One of the more difficult parts of a divorce is property division. This can be made more difficult when one spouse hides assets. Hidden assets make it impossible to fairly distribute assets and unfairly deny one spouse what is rightly theirs. Fortunately, there is a way to discover these assets. Forensic accountants can be hired during and after divorce proceedings to locate any assets that may have been hidden. Then, these newly discovered assets can be properly distributed, and the spouse who hid them can be appropriately penalized. If you are concerned that your spouse is hiding assets, call King Law Offices at (888) 748-KING and speak with one of our North Carolina or South Carolina divorce attorneys to learn more about your legal options. We proudly serve Winston-Salem, Rock Hill, Mecklenburg County, Haywood County, and Watauga County.
What Do Forensic Accountants Do?
Forensic accountants are specialized accountants who combine accounting skills with investigative techniques to investigate financial irregularities and crimes. These irregularities and crimes include fraud and asset recovery, both of which would cover hidden assets. Forensic accountants analyze financial records to identify inconsistencies and hidden assets by looking for suspicious transfers and manipulated financial information.
A forensic accountant can also trace accounts and cash flow, perform due diligence reviews, and explain the nature of financial crimes to the court. In divorce proceedings, they generally use financial records, account tracing, and cash flow to identify whether any assets have been hidden and if so, where or with whom they might be hidden. While a forensic accountant can review financial records such as tax returns, bank statements, and a business’s bookkeeping, they are not a traditional accountant. However, a spouse may first become aware of an irregularity indicating a possible hidden asset by their regular accountant pointing it out. At this point, they may need to hire a forensic accountant to investigate the irregularity further and bring it to the court’s attention.
What Documents Do Forensic Accountants Review to Look for Hidden Assets?
Forensic accountants do not go out and investigate as law enforcement might. Instead, they rely on documents to provide the evidence they are looking for. A forensic accountant will use bank and brokerage accounts, business ownership interests, real property documents, tax returns, investment portfolios, and income of non-owner employees and executives when trying to determine if one spouse is being deceptive and is hiding any assets. They may also rely on other documents, interviews with the divorcing couple or others who may have knowledge regarding their assets, and take other actions as necessary to make their conclusions.
What Are Hidden Assets?
Hidden assets are any financial assets a spouse intentionally conceals from their partner during divorce proceedings. By concealing these assets, the spouse violates the legal requirement to disclose all assets. In North Carolina, NC G.S. §50-21(a) requires the spouses to each disclose all assets they claim to be marital property and all assets they claim to be separate property. Rule 20 of the South Carolina Rules of Family Court requires individuals in South Carolina to serve and file a current financial declaration in any domestic relations action when the individual’s financial condition is relevant or an issue to be considered by the court. This applies to divorce, as the spouses’ financial conditions are both relevant and an issue to be considered by the court to determine property distribution.
The assets that may be considered hidden can include bank accounts, investments, property, or other valuables not listed on official documents. The assets may be located in the same state or another state. Assets may be hidden by opening secret bank accounts, transferring ownership of an asset to a third party to get it back post-divorce, underreporting income on tax returns, or simply not disclose the ownership of valuable possessions. While the assets may also be physically hidden, the point of hiding assets is that the individual hopes that their spouse and the court will not be able to determine that they own the asset. If they are successful, the spouse hiding the asset retains it and does not have to fight for it during the property distribution or sell it to split the proceeds with their spouse.
What Are the Penalties in North and South Carolina for Hiding Assets?
In North Carolina, NC G.S. §50-20(a) provides for an equitable distribution of assets during divorce proceedings. Typically, North Carolina courts attempt to make this an equal split, with each spouse getting half of the assets, but if that is not possible, they make it as fair as possible. South Carolina’s SC Code §20-3-620 also provides for an equitable distribution of property. When one spouse is caught hiding assets, one potential penalty is to give the non-hiding spouse more of the marital assets to give a “credit” or additional assets for the harm they suffered as a result of the hidden assets. We proudly Forsyth County, York County, Mecklenburg County, Haywood County, and Watauga County.
While several penalties may be imposed for hiding assets, one of the most significant penalties is the loss of credibility the individual will have with the court after discovering that they hid assets. The court will question everything the individual said previous to the discovery as well as everything they say after the discovery. This can result in the innocent spouse getting more favorable terms because the court no longer trusts the spouse who hid assets.
