What Happens If a Spouse Hides Assets During Divorce?

Texas is a community property state, meaning most assets acquired during marriage are considered jointly owned by both spouses, regardless of who earned or purchased them. During a divorce, these assets are divided in a “just and right” manner. This means they deliberately are not split 50-50. The aim is for both partners to emerge from the divorce on an equal financial footing. Because of the nature of marriage, this often means that one spouse will end up with more assets than the other.

For example, if a husband worked minimum wage jobs and did not concentrate on his career so that his wife could get an advanced degree, she would likely have much greater income potential than he does. In a divorce, the courts will award him more assets to make up for this. In another marriage, a wife may have been a homemaker for years while her husband steadily improved his career through experience and promotions. In a divorce, she may find herself in a situation where she is unqualified for most jobs, while her husband can easily command $100,000 a year in salary. Again, the courts will award her more assets to make up for this.

When a spouse realizes that they are likely to lose an asset they really value, whether that’s a bank account, a piece of property, or a big chunk of their retirement, it’s not uncommon for that spouse to try to hide that asset from division. Hiding assets can involve transferring money to secret accounts, undervaluing property, or claiming that community assets are actually separate property. A spouse might move funds to an offshore account or “gift” property to a friend temporarily. These actions violate Texas law, which requires that both partners give a full and true financial disclosure during divorce proceedings.

Consequences of Hiding Assets

The courts consider hiding assets to be serious financial misconduct that undermines the integrity of the divorce process. If your spouse is caught hiding assets, one of the most common penalties is to award an even larger share to the innocent spouse in consequence. For example, if one spouse were to try to hide $50,000 in a secret account, if the court finds out about this, rather than dividing that $50,000 between the two spouses, it may just award the entirety of it to the innocent spouse.

In other situations, or in addition, the court can impose sanctions on the guilty spouse. The court may, for example, require the guilty spouse to pay all the legal fees of the innocent spouse. If you don’t discover that assets have been hidden until after the divorce has been finalized, you can file a motion to reopen the case, and this might lead to a completely revised settlement. If the hiding also involved any fraud or perjury, such as if the guilty spouse lied on an official financial disclosure, they might also face criminal charges. This is fairly rare and divorced, but it can happen.

How to Discover Hidden Assets

Of course, none of the penalties listed above matter if you don’t discover that your spouse is hiding assets at all. It’s essential that you be personally aware and that you talk with an attorney who has experience in divorce law. An attorney can help you uncover hidden assets and know what kind of things to look for in these situations. Red flags that you might notice could be unusual bank account activity or inconsistencies in your spouse’s lifestyle. Your lawyer can also help you discover whether any financial records might be missing. In Texas, both spouses must complete a sworn Inventory and Appraisement in a divorce. This should list all assets and debts, and your attorney will often be able to tell if there are discrepancies in this document.

Hiring a forensic accountant is another common strategy, and a divorce lawyer will have a network of professionals of this type to bring on board if necessary. A forensic accountant can trace financial transactions, analyze complex financial structures like businesses or trusts, and identify hidden accounts. Your lawyer can also use discovery tools like subpoenas or depositions to uncover evidence that assets have been hidden. Texas law is on your side here and gives your attorney relatively broad powers to uncover these sorts of things.

Preventing a Spouse From Hiding Assets

While it’s not possible to guarantee that you can stop a spouse from hiding assets, if you are proactive, you can discourage them from even attempting to cheat you in this way. Carefully and regularly monitor all joint accounts and keep records of any major purchases that are being made. If you even have the barest suspicion that your spouse might be trying to hide assets, don’t just dismiss this worry: talk to your attorney immediately. Your attorney can request a court order to freeze accounts or to restrict the transfer of assets during the divorce, and the court may also set down temporary orders that preserve all your community property while the divorce case is pending.

If you do discover that assets are being hidden, your lawyer will immediately present this evidence to the court. The judge will carefully consider the evidence, and the evidence will need to be clear. Suspicions are not enough. Bear in mind that the more transparent and cooperative you are with your financial disclosures, the stronger your case and the better impression you will make on the court, in contrast to your spouse’s dishonesty.

Mediation and Negotiation

Most divorces in Texas do go through a mediation process where the spouses negotiate over the division of assets. Mediation provides a chance for you to negotiate transparency and help your spouse realize that it would be better to simply be honest than to attempt to get away with asset hiding. While it might seem emotionally satisfying to see your spouse hit with penalties for hiding assets, the divorce will go more quickly and smoothly if you are both just transparent from the beginning and can come to an agreement through mediation. If you and your lawyer have evidence that assets have been hidden, presenting this during mediation is often enough to clear up the issue.

But if your spouse continues to deny that they are hiding assets and mediation fails, the case will, of course, have to go to trial. If it does, you can be sure that your lawyer will argue persuasively for you to be given a larger part of the marital estate because of your spouse’s misconduct.