Hidden Assets – Becoming Creative
Hiding assets from a spouse is never a good idea. Such actions will likely have costly results, such as sanctions by the court or added alimony. Depending on the issue(s) and the state where you live, the perpetrator could be arrested or reported to the IRS or other authorities. Despite the risks, spouses have hidden assets by transferring them to family, friends, or acquaintances.
Some have withdrawn large sums of cash from banks and stored the funds in an undisclosed safe, safe deposit box of a friend, or other locations. Others will convert cash to other transferable assets. Jewelry and artwork can be easily moved and “stored” with friends / family or transported to another state or country.
As we rely on more technology and become a more paperless society, we are noting that spouses are becoming more creative with trying to move or hide assets. If hidden assets are a concern, below are just a few areas to consider.
Instead of using a central bank, cyber-currencies, better known as “cryptocurrencies” (such as Bitcoin, Ethereum, and Litecoin) all use block-chain technology to conduct peer-to-peer transactions. The number of such currencies are growing and provide more anonymity than traditional bank accounts. Instead of having a bank account, users have encrypted digital wallets where their cryptocurrency is stored. Transactions are recorded on a public record (which can be publicly examined) but identities are masked by codes. If one suspects that cryptocurrencies are being used, you can look for the initial purchase and examine used applications.
Prepaying credit cards
Using credit cards to maintain a lifestyle is nothing new. We have found that some business owners may use company funds to pay for personal credit cards and in some cases, such payments exceed the balance due, leaving an over-payment balance. This can provide a double benefit to the individual participating in this behavior; 1) a potential reduction in business value and 2) access to additional (unreported) funds.
Two things should be reviewed to ensure this isn’t happening. First, you should always run a complete credit check, which should include all credit cards listed under the individual’s identity. Secondly, you should subpoena statements from each credit card company. You or an expert should be able to review activity to assess the nature of purchases and confirm that over-payment balances do not exist.
Companies that make frequent wire transfers or ACH payments may slip a personal payment in the mix. Such personal payments may be difficult to identify, as accounts could be in a different name or even a different country. One may need to examine financial records to identify what was received for the transfer(s).
The rise of gift cards have led to another vehicle to hide / move assets. Gift cards can be purchased from just about anywhere. It is a vehicle to “layer” transactions, where a personal card purchase can be disguised as a legitimate business expense. Others can disguise gift card purchases as grocery store or pharmacy purchases. For example, a spouse – in planning her divorce, stashed over $7,000 in an Amazon account. Over the course of about a year, she purchased Amazon gift cards at the supermarket, adding the balances to her account.
Overpaying estimated taxes can be a vehicle to hide money. You should examine tax returns and tax payments to assess whether money is being deposited with the IRS (or other tax authority), only to be refunded at a future date.
Shifting Warning Signs of Hidden Assets
The above areas are examples of some current trends. Lawyers and experts always need to be aware of signs that someone is hiding assets. With changes in technology and general financial trends, the warning signs are shifting. If you have such concerns and wish to discuss how we can assist you, contact the experts at Baum Blaugrund.