Hiding Assets in a Divorce: A Costly and Risky Mistake
The temptation to hide wealth from a financial settlement can be strong, especially in a high net worth divorce—but hiding assets in a divorce is not only unethical, it is illegal and carries severe consequences. From offshore accounts to hidden business interests, this article explores how people attempt to conceal assets, how family lawyers uncover them, and the significant risks and penalties involved.
Why Hiding Assets in a Divorce Is a Bad Idea
The courts in England and Wales operate under the principle of full and frank disclosure. This means that both parties are legally obligated to provide a complete and accurate picture of their financial position to ensure fair financial settlements. Attempting to conceal wealth—whether in undisclosed bank accounts, offshore trusts, or underreported business income—can lead to severe legal consequences.
If a spouse is caught hiding assets, the court has the power to impose adverse cost orders. Moreover, judges take a dim view of dishonesty, often awarding the innocent spouse a greater share of the marital assets as a consequence.
Making a false statement to court in oral evidence whilst under oath, or in a written document supported by a statement of truth can constitute perjury, and a family judge can make a referral to the Director of Public Prosecutions if they feel it necessary.
Common Ways People Try to Hide Assets in a Divorce
1. Undisclosed Bank Accounts and Cash Hoarding
One of the simplest methods is to shift money into undisclosed bank accounts or to withdraw large sums in cash before divorce proceedings begin. However, forensic accountants and financial disclosure requirements make it increasingly difficult to get away with such tactics.
2. Offshore Accounts and Trusts
More sophisticated attempts at concealment involve offshore accounts and trusts in tax havens such as the Cayman Islands, Switzerland, or the British Virgin Islands. While offshore structures can be legally used for tax efficiency and wealth management, failing to disclose them during divorce proceedings is a serious legal breach.
3. Underreporting Income and Deflating Business Value
Business owners may manipulate financial records to make their company appear less profitable or delay lucrative deals until after the divorce. Family lawyers are well aware of these tactics and often bring in forensic accountants to assess the true value of business interests.
4. Transferring Assets to Family or Friends
Another common method is transferring money or other assets to third parties, such as family members, friends or business associates, under the guise of legitimate transactions. This is known as “warehousing”. Courts can reverse / “set aside” these transfers if they are found to be deliberate attempts to deceive the court and improve that party’s position in court.
5. Cryptocurrency and Digital Assets
The rise of cryptocurrency has introduced a new avenue for asset concealment. Digital assets stored in undisclosed wallets or moved between multiple accounts can be difficult to trace, but courts are increasingly adept at uncovering these holdings.
6. Undervalued or Hidden Property
Some individuals attempt to hide wealth by failing to disclose ownership of overseas properties or by undervaluing real estate. International property holdings are increasingly subject to scrutiny, and courts may request external investigations if necessary.
How the Family Lawyers Uncover Hidden Assets
Experienced family lawyers are highly skilled in uncovering hidden assets, employing a combination of legal strategies, financial expertise, and investigative techniques. They work closely with forensic accountants to analyse financial records, identify discrepancies, and trace transactions that suggest undisclosed wealth. Lawyers can apply for court orders compelling financial institutions, businesses, and offshore entities to disclose information, ensuring transparency. Applications can be made to freeze assets, or set aside transactions that were made to try and put any assets outside the reach of the court.
Additionally, they leverage international legal frameworks to track assets held abroad, challenging complex structures designed to obscure ownership. Their deep understanding of divorce law enables them to anticipate and counteract concealment tactics, ensuring that clients receive a fair financial settlement.
1. Financial Disclosure Requirements
During divorce proceedings, both parties must complete a Form E, a detailed financial statement covering all assets, liabilities, and income sources. The Form E is signed off with a Statement of Truth, and stands as written evidence. As such, false statements can lead to perjury charges. Providing all relevant financial information, including bank statements, investments, and property holdings, is crucial for ensuring transparency and fairness in the divorce process.
2. Court Orders and Third-Party Disclosures
The court can compel financial institutions, business partners, and offshore trustees to provide information if a spouse is suspected of concealing assets.
3. Freezing Orders
If there is strong evidence that a spouse is hiding assets, courts can issue a freezing order, preventing further asset transfers and ensuring that wealth remains available for division. This can be against assets in this jurisdiction or abroad.
Hidden assets are not limited to ultra-high-net-worth individuals; they can arise in divorces at all wealth levels.
The Importance of a Fair Financial Settlement
Achieving a fair financial settlement is paramount in a divorce to ensure that both parties receive an equitable share of the marital assets, can help prevent disputes and reduces the risk of further legal action, providing a foundation for both parties to move forward with their lives.
The court’s primary objective is to achieve a settlement that meets the needs of both parties. This can include the division of assets, spousal maintenance, and child support. Seeking the advice of a specialist divorce solicitor is crucial to ensure that you receive a fair financial settlement tailored to your circumstances.
This can significantly reduce stress and anxiety during the divorce process, allowing both parties to rebuild their financial stability. It ensures that both parties can maintain a reasonable standard of living post-divorce, fostering a smoother transition to the next chapter of their lives.
Penalties for Hiding Assets in Divorce
Hiding assets can lead to severe consequences, including:
Adverse Inference: The court may assume the worst and award the innocent spouse a larger share of the assets.
Financial Penalties: Courts can make costs orders against a party for attempting to mislead the court.
Imprisonment for Contempt of Court: In extreme cases, individuals who deliberately hide assets and repeatedly refuse to comply with court orders can face imprisonment.
Set Aside Orders: Any settlement obtained through dishonesty can be reopened, and the court can redistribute assets accordingly.
How to Legally Protect Your Wealth in A Divorce
While hiding assets is illegal, there are legal and legitimate ways to protect wealth in a divorce, such as pre-nuptial and post-nuptial agreements, family trusts, and careful tax planning. Before attempting to protect your wealth in a divorce take advice from a specialist family lawyer who can guide you on the legalities of these approaches and how much protection they may provide.
Attempting to hide assets in a divorce is a high-risk strategy that rarely succeeds and often leads to severe legal and financial consequences. Transparency and compliance with disclosure requirements are essential to achieving a fair settlement. For those concerned about protecting their wealth, seeking legal advice from specialist divorce solicitors is the best approach.
If you suspect your spouse is hiding assets or need guidance on ensuring full and fair financial disclosure,
call us on 020 7242 6000.