose invoices for repairs, maintenance, professional fees or other expenses related to previously unreported assets.

Lifestyle analysis is another powerful tool for revealing hidden assets and income. The expert determines whether a couple’s income and assets are sufficient to cover its expenses and liabilities. A shortfall may indicate hidden sources of funds.

Fill in the blanks

Need help compiling a list of documents to request during discovery or conducting a forensic analysis to reveal hidden assets and income? Contact a financial expert to develop a clear picture of a couple’s financial condition and arrive at a fair divorce settlement.

Michael Lehner

This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and, accordingly, assume no liability whatsoever in connection with its use. In addition, any discounts are used for illustrative purposes and do not purport to be specific recommendations.