During a divorce, both spouses have to make important decisions about big issues like dividing up their property, financial support, and how to share parenting time. They also have to do a fair amount of work to gather financial documentation to prepare for a divorce. When one spouse is not fully transparent about their finances, it can make deciding on property division and determining support much more challenging.
Hidden assets in a divorce can include anything from undisclosed bank accounts to transferring property to a relative to undervaluing a business. Whether hiding assets is deliberate or because of poor recordkeeping, it can complicate the process of determining an equitable distribution of marital assets. If you are going through a divorce in Colorado, learning the potential warning signs that your spouse is hiding assets can protect your financial interests.
At Solutions Based Family Law, we are fierce advocates for clients going through divorce in the greater Denver area. Whenever possible, we help our clients work out agreements to avoid the cost and stress of litigation. When necessary, we take your case to trial to protect your interests. Contact our law offices today to schedule a free consultation with a Denver divorce attorney.
What Are Hidden Assets in a Colorado Divorce?
Hidden assets are the financial resources or property that one spouse leaves out of their financial disclosures during a divorce. They may do so intentionally or unintentionally, but the end result is the same. The other spouse doesn’t have the full financial picture because their soon-to-be ex isn’t being transparent.
A party may hide any type of asset during a divorce, such as:
- Checking or savings accounts
- Investment and brokerage accounts
- Cryptocurrency or digital assets
- Retirement accounts
- Business interests
- Real estate
- Valuable personal property (such as rare coins, expensive jewelry, or pricey art)
- Stock options or restricted stock
- Cash kept outside of traditional financial accounts
- Accounts held in another person’s name
- Money or property transferred to relatives or friends
- Undisclosed ownership interests in a business
- Tax refunds or anticipated bonuses
- Intellectual property or other income-producing assets
In a Colorado divorce, all marital property is subject to equitable division. Broadly speaking, marital property includes all assets and debts acquired by either spouse during the marriage (other than inheritance or gifts to one spouse).
When it comes to dividing marital property, the important issue is not just whether an asset is titled in both spouses’ names. Even if only one spouse’s name appears on an account or ownership document, it may still be part of the marital estate.
Getting a complete understanding of each spouse’s finances is critical to a fair division of marital property and decisions on spousal support. Each spouse is required to complete a Sworn Financial Statement at the start of the divorce process, listing income, assets, debts, expenses, and more. These forms require both spouses to include separate and marital property.
Because full financial disclosure is so important in the Colorado divorce process, it is important to be aware of red flags that your spouse may be hiding assets. If you are concerned about hidden assets, our Colorado divorce lawyers can help protect your rights and fight for an equitable outcome.
Financial Red Flags That May Indicate Hidden Assets
Not every financial irregularity means that a spouse is hiding property or money. However, there are some inconsistencies or changes in a person’s finances that may warrant closer attention if you are going through a divorce. This may include:
- Unexplained Bank Transfers: Large transfers shortly before or during a divorce can warrant investigation, particularly when the destination of the money is unclear. For example, you may notice that money has been moved from a joint checking account into an unfamiliar account, or that a substantial amount of money was transferred to a relative without a clear explanation from your spouse. You should look for:
- Unusually large withdrawals
- Transfers to unfamiliar accounts
- Repeated electronic payments
- Checks written to unknown individuals
- Transfers to relatives or friends
- Sudden cash withdrawals
A single unusual transaction may have an innocent explanation. However, a pattern of unexplained transactions can be more significant during a divorce.
- Accounts You Did Not Know Existed: If your spouse has managed the family’s finances, you may not be aware of every account. You should review all available financial records for references to:
- Banks or credit unions
- Brokerage firms
- Retirement plans
- Investment platforms
- Digital payment services
- Savings accounts
- Certificates of deposit
- Online financial institutions
Account numbers appearing on tax returns, statements, or transfer records can sometimes provide leads to additional financial accounts.
- Sudden Changes in Spending: A spouse who suddenly changes their spending habits may be creating another financial trail worth examining. Examples include:
- Unusually large purchases
- Frequent cash withdrawals
- New credit card charges
- Payments to unfamiliar businesses
- Expensive purchases that don’t appear on asset disclosures
- Significant transfers immediately before separation
Spending patterns can sometimes help explain where money went and whether assets were transferred or converted into other property.
- A Business That Suddenly Appears Less Profitable: Business ownership can make financial investigations considerably more complicated. If your spouse owns or controls a business, examine whether its reported income and expenses appear consistent with those from previous years. Potential warning signs can include:
- A sudden decline in reported revenue
- Increased business expenses
- Payments to relatives or other related parties
- Unusual loans from the business
- Delayed invoices
- Personal expenses characterized as business expenses
- Significant changes in inventory
- Accounts receivable that suddenly decline
- Compensation that changes without an obvious business reason
Business owners may have more opportunities to control the timing and reporting of income than employees receiving a regular paycheck. That does not mean every change is improper, but substantial discrepancies may require closer financial analysis.
