Whenever a relationship breaks down, identifying and dividing property and financial interests can become one of the most difficult parts of the entire separation process.
This situation can become more complicated if one party is suspected of hiding assets, understating income, transferring property, or withholding important financial information. This may make it difficult to establish the parties’ true financial position and negotiate a fair property settlement.
If you are concerned that your former spouse or partner has not provided complete or accurate information, or you suspect that this may be a path they go down, please reach out to us. Working with experienced divorce lawyers in Melbourne can help you understand the disclosure obligations that apply and the steps available to investigate possible non-disclosure.
Why Financial Disclosure Matters In Divorce?
It is important to understand that divorce and a property settlement are separate legal processes:
- A divorce is the process of changing your legal status from “married” to “single”. It does not automatically deal with property interests or parenting arrangements.
- A property settlement may be negotiated or commenced before a divorce is finalised, although time limits can apply after divorce or following the breakdown of a de facto relationship.
Parties to a financial or property settlement matter are required to provide full and frank disclosure of their financial circumstances, namely their:
- Assets;
- Liabilities;
- Financial resources; and
- And other relevant interests held by both parties
A spouse may have an interest in a family home, investment property, bank accounts, shares, business interests, trusts, vehicles, superannuation, or other financial resources. If relevant information is withheld or deliberately concealed, it can make it difficult to establish the true financial position of the parties.
Common Ways Assets or Income May Be Hidden
Asset concealment does not always involve transferring large sums of money into another account. Financial interests can be obscured in several ways, including through complex transactions or incomplete records.
1. Transferring Money to Another Account
A spouse may move money between bank accounts or transfer funds to accounts held in another person’s name, typically a relative, friend or business partner.
As family lawyers, we can request relevant financial records and examine transactions to determine whether further information or documentation may be required. If adequate information has not been provided voluntarily, further disclosure procedures or subpoenas may be considered.
2. Undervaluing Assets
Assets such as businesses, investments, vehicles, or valuable personal property may be presented as being worth less than their actual value.
Where an asset’s value is disputed, an independent valuation may be necessary. Depending on the asset, this could involve engaging a property valuer, forensic accountant, business valuer or another suitably qualified expert.
3. Withholding Information About Income
A spouse may fail to disclose certain sources of income, including business income, investment returns, commissions, or other financial benefits.
Lawyers can compare disclosed taxation records, bank statements, financial statements, payslips and business documents to help identify gaps. Accounting or forensic assistance may be appropriate in more complex matters. We have built relationships with other professionals who are experts in their field to help us in this pursuit.
4. Transferring or Disposing of Property
Assets may be sold, gifted or transferred to another person before or during separation. The transaction may be presented as legitimate, even though the person continues to use, control or benefit from the asset.
Not every transfer is improper. However, the timing, value and circumstances of a transaction may require closer investigation, particularly if it was not made at market value or there is no clear documentary explanation.
5. Hiding Business, Company or Trust Interests
Companies, partnerships and trusts can sometimes make a person’s financial interests more difficult to understand. This does not necessarily mean that an asset has been hidden, but it can make financial disclosure more complex.
Lawyers can review publicly accessible information about companies, businesses, trusts, and other financial structures to help establish the relevant interests of the parties. However, disclosure sought in relation to these entities would include trust deeds, financial statements, tax returns, loan accounts, distribution statements, shareholder records and documents showing who controls or benefits from the structure.
6. Concealing Cash or Other Valuable Personal Property
Cash, jewellery, artwork, collectables, cryptocurrency, motor vehicles and other valuable personal possessions may be omitted from a person’s financial disclosure.
A lawyer can help determine the information and documents relevant to those assets and advise whether further enquiries, valuations or formal legal steps are appropriate.
7. Creating or Inflating Liabilities
Non-disclosure concerns are not limited to hidden assets. A person may allege that money is owed to a relative, friend or associated entity, or may present a personal expense as a business or relationship liability.
The existence, purpose and enforceability of an asserted debt may need to be examined.
Relevant considerations can include whether:
- There is a written loan agreement,
- Repayments have been made, and
- The parties have previously treated the arrangement as a genuine loan.
What Happens If a Spouse Hides Assets?
The assets will need to be investigated. The appropriate approach depends on the nature of the concern, the available evidence and whether court proceedings have commenced.
Possible steps may include:
- Requesting specific financial documents;
- Comparing bank statements, taxation records and financial statements;
- Conducting property, company and other public-record searches;
- Obtaining superannuation information;
- Requesting explanations for significant and/or unusual transactions;
- Jointly appointing an independent valuation;
- Engaging a forensic accountant in a complex matter;
- Issuing a subpoena to a bank, accountant, employer other relevant third party;
- Seeking Court Orders for further disclosure; or
- Seeking urgent Orders to preserve property where there is a genuine risk that it may be sold, transferred or otherwise dealt with.
In some circumstances, the court can take non-disclosure into account when determining a property settlement. The appropriate response will depend on the facts, the available evidence, and the stage of the proceedings.
If material non-disclosure is discovered after final property orders have been made, there may be circumstances in which a party can apply to have those orders set aside.
This is why acting promptly to obtain legal advice when financial information appears incomplete or inconsistent can be important.
Signs That Financial Information May Need Further Investigation
Suspicion alone does not establish that assets have been deliberately hidden. However, certain inconsistencies may justify asking further questions or seeking professional advice.
These can include:
- Bank statements that appear incomplete;
- Significant unexplained withdrawals or transfers;
- Sudden changes in reported income;
- Assets that appear to have disappeared before separation;
- Business records that do not appear consistent with previous financial information;
- Unexplained debts or liabilities; and
- Financial transactions involving relatives, friends, or associated businesses.
A single inconsistency does not necessarily mean that a spouse is hiding assets. However, a pattern of unexplained transactions or missing information may require closer examination.
Why Acting Early Can Matter
Financial information can become more difficult to establish as time passes, particularly where assets have been transferred, sold, moved, or otherwise dealt with.
If you have concerns that your spouse has not provided complete financial information, obtaining legal advice early can help you understand the situation before making decisions about a property settlement.
It is equally important not to assume that every inconsistency amounts to deliberate wrongdoing. Financial circumstances can be complicated, and an apparent discrepancy may have a legitimate explanation. Professional advice can help distinguish between an unexplained financial issue and deliberate non-disclosure.
Final Thoughts
Hiding or failing to disclose relevant financial information can make an already difficult separation more complicated. It may prevent the parties from properly understanding their financial position and undermine negotiations about a property settlement.
A careful review of the available financial records can help identify potential gaps, clarify disputed transactions and determine whether formal disclosure or other legal steps are required.
The experienced divorce lawyers from the Tonkin Legal Group team can provide guidance on the legal process and advise you about financial disclosure, property settlement negotiations, and the options available if you are concerned that your former spouse or partner may be concealing assets, income or other financial interests.