People choose Collaborative Divorce over traditional litigation when they want the divorce to be more amicable. The hallmark of a Collaborative Divorce is honesty.
Both spouses are expected to provide full disclosure about all assets, both those known to be community property and those that they claim are separate property. In rare cases during the collaborative process, one party discovers the other is hiding assets. The consequences to the dishonest person may be great.
A Forensic Accountant Can Find Hidden Assets
It often surprises the party trying to hide assets that the assets are discovered. A forensic accountant reviews tax returns and other financial information and documentation. Typically, hidden assets are found this way. If there is still a suspicion of hidden assets, an outside private investigator may find them.
Breakdown of the Collaborative Divorce Process
When it is discovered during a Collaborative Divorce that one party hid assets, the collaborative process breaks down. Once trust is lost, the Collaborative Divorce process which is grounded in trust, goes out the window. According to the collaborative contract, the parties must start the divorce process over and retain new attorneys.
The move to traditional litigation means the divorce will become much more expensive. The parties will use the discovery process of litigation to exchange information, issue subpoenas, issue document demands, spend time pouring over documents, and perhaps even proceed to expensive court hearings.
Consequences of Hiding Assets Can Be Steep
Courts frown on a spouse who tries to hide assets from the other spouse during the divorce process. The law allows the court to order the dishonest spouse to pay both party’s attorney’s fees and all the costs. If hiding the asset rises to the level of fraud, the court can award 100 percent of the value of the hidden asset to the other party.
In a well-known California case, In re: Marriage of Denise and Thomas Rossi, Denise Rossi won nearly $7 million in the lottery. Shortly after winning, she filed for divorce, changed her address for her lottery winnings to go to her mother’s house, and did not reveal her lottery winnings to Thomas.
During the divorce proceedings, Denise signed a document under oath swearing she had revealed all assets, both personal and community. When Thomas learned about the lottery winnings, he petitioned the court to award him the entire lottery winnings to punish Denise for her fraud. The divorce court and appellate agreed and the entire $7 million in lottery winnings were awarded to Thomas.
If you need a forensic accountant to assist with your divorce, contact me, Ron J. Anfuso, CPA/ABV for a free consultation.