North Carolina
In addition to altering asset distribution, a spouse caught hiding assets can face penalties for lying under oath. The judge can issue other sanctions for the hidden assets, including monetary penalties. They may order the individual to make higher alimony payments or pay the other party’s legal fees.
If the hidden assets are discovered after divorce proceedings have concluded, if the innocent spouse receives alimony, they can petition for a post-divorce modification of alimony. If granted, this petition would result in the spouse who hid the assets paying higher alimony payments.
South Carolina
South Carolina courts may bring criminal charges for perjury, fraud, and contempt of court against individuals who hide assets during divorce proceedings. There are also financial penalties, such as fines and paying the other spouse’s court costs and attorney fees.
Like in North Carolina, if the hidden assets are discovered after divorce proceedings are over, the case can be reopened, and additional penalties can be imposed on the spouse who hid the assets. The judgment may also be modified to reflect the newly discovered assets. Whether you live in North or South Carolina, if you suspect your spouse has hidden assets, a divorce attorney with King Law Offices may be able to help you find a forensic accountant and hold your spouse accountable.
How Might Forensic Accountants Identify Hidden Assets During Divorce Proceedings?
Forensic accountants use a variety of documents to identify hidden assets during divorce proceedings. They review these documents for irregularities, inconsistencies, and inaccuracies that may indicate something is being concealed. There are some specific things that they may look for, such as offshore accounts or digital currency investments.
Suddenly Overpaying Debts
Sometimes, people have a little extra money and want to pay off their debts more quickly. However, when an individual is involved in divorce proceedings, suddenly overpaying their debts is cause for suspicion. By paying off these debts, the individual may be reducing the cash value of the marital assets, reducing the amount of assets available to be distributed between the spouses. If a spouse suddenly pays more toward debts, especially if there is no increase in income or other extra funds, this may indicate an attempt to hide assets.
Digital Currency Investing
Digital currency, or cryptocurrency, is decentralized and somewhat anonymous. This makes it difficult for legal authorities to trace or regulate. A spouse may invest in cryptocurrency to hide assets, particularly if they know that their spouse does not have any interest in or understanding of cryptocurrency. Forensic accountants may discover these investments by noting transactions with cryptocurrency exchanges on bank statements. Spouses may become aware of the investments by finding crypto-related apps on the spouse’s phone.
Creating Offshore Accounts and Shell Companies
Offshore accounts, particularly those located in places known for being secretive regarding banking, are a widespread method of hiding cash assets. Shell companies are another standard method that prove helpful for hiding both cash and property. The individual can transfer the titles to property to the shell company to deny ownership. These can be more difficult to find, but money transfers from known accounts to unknown ones can be a clue. The sale of known assets to what appear to be businesses may be an indication of a shell company.
Transferring Wealth to Family or Friends
Another standard method of hiding assets is transferring assets to family or friends. The individual will transfer titles or other proof of ownership to the friend or relative with the intention of the friend or relative transferring them back after the divorce is final. However, this can also be done with assets that do not have titles or other proof of ownership, such as jewelry. In some instances, the spouse may transfer these assets openly, telling the spouse that it is a gift to the friend or relative. Sudden gifts to friends or relatives when it is not a birthday or gift-giving holiday, particularly if the couple is discussing or in the process of divorce proceedings, should be a red flag that makes an individual consider hiring a forensic accountant.
Cash Withdrawals
Cash withdrawals can be another common way to hide assets. From small withdrawals as cash back when they make a purchase to much larger withdrawals at an automatic teller machine (ATM) or in the bank with a teller, cash is essentially impossible to track once it has been withdrawn. The individual can spend it, hide it physically, put it in a new hidden bank account, or take other actions. Forensic accountants can review bank statements, invoices, receipts, and other financial documents to determine whether cash withdrawals match up with any legitimate purchases. If not, they can flag the withdrawals to bring to the attention of the attorneys or the court.
Learn Whether Forensic Accountants May Benefit Your Divorce From a Knowledgeable Divorce Attorney
Unfortunately, it is a common practice for spouses to try to hide assets during a divorce. If you believe your spouse is doing so, forensic accountants may be able to review your financial documents and locate the hidden assets during or even after divorce proceedings. At King Law Offices, our North Carolina and South Carolina divorce attorneys may be able to assist you in finding a forensic accountant, locating assets that were hidden, and ensuring an equitable distribution. Call (888) 748-KING to schedule a consultation to review your case.