Going through a divorce is tough, especially when it comes to reaching a fair financial settlement. In order to get a legally binding financial order, both sides have to be honest about everything they own to make sure everyone knows what's in each other's pockets and help figure out a fair deal.
However, it’s not uncommon for some divorcing couples to try and hide cash or assets during a divorce. Besides being shady, it's a big no-no in the legal world because of a rule called the duty of full and frank disclosure. This is a way of saying both sides have to provide a full rundown of their finances, like bank statements, pensions and tax info.
Trying to hide money can get you in hot water because the truth usually comes out, whether it's through questions, bank digging, or the help of a money detective (aka a forensic accountant).
In this article we’ll look at:
How divorcing couples are expected to disclose assets in a divorce;
Common ways of hiding assets in a divorce;
Potential penalties for hiding assets in a divorce;
How to find hidden assets in a divorce;
How to prove an ex is hiding money or assets;
Next steps if you suspect your ex-partner is hiding money.
Disclosing assets in a divorce
If divorcing couples can’t agree on financial matters when getting divorce, one of them can apply for a financial order to help reach a fair financial settlement.
As part of this application, both parties must fill out what’s called a Form E. The purpose of this form is to provide the court with full details of the financial situation of both parties, including:
Current marital status and living arrangements;
Details of any children of the family and who they live with;
Health status of the person filling out the form and children;
Present and proposed future educational arrangements for children;
Child support maintenance orders or agreements;
Details of other court cases between separating parties;
Current residence, occupants and terms of occupation;
Details of the family home (i.e who owns it, current market value, etc.)
Details of any other property, land, or buildings;
Personal bank, building society and National savings accounts from the last 12 months;
Investments;
Life insurance policies;
Monies owed to the form filler;
Cash sums held in excess of £500;
Personal belongings individually worth more than £500;
Liabilities (e.g. credit cards, bank loans, and hire purchase agreements);
Capital Gains Tax payable on the disposal of any real property or personal assets;
Business assets and directorships;
Pensions and Pension Protection Fund (PPF) compensation;
Income from employment, self-employment, partnerships, investments, state benefits, etc.
In the form, both parties also outline their income needs for themselves and any children living with them or provided for by them.
The aim of the form is to get the full picture of both parties' financial situation over the past year in order to reach a settlement that doesn’t disadvantage either party.
Before filling out this form, some individuals might try to hide assets to avoid them being taken into account. But this isn’t a good idea. Courts can, and will, scrap the whole deal if they catch wind of it. Or, if the other side smells a rat, they can call for a freeze or demand the hidden issues be bought to lie. In short, it’s a messy and costly route, with legal bills piling up.
Common ways of hiding assets in a divorce
Individuals may try to hide assets in a divorce by:
Moving money to a different account (i.e. savings account or an undisclosed account);
Transferring money to family temporarily;
Making up debts;
Creating fake invoices;
Undervaluing or underrepresenting business interests;
Undervaluing assets;
Claiming valuable assets are held for someone else;
Not disclosing investments in digital wallets or account (e,g Paypal or cryptocurrency);
Transferring money to offshore accounts;
Buying expensive assets that retain their value;
Deferring bonuses;
Regularly withdrawing cash from bank accounts;
Failing to disclose old pensions;
While some of these actions (such as offshore accounts) don’t always indicate that someone is deliberately hiding money or assets during a divorce, they can be red flags that something is amiss, and are definitely worth investigating.
When it comes to hiding assets, the problem with all of these approaches is that there are ways and means for another party to find out about hidden assets, or flag up discrepancies or underrepresentation. Therefore, when it comes to financial disclosure, honesty is always the best policy.
Penalties for hiding assets during a divorce
If someone deliberately lies or cooks the booking in their financial disclosure during a divorce, it’s as serious as lying under oath in court.
At best, it can cause delays in reaching a financial settlement, and you may be ordered to foot the bill for all the legal costs as a result. At worst, if the misrepresentation or fraud is extreme, it can be classed as perjury, which is a criminal offence that could lead to a criminal record or even a prison sentence.
These consequences don’t diminish further down the line, either. If it comes to light that an original settlement was based on false disclosure the court can reopen the case and change the financial order.
Hiding assets during divorce is a serious no go. No family law or divorce solicitor worth their salt will advise you to fudge the numbers when it comes to financial disclosure. Instead, the best course of action is to be open, honest and transparent when filling in your Form E to avoid severe consequences and costs in the future.
Ways to find hidden assets in a divorce
In the process of a divorce, you might notice your ex-partner becomes secretive about finances. For example, they may change the log-in details to your joint account or be cagey about talking to you about money. Alternatively, you might notice unusual transactions, like money being transferred between accounts or changes to normal expenditure.
These could be indicators that your ex-partner is trying to hide assets to avoid disclosing them. Here are a few ways you can go about finding hidden assets if you suspect foul play:
Check your bank statements
If you have access to them, take a look at your shared bank statements and other financial paperwork, like mortgage statements. If you notice anything unusual, make a note of this and communicate it to your divorce solicitor. For example, you might notice regular cash withdrawals, expenditure on items which don’t lose their value, like jewellery, or transfers to another account that you're not sure about.
Read their financial disclosure
Form E is a long document (28 pages, in fact) but it’s worth spending some time reading through the other party's financial disclosure to see if you can pinpoint any discrepancies. If you notice something that doesn’t add up, you can flag this to your solicitor, or you can give them the document to have a look over to see if they notice anything unusual.
