A recent Washington Post article looked at the issue of fraud in divorce, particularly the use of offshore accounts and corporations by wealthy Americans looking to hide assets from a spouse in divorce. The issue is on the minds of more people after the release, earlier this month, of the so-called Panama Papers, which consist of millions of leaked documents providing information for over 214,000 offshore companies connected to a Panamanian law firm.
While it has become more difficult and risky in recent years to use offshore accounts to evade taxes and hide assets from a spouse in divorce, the Panama papers highlight the fact that it still occurs.
Most of the time, hidden assets can be traced in the discovery process, in which both parties are required to turn over information at issue in the divorce case. The super-wealthy, though, are still sometimes able to keep assets hidden by using complicated corporate entities or offshore accounts. Tracing marital assets to these offshore corporations and accounts is usually possible, but not without costly and time-consuming investigation.
More often, a spouse will attempt to use more ordinary means to conceal assets, such as domestic shell corporations, hidden brokerage accounts, life insurance, trusts, and unknown safe deposit boxes. In some cases, fraudsters will convince family and friends to help hide assets. Knowing where to look and what red flags look like is important in order to trace these assets in the discovery process.
In our next post, we’ll continue looking at this issue and why it is important to work with experienced legal counsel when a spouse is suspected of asset fraud.
The Washington Post, “How the world’s wealthy hide millions offshore — from their spouses,” Ana Swanson, April 19, 2016.
Divorcemag.com, “Financial Fraud and Divorce,” Peggy L. Tracy, Sept. 25, 2015.