The stress and turmoil of divorce is made more challenging when one spouse attempts to conceal assets. Under New York’s equitable distribution of marital property laws, hiding assets in a divorce is a serious offense. It is essential to understand the tactics used to hide assets, how to uncover hidden assets, and how these assets are typically divided in a New York divorce.

Understanding Equitable Distribution and Marital Property in New York

New York is an equitable distribution state. This means that any assets acquired during the marriage are generally going to be subject to distribution in a divorce action. Separate property, on the other hand, includes assets acquired before the marriage, or during the marriage through gift, inheritance, compensation for personal injuries and any property deemed separate property in an enforceable marital agreement. When a couple divorces, only marital property is subject to division and separate property is not distributed.

Discuss Why Assets Are Hidden in Divorce

Hiding assets is, unfortunately, a common occurrence. A party may hide assets in anticipation of a divorce for several reasons:

Reduce the Marital Estate: By hiding assets, a spouse can make it appear they have less wealth, leading to a smaller portion of assets being subject to division in the divorce. This can result in them keeping more property, money, or other valuables for themselves.
Avoiding or Minimizing Alimony / Spousal Support: Hiding income or assets can create the illusion of a lower earning capacity or financial need, potentially reducing the amount of alimony they might have to pay to their ex-spouse.
Avoid or Minimizing Child Support Obligations: Similarly, hiding assets can impact child support calculations. By appearing less wealthy, a party may be able to reduce their financial obligations towards their children.
Maintain Dominance and Control: Some individuals may simply want to maintain control over certain assets and prevent their spouse from having any claim or access to them during or after the divorce.
Punishment or Revenge: A spouse might hide assets out of spite or a desire to punish their partner, aiming to leave them in a difficult financial situation. At times, this may be done based on some belief that the other party has already received more than their “fair share” and, therefore, the hiding of the asset is perceived to be justified.

Common Tactics for Hiding Assets in Divorce

Spouses seeking to conceal assets may employ various tactics, including:

Undervaluing assets: This can involve understating the value of a business, real estate, or personal property.
Creating fake debt: A spouse may create fictitious loans or debts to reduce the apparent value of their assets.
Deferred compensation: Bonuses, stock options, or other forms of deferred compensation may be delayed or hidden.
Hidden bank accounts: Funds can be moved to secret accounts or held in the names of family members or friends. Accounts may be established in the Cayman Islands, Switzerland or other jurisdictions that withhold information of their investors.
Investing in Cryptocurrency: Cryptocurrency presents unique challenges due to the perceived anonymity and decentralized nature of assets like Bitcoin or Ethereum. A spouse may purchase digital currency or store funds in digital wallets that are more difficult to track.
Cash transactions: Conducting business in cash can make it difficult to trace the flow of money.
Overpaying taxes: A spouse may intentionally overpay taxes during the marriage, to artificially reduced their net income and to receive a large refund after the divorce.
Transferring Assets to Third Parties: A spouse may “gift” money or property to a friend or relative, often with the intention of getting it back later. They may even open joint accounts with family members or close friends to camouflage the funds. Similarly, an asset may be sold to such a third party at an artificially low price in order to disguise the transaction and make it appear legitimate.
Transferring assets to trusts or shell corporations: Assets can be moved into trusts or shell corporations, making them difficult to trace.

Uncovering Hidden Assets – How to Discover Hidden Assets in a Divorce

If you suspect your spouse is hiding assets, it’s crucial to consult with a New York divorce attorney experienced in locating hidden assets. They can utilize various methods to uncover hidden assets, such as:

Reviewing financial records: Examining bank statements, tax returns, credit card statements, and investment account statements can reveal inconsistencies or suspicious activity.
Conducting a lifestyle analysis: Comparing your spouse’s lifestyle to their reported income can help determine if they are spending more than they are claiming to earn.
Hiring a forensic accountant: A forensic accountant can analyze financial records, trace transactions, and identify hidden assets.
Tax Return Analysis: A spouse looking to hide assets may slip up in their tax returns, where certain deductions, interest income, or property holdings might still be reported. Comparing multiple years of returns can reveal suspicious trends, such as a sudden drop in reported income or newly created entities that require a Schedule K-1. Additionally, this office has had several cases where hidden or secret bank accounts were uncovered when such accounts are listed for refund purposes in tax returns.
Lifestyle Analysis: A lifestyle analysis compares a spouse’s spending habits and known expenses to their declared income. If someone is consistently spending more than they’re claiming to earn, that gap might indicate concealed funds. This thorough review can cover credit card expenses, loan payments, luxury purchases, and more.
Digital Tracing: Electronic footprints can be revealing. Emails, text messages, and even social media posts can lead investigators to hidden assets. For instance, if your spouse posted photos of a new boat or a vacation home that they haven’t disclosed, that information could prove invaluable.
Private Investigators: In some situations— especially in high-asset divorces — hiring a private investigator might be warranted to trace hidden property or business interests. Investigators may conduct surveillance, look into public records, property filings, and discreetly monitor suspicious activity.
Issuing subpoenas: Subpoenas can be used to obtain records from banks, employers, and other third parties.
Deposing witnesses: Depositions can be used to gather information from family members, friends, or business associates who may have knowledge of hidden assets.

