As part of your divorce, you will have to come to an agreement about how you split any assets that you own. This may include property, savings, investments, valuable items and pensions. This process requires both parties to be open and honest in disclosing their financial arrangements. However, there are cases where a spouse fails to disclose assets in an attempt to avoid them being split when the marriage ends. So, what assets do you have to disclose? What assets are commonly hidden during divorce? How do you know if your spouse is hiding assets? And what should you do if you think your ex is hiding assets? Keep reading for answers to these questions and more in our guide to hidden assets and divorce.
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Why are hidden assets an issue during divorce?
If you are divorcing, then splitting your assets is a critical part of this process. Most spouses disclose their property and assets honestly and openly, meaning a fair settlement can be agreed.
In some cases, a spouse will decide not to disclose certain assets. This is because any asset that isn’t incorporated into your divorce settlement can’t then be split. Even if it is discovered at a later date, there is a possibility that it will already have been sold.
Anything not disclosed as part of a divorce is called a ‘hidden asset’. If it discovered that either of you are hiding assets during the divorce process, then the court will take this extremely seriously (see below).
What financial assets should be disclosed in divorce proceedings? What is ‘financial disclosure?
When your marriage ends, you will need to reach a financial agreement. The only way this can be done fairly is for each spouse to fully disclose all their finances, including property, income, pensions, cash and assets.
This is true if you come to an agreement yourselves or if the court makes an order.
The requirement for full financial disclosure means you have to be open and honest about:
- all savings, investments and property that you own.
- the pending sale of a business
- an inheritance or gift that you have just received
- all pensions that you own
If the court is involved in dividing your assets, financial disclosure takes place through ‘Form E’. This is a document both you and your spouse should complete outlining all your financial details. You will normally have to provide items such as:
- 6 – 12 months bank statements
- Details of any pensions you have; both personal and occupational pensions
- Mortgage statements
- Life insurance documents
- Evidence of all your income including wage slips, your P60, or 2 – 3 years accounts if you are self-employed
- Valuations of any properties that you own.
You should provide as much information and detail as possible, as well as any commentary about transfers in or out of your accounts.
Financial disclosure is a key part of any divorce settlement and courts take an extremely dim view of non-disclosure. Withholding information and hiding assets can result in your case being opened and settlements can be renegotiated in the event that hidden assets are discovered.
What assets are commonly hidden in divorce?
There are a number of different assets that your spouse can hide during divorce.
- insurance polices
- stocks and shares
- pensions and annuities
- Property (especially overseas)
- other bonds, savings or investments.
Sometimes these assets are hidden in offshore accounts or property is transferred into someone else’s name. More simply, spouses can give assets to friends or family to ‘hide’ during the divorce settlement.
In some cases, employers can also be asked to defer the payment of wages, commission or bonuses until after the divorce is concluded.
How might I spot if my spouse is trying to hide assets?
Here are four warning signs to look out for that your spouse is hiding assets.
1. They change their mind about the divorce
Sometimes, a spouse will consult a divorce solicitor and learn about the financial implications of divorce. Perhaps their lawyer tells them that they will need to provide 12 months bank statements or explain to them exactly what you will be entitled to when your marriage ends.
They may then want to ‘try again’ or otherwise not pursue the divorce until they have got their finances in order. This may give them time to start hiding assets and arranging their affairs in such a way as to reduce the asset pool that will be split when they finally decide to proceed with the divorce.
2. They stop receiving as much mail
If there’s a sudden decline in the amount of mail your spouse receives, they could possibly be having important documents sent to a work or other address. Keep an eye out for official documents suddenly no longer arriving at your home address.
3. Passwords to online accounts are changed and you lose access to information
If you suddenly discover that the online passwords to accounts or investments have been changed, then your spouse could be trying to hide assets.
If your spouse also decides no longer to involve you with the administration or running of their business, then this is also a sign that they could be arranging their affairs in such a way as to hide assets.
4. Property is transferred into the names of family members
If property is suddenly transferred into the names of family members or friends then this could be sign that your spouse is trying to ‘hide’ these assets.
For example, they may have come to an agreement with their children from their previous marriage to temporarily take ownership of property that will be returned to them when the divorce is concluded.
How are assets hidden?
There are several common ways that spouses hide assets in order to avoid disclosing them during the divorce process:
- not reporting all their self-employed earnings in order to artificially reduce their income
- delaying a bonus or commission from an employer until after the divorce
- overpaying taxes in anticipation of a refund in the future
- hiding cash in secret, either at home or in safety-deposit boxes
- asking friends or family to look after cash or assets with the intention of having them returned after the divorce
- using online accounts such as PayPal to hide cash
- buying expensive goods to try and hide the true worth of assets.
