The Implications of Hidden Assets in a Texas Divorce

 Posted on February 01, 2022 in Property Division

Texas is a community property state, which means that all assets classified as “marital property” will be subject to division in a divorce. Furthermore, because Texas is a community property state, the community estate is generally divided equally among the parties, unless a disproportionate division is warranted. As we’ve discussed in earlier articles, marital property is essentially any property acquired after the marriage, unless one of several exceptions applies. For instance, property acquired via inheritance, or via gift, is typically considered separate property even if acquired during marriage.

In order to properly divide property in a divorce, both parties need to be fully transparent with their asset holdings. Sadly, in some cases, parties are less than fully transparent, and sometimes people even deliberately hide assets in order to “cheat” their spouse. Divorce is very often a process involving heated emotions, and so we shouldn’t be too surprised to learn that this happens from time to time. Nevertheless, it is still unfortunate to see.

In this post, we’re going to discuss the various methods that spouses use to conceal assets in a Texas divorce, and then go over some of the potential consequences for this type of behavior.

Methods of Hiding Assets

Diversion of Assets: This is one of the classical ways to conceal assets. In this situation, a spouse will divert funds from known sources to unknown sources – say, from a joint bank account to an offshore account or other unknown account – and attempt to conceal funds or other property.

Misrepresentation / Undervaluing: This is common when one spouse is familiar with the fair market value of certain assets (real estate, jewelry, etc.) and the other is not. So, one spouse might attempt to deliberately undervalue certain property with the goal of receiving it in its entirety during the divorce.

Prepayment of Taxes: This is a way for one spouse to deliberately decrease the total available assets and also derive a benefit at the same time. One spouse might prepay his or her taxes to the IRS; this will decrease available cash, but essentially boost the payor's available cash in the future.

Omission of Assets: This is another classic example of concealing assets. One spouse will simply fail to fully report or reveal all property holdings at the time of the divorce. Concealment via omission or nondisclosure is quite common.

Potential Consequences for Hiding Assets

These are just a few examples of how assets are concealed during divorce; there are other ways too. Regardless of the method involved, Texas judges are quite strict when it comes to dealing with instances of asset concealment. Concealing assets is considered a blatant act against the court and the divorce process in Texas. Consequently, offenders can face one of several penalties.

For one, if a judge determines that one spouse has deliberately concealed assets, either by omission or some other means, then one of the common responses by judges is to assign the hidden asset or assets to the other spouse. In other words, if one spouse is caught hiding $50,000 in liquid funds from the court, then those funds may be turned over to the other spouse if the concealment is uncovered. The same thing might happen if the assets are uncovered after the divorce process is complete. This means that hidden assets may still lead to penalties even if they are uncovered after the divorce is finalized.

In some cases, not only will hidden assets be forfeited if they are uncovered, the spouse concealing the assets may face perjury charges. When spouses report assets in a divorce, they are essentially declaring under penalty of perjury that their representations are accurate. So, when someone violates this principle, he or she may also face perjury charges and face criminal prosecution.

Contact The Ramage Law Group for More Information

For more information, contact The Ramage Law Group today by calling 972-562-9890.