When a couple decides to separate or even before then when they are encountering difficulties in the relationship, or trust has been eroded, suspicions can arise about whether the other spouse is hiding assets. These concerns usually arise when one person has been excluded or has chosen not to be proactively involved in the management of finances during the marriage.
In circumstances like this, suspicions can arise because there is a lack of information available or a high degree of mistrust in the relationship. If trust issues already exist in other areas of the relationship, such as if there has been an affair or business dealings have gone sour that one party has not been aware of, it is not uncommon to start questioning everything to do with the finances in the relationship.
One person may have concerns around what has happened to some money, or whether the other person has deliberately hidden assets or engaged in some kind of pre-divorce planning, which would minimise their overall exposure when they do decide to communicate that they want to separate. Others may have concerns because of pre-existing knowledge about how their current partner may have approached a previous separation.
When people in these types of situations come to see us for the first time they are concerned about whether the other person will be open and honest in disclosing all of their assets, income and debt. What we have found over the years is that whilst there will always be a small proportion of people that don’t play by the rules, these types of concerns can often be unwarranted as most people realise that they need candid about what their position is. This is because the family law process that they need to go through to determine a financial settlement requires a full and frank disclosure of their financial circumstances.
Disclosure of financial records when separating
In the majority of cases, having to disclose bank statements and financial records means it is harder to hide assets. Each party’s lawyer will advise that they need to be an open book when it comes to financial disclosure. If someone comes to us and expresses concern about information being withheld, we look at whether there is any evidence of that in the disclosure process and assess how forthcoming information is when it is requested.
Occasionally you do have instances where people are trying to pull the wool over the other person’s eyes and there will always be a small proportion of people who don’t play by the rules.
Here are a few things that you can watch out for:
Large cash withdrawals and regular transfers
When we are looking at people’s bank statements we will analyse any large cash withdrawals and look for a pattern of regular withdrawals or transfers to unknown accounts. The transfers might not be known by each party and can be used to park money if someone is lying about their debt or the money they earn.
Sometimes when a client of ours sees these documents they realise their situation is very different from what they might have expected – either better or worse. For example, checking the bank statements might uncover a level of debt the other party was not aware of, or it could uncover issues such as gambling or an unknown or failed investment or business venture. There are also occasions where one person may have not been fully aware of the business profitability, the investments, or the extent of their savings.
Delaying receiving funds
If a party is delaying receiving cash or payments it may be a sign that someone is doing pre-planning before separation to attempt to reduce the financial cost of the divorce. For example, if one person in the relationship is paid cash bonuses or commission components in their salaries and the timing of these payments changes this could signify someone is looking to defer an improvement in their situation until a later time.
When reviewing bank statements, past history of bonuses is often considered. If someone has always been eligible for a bonus at a certain time of the financial year you can see a pattern and ask questions around that, rather than it not being taken into account.
However, this can be trickier to identify when someone is self-employed or has a solid relationship with their employer. They may have a greater capacity to defer payments, delay issuing invoices or have large debtors, which remain unpaid.
This is why exploring sources of income and the timing of payments should be reviewed. It is all about being aware of the potential issues and asking the right questions. Having a lawyer who is experienced and regularly deals with these issues, particularly if there is significant income or a business involved, helps.
Assets will be discovered
If someone deliberately tries to hide assets from their ex-partner there are many ways these may come to light, because there are many checks and balances that form part of the financial disclosure process. If this process occurs and there are still concerns then there can be other ways or means of gathering this information. If a Court is involved, someone is more likely to be found out if they have not been upfront. For example, if the matter is in Court, subpoenas may be issued to get information directly off of the bank or an employer which may not have already been produced.
If a Court finds that you have not disclosed assets and there is clear evidence of this, the Court can make findings against or draw inferences that party. If the assets which no longer exist are discovered during the proceedings in some limited circumstances they can be notionally added into the asset pool of the person who failed to disclose them, often resulting in a reduction of the settlement they receive at the time. Furthermore, if court proceedings have been finalised and it is discovered that a party did not fully disclose their assets, which are of such significance that it would have been material to the outcome, there may be grounds for the Court to set aside the previous property orders and make new orders.
Information is power
Depending on what stage you are at in the separation process, the key is to understand that information is power. The best thing you can do is to keep informed throughout your relationship and to have a general knowledge and understanding of how your finances are operating.
If you are considering a separation think about getting pre-separation advice and gathering information and documents early to fully understand where you stand. This might include getting copies of financial records to arm yourself with knowledge.
Think financially, not emotionally
Separating from your partner can be an emotional and stressful time. If you are in this situation, determine what information you need to know and think about what will be helpful to the overall picture. If you are looking into individual small transactions, consider how significant they are in the overall scheme of what you own. It is important to reality test whether this really matters as part of the bigger picture or you getting to the bottom of the issue may only result in unnecessary cost and delay.
Look to a family lawyer for some advice around that because sometimes people act emotionally rather than commercially after separation. This is particularly true if there are trust issues involved, such as in the instance of an affair, because the assumption can often be that other things are being kept a secret too which can then create a vicious cycle of needing to have so many questions answered, which may not necessarily be to your advantage overall.
It is important to be alert but not alarmed. If you suspect that your spouse is hiding assets and you have identified some of the red flags, working through your concerns with a lawyer is vital. Seeing a specialist family lawyer will allow you to make an informed decision about how much information is enough for you to be comfortable about making a decision to move forward or what else may be needed to put you in a position where you are comfortable to do so.
If, however, you have a concern that something immediate is going to happen and your partner is going to transfer assets to someone else or overseas, and that is abnormal in your circumstances, it is important to get advice urgently and understand what your options are.
Phillips Family Law is an award winning Family Law practice serving clients across Australia and abroad. Regardless of where you are in your decision making process, we can make you aware of your options. To discuss your situation confidentially phone +61730079898 or secure a time by clicking here.