- Assets That Are Suddenly “Worth Less:”: Valuation can become an important issue when spouses own businesses, real estate, investments, collectibles, vehicles, or other valuable property. A claimed decrease in value is not automatically evidence of concealment. However, inconsistent valuations may deserve further documentation. For example, a spouse may claim that a business is worth substantially less during divorce than it was during the marriage while continuing to operate it successfully. Independent valuation or financial analysis may help determine whether the stated value is supported by reliable evidence.
- New Debt That You Do Not Recognize: Hidden assets are only part of the financial picture. Hidden or questionable debts can also affect property division. Be cautious about unfamiliar:
- Credit card balances
- Personal loans
- Business loans
- Transfers characterized as loans
- Accounts payable
- Promissory notes
- Cash advances
A spouse may claim that money owed to a friend or relative is legitimate debt. Documentation can help establish whether the obligation actually exists and when it arose.
- Missing or Incomplete Financial Records: Missing documents can be another warning sign. If financial records that were routinely available during the marriage suddenly become unavailable, it may be appropriate to determine why. Important documents can include:
- Bank statements
- Brokerage statements
- Retirement account statements
- Tax returns
- Pay stubs
- Loan documents
- Credit card statements
- Business records
- Real estate documents
- Insurance policies
- Trust documents
- Investment records
What Should You Do If You Suspect Your Spouse Is Hiding Assets?
Financial transparency is an important part of the Colorado divorce process. If a party does not provide full, accurate information in their Sworn Financial Statement, it could lead to consequences in the divorce case.
If an undisclosed or hidden asset is discovered, the consequences will depend on the circumstances, including when the asset was discovered, whether the omission was intentional, the value of the property, and whether a final agreement or court order has already been entered. The consequences could include:
- An unfavorable division of the marital estate, including awarding the concealed asset to the honest spouse
- An order for the spouse who hid the asset to pay the other spouse’s attorney’s fees associated with uncovering the hidden asset
- Sanctions and fines
- Contempt of court
- A perjury charge for intentional concealment
- Reopening the divorce case (up to 5 years after the final decree) if the divorce has been finalized
These potential consequences make it important to not only watch for warning signs of hidden assets, but to take steps if you do suspect that your spouse is hiding assets. You should focus on gathering evidence and preserving relevant evidence:
- Gather Financial Information You Can Lawfully Access: If you have legal access to household financial records, make copies of important documents and account information, such as recent tax returns, bank statements, mortgage documents, credit card statements, and business financial records. Do not attempt to access accounts if you do not have authorized access.
- Create a Timeline: A financial timeline can help to identify unusual activity. Make notes of significant events, such as when you learned about the divorce, when large withdrawals occurred, when accounts were closed, or when a business changed ownership. This timeline can help your Denver divorce lawyer understand the history and decide what issues may warrant further investigation.
- Compare Financial Statements: You shouldn’t look at individual documents in isolation. Instead, you should compare the information reported in a sworn financial statement with any available financial documents that you may have.
- Ask for Documentation: If a spouse reports owning an asset, owing a debt, or receiving a particular amount of income, you can ask for documentation to verify the information. An unexplained number on a financial statement isn’t necessarily proof of wrongdoing, so additional evidence can help clarify if there is an issue.
- Consider Additional Discovery: During a divorce, your attorney can ask for information through a process known as discovery. When your spouse does not fully disclose assets, your Denver divorce attorney may consider depositions, requests for production, or other methods to obtain relevant information.
While a failure to disclose assets can be infuriating, it is important to remember that this issue may wind up in court. You will need to thoroughly document the potential hidden asset. Be sure to remember that if you do anything shady during this time, such as hacking into an online account, it could backfire when the matter is presented to a judge.
How a Colorado Family Law Attorney Can Help
A divorce settlement is only as fair and informed as the financial information behind it. If one spouse controls most of the family’s finances or you suspect that assets haven’t been fully disclosed, it is important to address those concerns before finalizing property division, alimony, or any other aspect of your Colorado divorce.
At Solutions Based Family Law, we help Colorado families navigate complex financial issues during divorce, including property division and financial disclosures. If you are concerned about hidden assets, unexplained transactions, or incomplete financial information, we can help you understand your options and determine what steps may be appropriate for your circumstances. To learn more or to schedule a consultation with a Denver divorce attorney, give us a call at (866) 522-7959 or fill out our online contact form.