During a divorce in Michigan, state law requires both spouses to provide complete and accurate financial disclosures. This transparency is essential to ensuring a fair division of marital property and debts. However, some individuals will attempt to hide assets, underreport income or conceal financial accounts to gain an advantage in settlement negotiations or court proceedings.
Hidden assets can significantly impact the outcome of a divorce and deprive the other spouse of property to which they may be entitled. Michigan courts take financial concealment seriously and have several tools available to uncover hidden assets and address misconduct when it is discovered.
What Are Hidden Assets and How Are They Concealed?
In a Michigan divorce, hidden assets are any income, property, accounts or financial resources that a spouse intentionally conceals to avoid including them in the marital estate. The goal is often to reduce the amount of property subject to division or to minimize support obligations. Common concealment tactics include underreporting income from employment, self employment or business activities. Some spouses may also transfer money or valuable assets to friends or relatives with the expectation that the assets will be returned after the divorce is finalized.
Additionally, other methods of financial concealment include creating fake debts to make a spouse’s financial situation appear weaker than it actually is. Undisclosed cryptocurrency holdings are becoming an increasingly common type of hidden asset, which can be difficult to trace without careful investigation. In addition, some individuals fail to disclose bank accounts, investment portfolios, retirement accounts, or other financial resources that should be included in the divorce proceedings. These actions can distort the true value of the marital estate and lead to an unfair property division if left undiscovered.
How Hidden Assets Are Discovered
When hidden assets are discovered during a divorce, they are often uncovered during the discovery process, which allows each party to obtain information about the other’s finances. Discovery involves requests for financial records such as bank statements, investment account documents and other materials that reveal hidden income and assets. Tax returns can also provide valuable insight by identifying sources of income and business interests, as well as uncovering discrepancies between reported earnings and a spouse’s lifestyle.
Divorce attorneys may use depositions to question a spouse under oath about their finances and employ subpoenas to obtain records directly from banks, employers, financial institutions or relevant third parties. In more complex cases, divorce lawyers may retain forensic accountants to trace transactions, analyze financial data and pinpoint concealed assets.
Common red flags accountants look for include unexplained withdrawals, missing financial documentation, sudden transfers to relatives or friends, unusual business expenses and a lifestyle that appears inconsistent with reported income. These warning signs usually prompt closer scrutiny during the divorce proceedings.
What Happens When Hidden Assets Are Found?
When hidden assets are discovered during a Michigan divorce, the consequences can be significant. Courts expect both spouses to provide complete and accurate financial disclosures, and intentional concealment may result in penalties that affect the outcome of the case, in addition to criminal charges for fraud, contempt of court or more. If hidden assets are uncovered after a settlement has been reached, a judge may reopen the agreement and reconsider the division of property to ensure a fair result.
Michigan courts also have the authority to adjust property division in favor of the innocent spouse and may award that spouse a greater share of the marital assets. In addition, a judge may view financial dishonesty as evidence that a spouse lacks credibility, which can affect other aspects of the case outside of asset division, such as child custody. These potential consequences highlight the importance of honesty, transparency, and full financial disclosure throughout the divorce process.
It is also important to prepare clearly organized documentation, including school records, medical records, parenting schedules and communication logs between parents. Honesty and consistency in this regard typically has a positive impact on the evaluator’s assessment. Because these evaluations have a significant impact on custody decisions, working with an experienced Michigan family law attorney specializing in custody disputes is important in order for parents to have the best possible outcome.
