The penalty for hiding assets during a divorce

Written by rob jennings
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The penalty for hiding assets during a divorce
Hiding assets in a divorce case can result in punishment by the court. (ring image by Jens Klingebiel from Fotolia.com)

State property division laws hold that all property acquired during a marriage through the efforts of either party is marital and subject to division by the court regardless of who actually paid for it. Fearful of having assets that they see as theirs split in a divorce case, some parties hide assets in an effort to escape equitable distribution (ED) or community property. While some get away with it, it can come at a price.

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Hiding Assets in Uncontested, Undocumented Cases

A party may get away with hiding assets or lying about what he has in cases where the couple elects to handle matters themselves without any kind of written agreement. Some parties may refrain from pursuing ED or community property and agree to the entry of an absolute divorce at the end of the legally mandated waiting period on the mistaken belief that the other side has nothing. Most states hold that a party has no ED or community property rights unless she asserts them prior to divorce; if there exists no open court case or separation agreement, the other side will generally get away with lying about his assets even if those misrepresentations caused the other party to believe her property division claim was worthless.

Hiding Assets in Separation Agreement Cases

Parties can settle property division rights in separation and property settlement agreements (SAPSA), sometimes called "marital settlement agreements." Most SAPSA have disclosure provisions where each party affirms that he or she has made a full disclosure of all assets and that a full opportunity has been provided to examine those assets. Although hidden assets may not be discovered until after divorce, the innocent party may be able to sue under the SAPSA on a theory of fraud or contract breach for violating the disclosure provision. Penalties can include attorney fees, loss of unhidden assets granted by the SAPSA and punitive damages for fraud.

Hiding Assets In Court Cases

Since attorneys are usually involved in property division cases in court, hiding assets becomes harder. Where a party does this and gets caught, however, the penalties can be severe. Sanctions, or punishments, for failure to fully answer discovery include the dismissal of a party's claims, attorney fees and monetary fines. Punishments for lying under oath about one's assets include incarceration. On top of this, the party who tried to hide his assets will now have to litigate his case before a judge who sees him as a perpetrator of fraud upon the court.

When the Assets Are Discovered After a Court Case Is Over

Sometimes hidden assets pass through the discovery process despite the best efforts of the other party's attorney and a property division order is entered that does not address that hidden asset. Under some circumstances, a party who discovers hidden assets after the case is over can move to set aside the order and re-litigate the case. This can expose the guilty party not only to attorney fee claims by the other side, but also to the necessity of having to pay a lawyer to re-litigate the case; only this time, he will be paying to litigate in front of an angry judge.

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