It’s vengeful, greedy, dishonest, and quite possibly illegal. Still, none of those issues stops soon-to-be-former spouses from trying to conceal money from each other to avoid having to give some of it up in a divorce.
A soon-to-be-ex might stash the funds in real estate or a business and use clever accounting tricks to cover their tracks; they might buy cryptocurrency or luxury goods that they don’t disclose; or they could stick money in a secret account overseas or maybe just down the road at a small community bank.
Hunting for hidden assets can be “like fishing,” a forensic accountant explained to THE EXIT. You can spend a lot of effort and money digging and end up empty-handed. But other times, a suspicious spouse can strike gold.
A New York-based private investigator, Michael McKeever, told us he had a client once who used spyware, planted into her soon-to-be ex-husband’s computer through a link he clicked, which allowed her to read his emails. (This is hacking and it’s a crime — McKeever clarified that the client undertook this scheme herself, and not him.)
Eventually, she found a smoking gun, McKeever said: “She was getting all of his emails for about four weeks until finally he sent an email to his accountant that said ‘can you show me all of my assets and show me all the ones that my wife doesn’t know about.’”
You don’t have to necessarily throw yourself into a wild fishing — or phishing — expedition to figure out if your spouse might be hiding money from you, though. Careful observation and intuition can do a lot to nose you onto the right clues, and help you narrow your search, experts said. “Most people fall into a pattern” when it comes to what they do with money, said Jason Pierce, a Boston-based forensic accountant who works on cases throughout the country. “Most people when they think of forensic accounting, they think of the money. It’s equally important to figure out the person.”
Living a lavish lifestyle
What’s the first and biggest red flag that might point to money being concealed somewhere? Expenses that stretch far beyond any income that you know about. “When the non-monied spouse tells you ‘we have nice clothes, we have a lot of goods, and we go on fancy vacations,’ and the tax return doesn’t show that much, then you know there are hidden assets,” said Manhattan-based divorce lawyer Beatrice Leong. “Anytime there is a lifestyle that doesn’t match what is showing on paper, you tend to think, ‘wait a minute…should we go deep-diving?’”
If one of the spouses owns or is an investor in a cash-based business, such as contracting, a restaurant, a hair salon, or maybe a gas station, that’s another possible clue. “That generally tends to send up a warning sign to divorce lawyers. Maybe they are declaring $300,000 but [the income] is closer to $1 million.”
Real estate is another potential trouble spot. A real estate developer with stakes in multiple projects can easily find ways to mask investments as expenses or otherwise misrepresent them on paper, said Pierce. “Those folks are notorious.”
Traveling alone, especially overseas
A person who rarely leaves the country is probably not going to go to the trouble of opening an offshore account in Switzerland, Latvia, the Caribbean or other exotic locations known for sheltering assets. But a spouse who frequently travels overseas, especially solo, may very well take the opportunity.
Leong, who works with a lot of Chinese clients, often encounters situations where money is “hidden away in a Chinese bank.” Although tracking down and getting a hold of assets in foreign accounts can be difficult, Leong said she has seen judges in U.S. divorce cases order spouses to disclose overseas account information — and defying a court order can have serious consequences, such as jail time.
Spending too much time on the computer
Have a soon-to-be-ex who spends all day long on the computer, doing mysterious things he or she tells you very little about? It’s possible that he or she is stashing away money in cryptocurrency or maybe non-fungible tokens, AKA NFTs. In a related trick, you can also store value in video games which incorporate NFTs to customize characters.
“You can get a character all decked out” with special attributes “and then sell it,” Pierce said.
Cryptocurrency and NFTs are recorded on public ledgers via blockchain, and so in theory they are traceable. But you must have a sense of what to look for in the first place to figure out what is there.
Noticing charges to unknown vendors
Charges on a credit card or debits to a checking account are often interpreted as “expenses,” but sometimes a spouse might use joint accounts to purchase assets that they keep out of sight. (No one wants to think a spouse, or an ex might be laundering money like a drug dealer — but it happens.)
Collectibles, art, antiques, high-end rugs are all items that can hold value well, and maybe even appreciate over time. If you suspect your ex might have siphoned money out of your marital estate, you may want to take a close look at the vendors listed on credit card or bank statements.
“Do some research on these vendors,” Pierce advised. “I’ll get all of that data into Excel…and do a Google search on all of the vendors — figure out what they are.”
Consequences of getting caught
Of course, a lot of asset hiding isn’t that complicated. Leong, the Manhattan divorce attorney, recalls a client who insisted her soon-to-be ex-husband was squirreling money away, but didn’t know where. So, Leong subpoenaed every single bank in Queens and Long Island, where the couple lived, and found what the woman was looking for. The husband had $150,000 at a small, local Long Island bank that he hadn’t disclosed in the divorce proceedings.
“Because he lied, the court punished him,” Leong said. While marital assets are usually divided in half in New York, the judge awarded all the $150,000 to the wife. “You should be honest and transparent” about your finances in a divorce, Leong said. “There is more to lose by lying.”