Use what you know
Often, there is an imbalance between divorcing couples, with one person having more control or visibility over finances than the other. However, this shouldn’t be the case when you’re seeking a divorce. You should take steps to get a good overview of your joint finances and use what you know to assess whether you feel your ex-spouse or partner is attempting to hide assets, or whether their lifestyle isn't reflective of their declared income.
For example, you may be aware that your ex had invested in cryptocurrency, like Bitcoin, recently, or that they have a Paypal account they haven’t disclosed. Alternatively, you might notice changes to their spending habits. Maybe they have started gambling or spending large amounts of money on extravagant items.
If you notice these things, you must speak up, as their are actions you can take to prove your ex-partner is attempting to hide money or deceive the courts in their financial disclosure, some of which we’ll look at below.
How to prove an ex-spouse or partner is hiding assets in a divorce
As the saying goes, the truth will out. And there are legal ways and means of uncovering hidden assets in the course of reaching a financial settlement in a divorce.
Raise A Questionnaire
Raising a questionnaire involves submitting a series of questions to the other party, asking them to provide detailed information about their financial situation. It can include questions about bank accounts, income sources, property ownership, business interests, investments, debts, liabilities, gifts, expenses, trusts and offshore holding and digital assets.
Raising a questionnaire can be a strategic move that prompts the disclosure of hidden assets or financial details quickly without seeking a court order. A solicitor can help draft and send a questionnaire should you need it.
Form of Authority
A form of authority is written permission from one party to another to access specific information or records such as bank statements, property ownership records, digital platforms or accounts, employment records, or tax information.
The only sticking point with this course of action is that your former partner does not have to give this permission and neither can they be forced to without an order from the court.
Specific Disclosure Orders
Specific disclosure orders are court issued mandates that request the other party provide detailed information about specific parts of their financial situation. If they do not comply with this order, the Court can impose penalties, such as fine or, in extreme cases, a prison sentence.
Non-Party Disclosures
Non-party disclosures involve obtaining information from individuals or entities not directly involved in the divorce case. It can be used to request:
Bank statements from joint accounts: If one spouse suspects the other is hiding assets, they can seek non-party disclosures from banks where joint accounts are held to reveal transactions or funds moved to undisclosed locations.
Employer records: If there’s a suspicion if hidden income, seeking disclosures from the spouse’s employer can reveal undeclared or deferred bonuses, stock options or additional income sources.
Business records: In cases where one spouse owns a business, non-party disclosures from the business associates, suppliers, or clients can uncover hidden assets or income streams.
Property Records: Non-party disclosures from the Land Registry or other property-related sources will reveal if the spouse owns additional properties.
Tax Records: Seeking non-party disclosures from HMRC can shed light on the true income and assets.
Trust Documents: If there are concerns about assets being held in trusts, getting non-party disclosures from trustees or administrators can provide insights into these holdings.
The court will grant a non-party disclosure order only when the documents in question are likely to support the case and disclosure is considered important to reaching a fair, equitable financial settlement.
Freezing Orders
Freezing orders can be issued by a court when there’s reasonable belief that a third party is about to dispose of assets. The order prevents the person from doing this until a financial decision is made.
For example, if there’s a belief that substantial funds are being moved to undisclosed accounts, a freezing order will stop any future transactions. Similarly, a freezing order can be used to prevent the sale or transfer of properties, business transactions, liquidation of investments and the transfer or conversion of cryptocurrencies.
A freezing order will only be granted if the applying party can demonstrate a genuine risk that the assets would be ‘dissipated’ (i.e. sold, transferred, liquidated, etc). It’s job is to safeguard the assets in question while legal proceedings are ongoing in order to reach a fair settlement that’s reflective of all the facts.
Anton Piller Order
An Anton Piller Order, also known as a civil search warrant, is a court order that allows a party to enter the premises of another, look for and seize relevant evidence without prior notice. It is generally only used in very extreme circumstances where the court is satisfied that there is a real risk an ex-spouse will try to destroy evidence.
A search order is often carried out by independent solicitors or other professionals to make sure the process is fair and legal procedures are followed.
Avoidance of Disposition Order
An avoidance of disposition order is a court order that prevents the disposal of assets when there’s reasonable suspicion that someone is trying to deprive another party of those assets or move them out of the court’s jurisdiction.
For example, if there’s a concern that a party is attempting to get rid of assets, whether through a gift, sale, lease, or any other means to avoid them being considered in divorce proceedings, the court has the authority to issue injunctions to prevent them from being disposed of in a way that could undermine the fairness of financial settlements.
This could be in the context of selling a property, transferring ownership of a business, or transferring or gifting assets to family members to shield them from inclusion in disclosure.
Forensic Accountants
Using a forensic accountant can be a highly effective way of uncovering hidden assets in a divorce. These professionals are highly experienced in financial investigations and are particularly useful when it comes to analysing complex financial structures where assets may be hidden. This course of action may be most appropriate in high net worth divorce proceedings.
What to do if you think your spouse is hiding assets
As you can see, there are a number of legal methods that can be applied to find and prove hidden assets in the course of a divorce.
If you believe this is something that is happening to you as you try to negotiate a fair financial settlement, it is best to seek help from a divorce solicitor who will be able to advise you on the best course of action and make the relevant applications on your behalf.
When it comes to financial orders and securing your future, it is super important that both parties are open and honest about their income, liabilities and income requirements for the future.
Should you need any help with divorce proceedings, or would like to know your options in pursuing a divorce or negotiating a financial settlement, our experts are on hand to help. Get a free case assessment and quote from our legal assessment team to find out where you stand and what your next steps could be.