In a previous blog post, we discussed how a spouse may hide assets and income in a divorce. If you believe your spouse is hiding assets and/or income in your divorce, there are ways you, an experienced divorce attorney, or an expert can investigate.
In this article, we will give an overview of avenues a divorcing party may explore in order to find hidden assets and income in a divorce. These include: 1) Rule 410 mandatory self-disclosure; and, 2) expert analysis and investigation.
Massachusetts Supplemental Probate and Family Court Rule 410
Under Massachusetts Supplemental Probate and Family Court Rule 410 (“Rule 410”), each party to a divorce must make certain financial disclosures to the other. These disclosures are required in every Massachusetts divorce case unless the court orders, or the parties agree otherwise.
The parties must make their Rule 410 disclosures within 45 days from the date of service of the summons. Broadly speaking, the documents the divorcing spouses must disclose include, but are not limited to: three years of tax returns and supporting documents; four recent paystubs; health insurance documentation; three years of statements for certain bank accounts, retirement accounts, and investments; loan and mortgage applications prepared in the three years preceding the complaint filing; and, financials statements the parties prepared in the three years preceding the complaint filing.
Although time-consuming, reviewing your spouse’s Rule 410 disclosures will offer significant insight into his or her financial circumstances. These disclosures could help you determine whether your spouse is hiding income and assets in your divorce and how to find them.
Tax Returns and Supporting Documents
As part of the Rule 410 disclosure process, each divorcing party must disclose to the other their federal and state income tax returns and schedules for the past three years. The parties must also share with each other supporting documentation for tax returns. Such supporting documentation includes, for example, W-2s, 1099s, and Schedule Es, among other documents.
Comparing a party’s current tax returns with those from previous years may offer clues about hidden assets or income. First, one could look at their spouse’s income to see if their spouse earned significantly more or less from one year to the next, or if there are other income discrepancies. Second, tax returns can offer insight regarding a spouse’s assets, albeit often indirectly. For example, if a spouse files a Schedule E, that could indicate to the other party that the spouse receives rental property income. If that rental property and related income were not disclosed, further investigation could be conducted.
If a spouse is a business owner or has an interest in a business, Rule 410 requires the disclosure of the tax returns and supporting documentation from the preceding three years (prior to the complaint filing) for non-public, limited partnership, and privately held corporate returns. So, one could also look for discrepancies in business income, profits, expenses, and the like over a period of time.
Bank Account Statements
One of the easiest ways to investigate a party’s income and assets is by reviewing their bank statements. This includes those for checking and savings accounts.
Under Rule 410, parties to a divorce must share with the other their bank statements for the past three years. This includes the following: statements for all bank accounts held in the name of either party (individually or together); any bank account held in someone else’s name that benefits a divorcing spouse; as well as any bank account a divorcing spouse has that benefits the minor child(ren) of the spouses.
These records reveal at least some of a party’s income and personal expenses. Similarly, these account records could show unusual expenses, spending, or withdrawals. In the case of transfers to other accounts, reviewing bank statements provided under Rule 410 could even help you find an undisclosed bank account held by the other party. When reviewing expenses
If the parties have children with savings or trust accounts, it is important to look into these as well. This will ensure that no usual withdrawals or deposits have been made to/from these accounts.
Loan Applications
When a person applies for any type of loan, the application process requires the disclosure of that person’s income, assets, and liabilities.
A divorcing party can therefore compare any such application completed by their spouse to their spouse’s financial statement in order to find discrepancies. Any discrepancies can disclose hidden assets or income.
Hiring an Expert to Find Hidden Assets and Income in a Divorce
Depending on what’s at stake in the divorce, it may be beneficial or necessary to hire an expert to determine the value of a party’s assets and help find hidden assets and income (if any). Some experts can assist generally in the investigation. Others, however, specialize in specific types of assets. It is therefore helpful to have an idea of what you hope your expert will learn or uncover in order to determine the type of expert you may need in your divorce case.
Business Valuation Experts
In some divorces, a spouse is either a business owner or has an interest in a business. The value of that business (or business interest) is relevant in the divorce because it is directly tied to the owner-spouse’s income and the size of the marital estate (which could include the business).
If a business owner-spouse undervalues their business (or business interest)–i.e. says it is worth less than it is–they are essentially hiding money. When questions arise as to the value of the business (or business interest) during the divorce process, it may be necessary to hire a business valuation expert (certified business appraiser). Business valuation experts/certified business appraisers undergo specialized training, enabling them to determine the economic value of a business. Their skills include, but are not limited to, analyzing business income, predicting future earnings, and studying management teams.
Pricing for these experts varies and is dependent on a number of factors. These factors can include the expert’s experience, the size of the business in question, and the type of business being investigated. An investigation into a smaller business may cost a few thousand dollars. By comparison, a valuation for a larger business that requires more time, outside research, and additional experts may cost upwards of $50,000.
Hiring an expert to complete a business valuation can be costly. But, in some circumstances, it could be more expensive for a divorcing party not to do so. Not only are these experts helpful in determining the value of the marital estate, but they can also help find hidden assets and income. This is especially true if a divorcing party believes their business owner-spouse is undervaluing the business, engaging in behavior to reduce income from the business, or hiding assets through the business.
Other Appraisers
Again, undervaluing an asset is one way to hide money. Like a business appraiser, other professional appraisers can determine the actual value of different assets, like real estate, equipment, and art. A real estate appraiser, for example, could help a divorcing couple determine the value of the marital home to facilitate the equitable distribution of the marital estate. A real estate appraiser could also ensure, however, that the opposing party in a divorce does not undervalue their income property, for example. The same could be said about other types of appraisers and assets, as well. Hiring a professional appraiser in a divorce offers the divorcing parties an unbiased valuation of an asset in question, potentially finding value (i.e. money) that could have otherwise been hidden from a spouse.
