In a Connecticut divorce, the court will divide and distribute all assets among you and the other spouse in a manner it deems fair and equitable, based on all the facts and circumstances of your unique case. But first, the court needs a complete picture of your income and the value of all assets that you and your spouse own jointly, individually, or jointly with someone else. Parties in a Connecticut divorce are required to fully disclose their financial condition to the other party and the court in a full, frank, and accurate way. But unfortunately, it is not uncommon for one spouse to try to hide assets in a fraudulent attempt to prevent them from being divided and distributed. Here are some tips for protecting yourself financially.

What documents need to be produced?

Early in the divorce proceedings, you and your spouse will be required to file financial affidavits that detail your income, assets, expenses, and debts. Assets to be divided and distributed may include real estate, investment assets, retirement assets, artwork and collectibles, intellectual property, ownership interests in business entities, cars, boats, and other items. To get a complete picture of your current and future assets and income, the court will require:

1. Past 3 years of federal and state income tax returns, including personal returns and returns filed on behalf of any partnership or closely held corporation of which a spouse is a partner or shareholder
2. Past 3 years of IRS forms W-2, K-1, and 1099
3. Last pay stub from the previous year, and all pay stubs or other evidence of income from the current year
4. Past 24 months of statements for all accounts maintained with any financial institution, including banks, brokers, and financial managers
5. Most recent statement for every retirement account, including Keogh, IRA, profit-sharing, deferred compensation, and pension plans
6. Most recent statement for any life insurance policies
7. Health insurance policy summary detailing coverage, cost, spousal benefits, and COBRA costs following dissolution
8. Appraisals of real estate and certain other assets that the spouses own, either individually, jointly, or with another party

Depending on your situation, more extensive or specific documentation may be required.

How are assets commonly hidden?

The sky is the limit when it comes to people’s creativity in defrauding others. Assets can be hidden in different ways, depending on the type of asset and the sophistication and resources of the person doing the hiding. A common way to hide an asset is for one spouse to have a friend or other third party hold something for them. For instance, someone with a valuable antique car may give it to a buddy to hold; the spouse may even stage a fake transaction to make it look like the friend bought the car.

A more sophisticated method is to form a limited liability company (LLC) or multiple LLCs and use them to hide assets. For instance, an individual may buy real estate in the name of an LLC, so the individual’s name is not on the property. This can make it harder to find, since the property will not come up when you do a simple search of assets under that person’s name. Some people cover their tracks further by not even listing their name as a member of the LLC that owns the property, but by having the members be a series of LLCs, thus burying the individual’s identity in shell after shell.

PayPal and Venmo are also common sources of hidden assets, since the other party may forget to look there. PayPal is now a bank account, and we have seen divorcing parties with $30,000, $40,000, or $50,000 in their PayPal accounts that the other party is completely unaware of.

Crypto currency is another effective tool for hiding assets. Someone may have put $1,000 in Bitcoin many years ago, and it could be worth $200,000 today, without the other spouse knowing anything about it.

People can also hide money by putting it into custodial accounts for their children. This is common in second and third marriages, when spouses bring children into the marriage. If the transfer of funds happened in contemplation of divorce, the court may determine it was a fraudulent transfer. To make this determination, the court will look at the historical record. If, for instance, you have been contributing $5,000 every year for 10 years, and you did it again this year, just before the divorce, that would likely be acceptable. But if you suddenly contributed $50,000 to a custodial account six months before starting divorce proceedings, it may be problematic.

How can people protect themselves during the marriage?

It is common in marriages for one person to be the money person, handling all or most of the family’s financial matters, while the other knows very little about the finances. People can protect themselves during their marriage by getting more involved in their family’s asset management. Some people do not like the idea of getting a prenuptial agreement or post-nuptial agreement, but these documents encourage full disclosure of assets, debts, and income, and encourage transparency in the marriage from day one.

How can hidden assets be uncovered in a divorce?

If you suspect your spouse may have hidden assets, speak to an experienced Connecticut family law attorney. When we meet with clients, we ask them if they had have any knowledge of any family assets that disappeared. We often work with forensic accountants, who scrutinize the other party’s financial documents for irregularities. When the other spouse is an owner in a closely held business, we typically work with a business valuation expert to analyze relevant documents. Based on what we find, we use the discovery process to obtain additional documents and evidence from the other side. Discovery is the formal process by which parties in a divorce obtain information and evidence from each other. In addition to demanding financial documents, we may use interrogatories, which are written questions that the other spouse must answer under penalty of perjury, and depositions, in which third parties with relevant information are asked questions under oath, as part of the fact-gathering process.

The family law attorneys at Ruel Burns Feldman Kukucka & Britt, LLC have extensive experience serving as trusted advisors and representing clients in divorces and appeals in Connecticut. If you are considering a divorce or seeking a modification or appeal of your divorce, alimony, or child custody orders, contact our family law attorneys at 860-206-9096 or online.