What Are the Consequences of Hiding Money in a Divorce

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Money is at the heart of many divorces.  Financial guru Dave Ramsey recently conducted a study on relationship problems and marriage and found that high levels of debt and lack of communication are the second leading cause of divorce (behind infidelity).  The study found that 33% of spouses have hidden a purchase from their spouse because they knew he or she would not approve. Hiding money during a marriage can lead to a divorce, but hiding money in a divorce can lead to serious legal problems.  

Discovery can expose secrets

If a divorce moves forward through the court process, each spouse will have an opportunity to use “discovery” to get information related to the case.  Most commonly, this means requesting documents like bank statements, tax returns, business records, and the like.  

A spouse will almost certainly be asked to disclose any assets they have.  

Discovery can be very wide-ranging.  Parties traditionally had access to anything “reasonably calculated to lead to admissible evidence,” though some courts are beginning to require that information requested must be proportional to the needs of the case.

The bottom line is that each side should expect to be forced to disclose financial information during the case, so it is often easier to just make those disclosures early instead of waiting.  

Bank account statements, tax returns, lists of expensive items and the like should usually be shared.  A divorcing spouse may also need to sit for a deposition, which is basically a recorded interview where the lawyer for the other side gets to ask questions.  

Interrogatories are similar, these are basically written questions asked to the other party.  Discovery can also include “requests for admission,” where one spouse asks the other to admit certain facts are true.  

Discovery can expose secrets

Penalties can be severe

First of all, you should recognize that your lawyer can be disciplined if he or she knowingly allows you to make false testimony or helps you hide assets.  A judge can also sanction one side.

The side hiding assets could have their claims dismissed or the court could just make negative assumptions related to their arguments.  The judge could order the spouse to give all the hidden money to the other spouse in the settlement as well.

The judge could also award a larger share of the overall assets to the other spouse.  In most states, judges have a lot of discretion to use the property division to even out any misbehavior.  

You probably cannot unring the bell

The exact law will vary from state to state, but once a final divorce decree is entered it is very difficult to get the final judgment overturned.  As a result, lawyers have extraordinary powers to catch someone hiding assets during a divorce proceeding, but little power to change anything afterwards.  This should be a warning that all spouses.

Each spouse (and their lawyers if they have them) should be diligent about securing all the necessary information.  If they are not, they are not going to get a second chance if they find out about hidden assets later.

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