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Full financial disclosure is essential to the resolution of finances on divorce. Without this ‘cards on the table’ approach, a fair division of assets simply isn’t possible. Yet, human nature being what it is, there are occasions when one or both parties will attempt to hide assets, inflate liabilities, or otherwise muddy the waters with a view to achieving a better outcome for themselves.
But beware, many cases of incomplete financial disclosure are rumbled. This may not happen immediately, but if and when it comes to light, the Court takes a dim view of dishonesty. And remember, your spouse is probably the person who knows you best! This ‘insider knowledge’ is the main reason that many cases of incomplete disclosure come to light – or suspected – sooner or later. Bear in mind that the Court may draw inferences if you cannot offer a convincing explanation in some respect. Not only that, a misleading or fraudulent statement or evidence disclosed could amount to perjury, which is a criminal offence potentially carrying a custodial sentence.
If incomplete disclosure comes to light after approval of a financial settlement, the Court can set the settlement aside. And if so, the other spouse is likely to claim costs.
Hiding assets on divorce
Some of the more common ruses are:
Spouses are required to provide at least twelve months of bank statements for every account they have an interest in. Cash is relatively easy to hide and evidence of larger and/or more regular withdrawals immediately raises a red flag.
A holding account is one into which funds are transferred from your main bank account awaiting collection by another party following a transaction. Perhaps the best example of a holding account is PayPal, which is often used to pay for online transactions. If a bank statement shows one or more transfers to such a holding account, it would be very easy to assume the money has simply been spent, whereas the funds may still be sitting there out of sight.
‘Secret’ Bank Accounts
Having a ‘secret’ bank or investment account is more common than you might think. It’s therefore particularly important to scrutinise the statements from disclosed bank accounts to check for unusual transfers.
Creating fake debt
Fake debt is among the most common ways people seek to reduce their assets on divorce. Typically, money is alleged to be owed to family members, perhaps for the payment of legal fees or to repay monies advanced during the course of the marriage, eg a contribution to a house deposit. A party should expect to be asked for full documentary evidence of an alleged debt, including text and email exchanges confirming the sum advanced was a loan and not a gift.
It’s very easy to overlook the value of saleable assets. In most cases, the parties will be asked to disclose the value of any items worth more than £500. Traditionally, thoughts turn to jewellery, antiques, and other collectables. But don’t forget valuable items such as bicycles, classic or expensive cars (unless they’re on finance), and intellectual property such as patents, trademarks and domain names. If their value is disputed, expert evidence may be required.
Many people have one or more pension pots from previous employment that they have not got around to consolidating. The disclosure of pension valuations is mandatory. Are you aware of all the pensions held by your spouse? The Pension Tracing Service (part of the Department for Work and Pensions) is sometimes used but requires the consent of the pension holder.
Also, if your spouse is 55 or over, have they “cashed in” any or all of their pensions? If so, can they provide evidence of where those funds have gone?
It’s clearly tempting to assert that assets are worth less than their true value. This is particularly common with business assets and in such cases, an independent expert forensic accountant may need to be instructed. Indeed, whatever the nature of the asset, if it has a significant value, expert evidence may be required.
Despite its notorious volatility, cryptocurrency is an increasingly popular alternative investment choice. However, its value can fluctuate wildly, making valuation difficult. The nature of cryptocurrency also means that it can be held offline as a series of code, meaning that if you’re unaware that your spouse owns cryptocurrency, it’s relatively easy to hide. Again, careful attention to bank statements may spot a transfer to a cryptocurrency exchange.
Money or assets owed to your spouse
This may be money genuinely owed, such as from a director’s loan account in a company, or money or assets supposedly gifted or put out of reach to a family member or friend. Remember, if the transaction is identified and a satisfactory explanation cannot be offered, the Court can draw inferences.
Another common ruse is to overpay on a credit card leaving a credit balance, which means the cardholder is owed money by their credit card provider.
Not all employment benefits may be clear from your spouse’s P60 or wage slips. Bonus schemes and share options are good examples of benefits you need to be aware of, but there may be others. Your spouse’s employment contract is a good place to begin investigating their entitlement to benefits.