A modern way of hiding assets during divorce is to use Bitcoin or other cryptocurrencies such as Ripple and Ethereum. These are virtual currencies and so there are no statements to disclose as the assets are stored online.
Tracing cryptocurrency can be very difficult, and while there is no Ministry of Justice guidelines in place, the Family Justice Council’s Advice Now guide states that both you and your spouse ‘need to be honest about what you own and what income you have’.
What about offshore or company assets?
Offshore assets can range from money in foreign accounts or offshore pensions to a holiday home in France. In more complex cases, money can be held in complicated offshore trusts or companies with the aim of reducing tax.
Finding and dividing offshore assets can sometimes be difficult. Even if an asset can be found, there may be tax liabilities associated with bringing assets back to the UK to be split in a financial settlement.
Offshore pensions can also present a problem as, often, an order made by a court in the UK is unenforceable against an overseas pension plan.
These issues mean that a financial settlement may therefore have to be agreed without dividing some of these offshore based assets.
What should I do if I think my spouse is trying to dispose of assets before our divorce?
If you believe that your spouse is hiding assets, or is trying to dispose of assets, you should seek legal advice straight away. Three ways that the court can step in:
- they can make an order under section 37 of the Matrimonial Causes Act 1973. This can be an order prevent the disposal of an asset or an order that required an asset that has already been disposed of to be transferred back
- a ‘freezing’ order that prevents the disposal of assets, which can include overseas assets
- a ‘search’ order which can try and unearth hidden assets (this search is used rarely and generally in cases of serious non-disclosure or where the assets are significant in value).
What if my spouse is spending heavily to reduce the assets?
When you are trying to reach a financial agreement (either privately or through the court), several factors will be considered. One of these is ‘the conduct of the parties’ if, in the court’s opinion, it would be inequitable to disregard that conduct.
In theory, you could use this to insist that any reckless spending that your spouse has been indulging in to reduce assets be added back into the settlement.
For you to prove this, there must be clear evidence of ‘wanton dissipation’. You will have to show that:
- the behaviour that led to the reduction in the value of your assets was ‘wanton’
- your spouse’s motivation was to reduce the amount of your financial claim.
If you hold money in joint accounts, then you may also be able to speak to your bank in order to ‘freeze’ the account and to prevent any further withdrawals.
Are there any limits on what I can do to access information to try and prevent the hiding of assets?
Yes. If there is no confidentiality issue, then you may be able to provide evidence of any non-disclosed assets.
However, recent court cases have made it clear that obtaining information in the wrong way could mean the evidence is inadmissible, and you could even be committing a criminal offence.
For example, if you access your spouse’s computer without their authorisation, you may be breaking the law. You could face a fine or even be sent to prison. Other circumstances that could see you facing criminal or civil action include:
- Opening your spouse’s mail
- Making copies of paperwork that relates to your spouse’s finances
- Taking your partner’s papers or documents
- Breaking into a locked office or filing cabinet.
While courts are keen to ensure that assets are not hidden, you and your divorce solicitor have to act within the boundaries of the law. Your solicitor is likely to refuse to accept any documents that you have not obtained through ‘legal’ means.
What is a forensic accountant, and can they help me locate hidden assets?
The job of a forensic accountant is to investigate business and personal finances in order to find inaccuracies and discrepancies.
They can help you to find any hidden assets onshore and offshore and give you advice on the potential value of such assets.
For example, they can use auditing techniques and analyse documents to uncover linked businesses where assets are concealed. They can find discrepancies relating to liabilities and raise questions about the operations of a business.
Once a forensic accountant has prepared a report, a divorce solicitor can follow up their findings in order to uncover the assets.
What happens if my spouse is found to have hidden assets?
The court takes non-disclosure of assets very seriously. In two separate cases in 2015, the Supreme Court ruled that a spouse had withheld financial information. In each case, the existing court orders were put aside, and the cases reopened.
You may be able to renegotiate your financial settlement if it has been found that the original order was based on dishonest information. Your spouse will have to prove that the non-disclosure would not have changed the financial settlement.
If you want your divorce to be concluded once and for all, and a clean break to be achieved, it is vital that you disclose all assets. If you don’t, it is possible that your case could be reopened in the future and the agreement renegotiated.
The information on this website is to be considered a guide and is therefore not legal advice. You use this information with the understanding that Wiselaw does not accept liability for any direct or indirect losses as a result of anyone relying on or acting upon the information on this website. Whilst we endeavour to provide accurate information, Wiselaw does not accept liability for any errors or omissions on this website.