As previously stated, the cost of hiring an appraiser will depend largely on the expertise and skill of the appraiser and the scope of the work. But in some divorces–especially those involving high-worth or complicated assets–it could be more costly to move forward without an appraiser’s expert valuation.
Forensic Accountants
The role of the forensic accountant in a divorce can be investigative or simply informative. A forensic accountant has the training and skills necessary to audit, analyze, and verify a party’s financial information, find financial discrepancies, and locate hidden assets. They may also help interpret financial information for the divorce case.
To facilitate their work, forensic accountants may analyze a party’s financial documentation, such as personal and business tax returns, bank statements, and credit card statements. They may also run financial information through data-mining software to identify patterns.
Forensic accountants are especially helpful in divorces involving complex financial matters or high-value assets, or when a divorcing party believes they need help to find hidden assets and income.
Private Investigators
Private investigators can look into a party’s personal, legal, and financial matters. They could conduct their work in person–through surveillance or conversations with third parties, for example–or search online to determine if a party to a divorce is hiding assets (real estate, automobiles, bonds, cryptocurrency, and so forth), hiding income, having an affair, etcetera.
Hiring a private investigator in a divorce case may be helpful if a divorcing party suspects the other is hiding something that could impact the divorce outcome–whether it be the division of the marital estate, child support or custody, or alimony. Private investigators can be particularly helpful in testing client assumptions, such as whether a spouse is having an extramarital relationship, hiding a substance abuse issue, or engaging in illegal activity. They’re also very helpful in modification cases to determine whether a change of circumstance has occurred, such as a change in employment or cohabitation in the case of an alimony modification or termination case. It’s a good idea to consult with a divorce lawyer to determine whether it makes sense to hire a private investigator in your case and, if so, which one.
Are Investigative Experts Worth the Expense?
It depends. Every divorce is unique, as is everyone’s financial situation. It is important to weigh the cost of an expert against the benefit that you hope to incur.
If complicated or higher-value assets are at stake, hiring an expert may be worth the expense in the long term. Alternatively, in divorces involving less income and lesser-value, less complicated assets, one may be able to investigate the other party’s financial situation themselves.
Other Steps You Can Take to Find Hidden Assets and Income in a Divorce
Laborious as it may be, reviewing your spouse’s Rule 410 disclosures is imperative in understanding your spouse’s financial circumstances. If you have questions about the legitimacy of your spouse’s Rule 410 disclosures and are unable or unwilling to hire an expert to dig deeper into any questions or discrepancies, there are steps you can take yourself to get some answers. And, as always, an experienced divorce attorney could also assist you through these steps.
Third-Party Subpoena
Suppose you review your spouse’s bank statements and find transfers made by your spouse to another, undisclosed bank account. This may lead you to suspect that your spouse has failed to disclose financial information (i.e. the undisclosed bank account). In that case, you have options to obtain that financial information, such as a third-party subpoena.
A subpoena, which is a document, is a discovery tool. There are two types of subpoenas. The first requires the recipient to appear in court and give testimony. The second type of subpoena, a subpoena duces tecum, requires the recipient to produce, in relevant part for this example, certain documents in that recipient’s control.
So, in our example above, the recipient of the subpoena duces tecum could be the bank where the undisclosed bank account is open. And the documents you request in this example could be the bank statements associated with that account. This is just one example of how a divorcing spouse could use a third-party subpoena in their case. There are other scenarios in which a third-party subpoena could reveal relevant and outcome-changing information in a divorce. Consulting with an experienced divorce attorney is the best way to determine if and when a third-party subpoena is appropriate in your case.
Public Records
Searching public records is a quick and affordable way to discover a party’s assets and income. This can be done on a computer or phone with internet access. For example, if you believe a party owns real estate they haven’t disclosed, you could search land records in the area where you believe the property is located. Or, in Massachusetts, if your spouse is a municipal or state employee, you can search public payroll records to determine their annual income (including overtime pay).
Unless you have access to background information software, searching public records may require that you first have some information to work with (ex. the county in which the undisclosed real estate you suspect your spouse owns is located).
Social Media
Social media can reveal a wealth of information about a party in a case. Monitoring your spouse’s activity on social media could offer indicators that your spouse has not been forthcoming about their financial circumstances. Perhaps your spouse’s financial statements indicate that they are living on a tight budget. Meanwhile, their social media posts show them taking multiple or lavish vacations, or they share a picture of the new car they just bought. This behavior could point to discrepancies in the financial picture your spouse is painting. It could also tip you off to new property that your spouse bought during the marriage but did not disclose to you in the divorce process.
Hiding Income and Assets Is a Form of Domestic Abuse
While the focus of this article is on how to find hidden assets and income in a divorce, it should be noted that hiding assets or income, or withholding money from a spouse, could constitute financial abuse.
When there is financial abuse in a case, the judge may draw an inference that there are other types of abuse, such as domestic violence. According to The National Network to End Domestic Violence, 99% of domestic violence cases involve some form of financial abuse. In such cases, one spouse will take control of the other’s finances in order to prevent them from gaining independence and leaving. If you or someone you know is in an abusive situation, we encourage you to reach out to a domestic violence hotline or family law attorney for help.
National Domestic Violence Hotline: 800-799-7233
Massachusetts SafeLink: 1-877-785-2020
List of Domestic Violence Services by Massachusetts County
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