Equitable Distribution of Hidden Assets

Once hidden assets are uncovered, they will be subject to equitable distribution along with the rest of the marital estate. While New York law presumes an equal division of marital property, a judge can deviate from this presumption if it is just and fair. Factors that a judge may consider include:

Disparity of earning capacity: If one spouse has a significantly higher earning capacity than the other, the judge may award a larger share of the assets to the lower-earning spouse.
Length of the marriage: The length of the marriage can also be a factor, with longer marriages often resulting in a more equal division of assets.
Health and age of the spouses: The health and age of each spouse can also be considered, particularly if one spouse has significant health issues or is nearing retirement age.

Consequences of Hiding Assets in a New York Divorce

Hiding assets in a New York divorce can have serious consequences, including:

Being held in contempt of court: This can result in fines or even jail time. A spouse who fails to comply with court orders for financial disclosure can be held in contempt of court, which may result in fines, the payment of the other spouse’s legal fees, and even jail time in extreme cases.
Being awarded a disproportionate share of the assets: The judge may award a larger share of the assets to the innocent spouse as a penalty for the other spouse’s misconduct.
Attorney’s fees: The court may order the spouse who hid assets to pay the other spouse’s attorney’s fees and costs.
Criminal charges: In some cases, hiding assets can result in criminal charges, such as perjury or fraud although such charges are exceedingly rare.

Protecting Yourself and Preparing for Divorce When Your Spouse Hides Assets

If you have even the slightest suspicion that your spouse may be concealing assets, it’s crucial to act proactively and protect your interests.

Gather Documentation Early
Before your spouse realizes that you’re considering a divorce—or as early in the process as possible— collect copies of all important financial documents. This may include:
- Bank statements (domestic and international)
- Credit card statements
- Tax returns
- Insurance policies
- Property deeds and titles
- Retirement account statements
- Mortgage records
Maintain a Paper Trail. Keep thorough records of household bills, major purchases, and any cash transactions that occur. If you notice large cash withdrawals or unusual financial activity, document it and notify your attorney. The more written proof you have, the easier it will be to spot inconsistencies and help your lawyer present a solid case in court.
Hire a Skilled Attorney. Having an experienced New York divorce attorney is one of the most effective ways to protect yourself. Your attorney will know how to navigate state-specific laws regarding equitable distribution and the various discovery tools available to you. They will also have connections with forensic accountants and financial experts if your situation calls for it.
Consult a Forensic Accountant. If there are complex assets, business interests, or large discrepancies in financial records, consider hiring a forensic accountant. While it may be an added expense, these professionals can identify hidden money or properties that could otherwise slip through the cracks.
Stay Organized and Communicative. Work closely with your attorney and financial advisors, providing them with every relevant detail. Prompt communication and thorough organization can help your legal team respond quickly to new developments and counter any deception your spouse may attempt.
Consider a Private Investigator. If you have serious concerns and strong reasons to suspect deceit, a private investigator may help uncover secret bank accounts, offshore properties, or suspicious corporate entities. Although this might be more common in high-stakes divorces, it’s an option worth discussing with your lawyer.

Suffolk County New York Divorce Attorney for Hidden Assets

Hiding assets in a New York divorce is a serious matter with potentially severe consequences. It is crucial that your spouse discloses all assets so you can obtain a fair share of the marital property under New York equitable distribution laws. The team at the Law Office of Louis L. Sternberg, P.C., diligently searches for all assets your spouse might try to conceal. By understanding the common tactics used to conceal assets and the methods for uncovering them, you can protect your financial interests and ensure a fair and equitable division of property. If you suspect your spouse is hiding assets, don’t hesitate to seek legal counsel. Contact our law office for a free consultation to discuss your situation with a Long Island divorce attorney. Call us now at 631-600-3295 or reach us through our online intake form.

Uncovering Hidden Assets in a New York Divorce

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