What happens if I hide an asset in divorce?


If you intentionally fail to disclose an asset in divorce, you risk ruining your reputation with the court, which may end up costing you much more than if you had made full disclosure in the first place.

This article deals only with intentional misrepresentations. Mistakes happen, and if you accidentally omitted an asset in your financial disclosure, you should immediately notify your attorney so it can be corrected. However, it’s important to be thorough in your reporting. Closely examine all of your accounts and history, and if there’s any doubt, verify before reporting.

But if you’re thinking about pulling the wool over the eyes of your spouse and/or the court, here’s what you should consider.

Although no misrepresentation is acceptable, the extent of the misrepresentation is an obvious factor. If a party fails to disclose a savings account that holds $100, that’s obviously much less significant than failing to disclose an investment account worth $100,000. The more you’re considering hiding, the higher the risk that you’ll be exposed and the higher the potential penalties.

Generally, the consequences of hiding assets can be significant and costly.

There are a couple of different ways that parties make representations to the court and the other side about their assets: through the filing of a financial statement, which is a statement filled out and signed under oath, disclosing income, assets and liabilities, and through the process of discovery, which consists of the parties exchanging information and documents usually about their income and assets.

How can you be exposed if you omit an asset?

Exposure usually happens either by information reaching your spouse through a person familiar with the family’s finances or your spouse or spouse’s attorney may learn of the hidden asset through discovery - the exchange of information and documents, and the use of subpoena powers. All documents and information related to ALL of your financial history is fair game, so assume the other side already has all of this when filling out your financial statement and complying with requests. It’s not uncommon for financial accounts to reference other accounts.

For example, there may be a transfer identified from one account to another. So the asset you’re trying to hide can come to the attention of the other side indirectly.

What are the consequences of hiding assets?

If the other side learns of the misrepresentation, the timing of that discovery will dictate what needs to be done to address it, and therefore what the consequences will be.

If it’s discovered before the divorce is finalized, it’s much easier to fix. However, if the judge learns of the misrepresentation, your credibility is destroyed, which lays the foundation for a poor outcome in your case. At the very least, the other side has possibly gained leverage in the case because your alternative to a negotiated resolution is going in front of a mediator or judge who will learn of your dishonesty.

If the misrepresentation is discovered post-divorce, that’s even worse. The other side now has the option of re-opening the case, which generally costs more time and money, and most of the money will likely come of your pocket.

In the event of a clear misrepresentation, especially if the parties have to spend considerable resources fixing the issue, the court is likely to award attorney’s fees to the aggrieved party.

Judges are human, and most humans don’t appreciate being deceived. Therefore, although the deception shouldn’t be a substantial factor in deciding issues on the merits based on the parties’ marriage, it’s hard for judges to ignore that someone lied to the court, and judges have a lot of discretion that they can use to achieve a result they think is “fair.” So even if the judge won’t specify that you’re getting punished for lying, that result can be reached and justified indirectly.

Honesty is the best course

The bottom line is that dishonesty does not pay in family court. The risk to your creditability, and consequently, to your financial future is too great. It’s not worth it. Educate yourself, choose a lawyer wisely, and work hard to achieve a good result. If you’re honest with the court, you’ll sleep better, and most importantly you’ll avoid the risk of a financial disaster that can cost you much more than the value of the asset you were thinking of hiding.