They say divorce isn’t cheap. That’s especially true when spouses can’t agree on the value of the marital estate and one spouse believes the other is hiding assets.
The Rybolovlev divorce gained notoriety when it was estimated to be the most expensive divorce in history. Ranked 14th on Forbes’ richest men of Russia, Dmitri Rybolovlev’s marital estate was worth billions, but the extent of those billions became in question when his ex-wife accused him of concealing marital assets. The couple had been married for nearly 20 years and with their wealth came a complex network of offshore companies and trusts funneling Dmitri’s billions, making it extremely difficult to keep track of finances.
In December of 2008, Elena Rybolovlev filed for divorce in a Swiss court, where the couple lived. Under Swiss law, Elena was entitled to an equal division of the marital estate, but she claimed Dmitri was using tax havens to obscure real estate and other wealth, making it nearly impossible to determine the actual value of the estate.
Spouses Get Away With Hiding Assets All the Time
Hiding assets isn’t uncommon and, for decades, spouses have sought the help of Mossack Fonseca & Co., a Panama based company that specializes in creating offshore accounts, to help them shield assets from their spouse. Dmitri hired Mossack to incorporate British Virgin Islands based company Xitrans Finance Ltd., which was essentially just a post office box front for a legitimate business.
By January of 2009, Dmitri had used his shell company to move $650 million worth of art and furniture, consisting of Picassos, Van Goghs, Monets, and Louis XVI furniture made from some of Paris’ grandest furniture makers, out of Switzerland to Singapore where Elena couldn’t access them. In the midst of the divorce, the court froze the couples’ assets, but somehow Dmitri was able to purchase an $88 million NYC penthouse. Exactly how was Dmitri able to buy the penthouse?
According to the National Endowment for Financial Education, 58% of spouses hide assets from their partner. Here are some common ways spouses typically hide money:
- Transferring assets into a separate account or shell company,
- Transferring assets to a friend or family member (once it’s given to another person, it’s not technically part of the marital estate anymore),
- Overpaying the IRS to delay payments until after the divorce,
- Taking cash withdrawals on debit cards,
- Turning down promotions or raises until after a divorce is finalized,
- Delaying receipt of commissions until after a divorce is finalized,
- Forgetful memories about retirement accounts & stock options,
- Not billing clients in a timely manner, creating fake expenses for a self-run business, or adding family & friends to payroll and paying them for “consulting”,
- Spending money on real estate or material assets like expensive artwork.
Spouses that really want to hide money can get creative, which means the list of possibilities goes on. This begs the question: what can a spouse do if they believe the other spouse is hiding assets?
Getting down to the Nitty-Gritty
Getting involved in family finances and making yourself aware of the assets and debts is probably the best way to ensure you’re not blindsided. In the Rybolovlev case, Elena hired a professional tracker that specialized in finding offshore wealth; she was eventually awarded $600 million worth of the marital estate at the end of the day. This can be expensive and those not involved in a high-stakes divorce still need remedies to protect themselves.
Hiring an attorney that has experience uncovering hidden assets is your best bet. Your attorney will be able to dig deep into a spouse’s financials through the discovery process, which is the best way to get information in a divorce. Discovery is an organized exchange of information between parties. Spouses, through their attorneys, will have the opportunity to ask for any information pertaining to the marital estate.
Tax returns are one the best instruments to get a good look at a spouse’s financials in terms of earnings and investments, but taxes don’t always provide the truest financial picture, especially if from a business owner. Discovery answers are considered under oath, which means each spouse has a duty to disclose all information to the best of their knowledge.
Lying about your financial state is illegal in a divorce case and doing so will put you in contempt of court. Penalties vary from state to state, but a deceitful spouse may be ordered to pay the other spouses attorney fees, ordered to pay fines, or, in serious cases, could end up in jail.
Not only does lying ruin any credibility with a judge, but it may also work in the honest spouses favor. In 1999, a California court ruled that a wife violated the state’s asset disclosure laws by failing to mention she won 1.3 million in the California state lottery just 11 days before filing for divorce. Well, guess what? The judge awarded all the winnings to the husband because the wife acted out of fraud and malice. Had the wife correctly disclosed her assets, the husband would have only been entitled to half her winnings. Bummer.
Authored by Ashley Roncevic, LegalMatch Legal Writer and Attorney at Law