How to Trace and Prove Hidden Assets in Family Law

During financial settlements following separation or divorce proceedings, it’s a legal requirement for both parties to fully disclose all their income, assets, debts, and other financial resources to ensure a fair and equitable settlement. This legal responsibility is referred to as financial disclosure.

In some cases, however, one party may fail to uphold their responsibility of financial disclosure, which can result in settlements skewing in favour of that party over the other. In these circumstances, settlements may be reopened on the grounds of suspected hidden assets. 

Reopening settlement proceedings can be time- and cost-intensive for both parties, so it’s in your best interests to ensure all assets are found and disclosed prior to settlement proceedings. If, however, you do need to prove hidden assets under Family Law due to other parties failing to be forthright and upholding their legal responsibility for financial disclosure, there are steps you can take to trace and uncover those assets with support from the Court.

Today, our Family Lawyers at Oxford Partners Lawyers will outline what supports and strategies are available to you when tracing and uncovering hidden assets under Family Law.

What constitutes a hidden asset?

A hidden asset can be defined as any income, earnings, financial interests (i.e. stocks and bonds) and other financial assets that one party has failed to disclose or has intentionally concealed from the other party during a financial or property settlement.  In failing to disclose or intentionally concealing assets, this party has effectively violated their legal obligations for full and frank financial disclosure. This action may result in the at-fault party receiving penalties from the Court.

Common methods for hiding assets 

• Establishing offshore accounts
• Undisclosed investments (i.e. cryptocurrencies, stocks, bonds, etc.)
• Hidden superannuation funds
• Purposefully undervaluing properties and other assets
• Stockpiling cash from undisclosed income sources
• Transferring funds and ownership of assets to third parties
• Creating fake liabilities (i.e. false debts, loans, etc.)

Warning signs of hidden assets

If you have reason to suspect that the other party is hiding assets during a financial settlement proceeding, we recommend looking out for any of the following warning signs to support your suspicions:

Discrepancies in salary or tax reports

If a party’s recorded salary at the same position is lower than in previous fiscal years, this may be indicative of the other party purposefully reducing their disclosed salary using different methods (i.e. delaying bonuses or commissions, overpaying on taxes to claim a larger tax refund, etc.).

Unexplained bank account withdrawals

Large sums of cash being withdrawn from personal or shared accounts without explanation may signal cash stockpiling (if withdrawn from an ATM) or that a hidden or undisclosed private account has been established without the knowledge of the other party.

Gaps in documented financial information

Unexplained gaps in documented financial information (like bank statements) presented during formal discovery can also signal that financial assets are being hidden.

Unexplained luxury purchases (i.e. cars, trips, etc.)

If a party that’s claiming to be in a weaker financial position suddenly purchases a new luxury car or even has a family member that has purchased a new luxury car, this may signal that financial assets are being transferred to other parties. This also applies to other unexplained luxury purchases including jewellery, designer clothing, or flight tickets and holiday bookings.

In short, even if you may not be able to trace hidden financial records, you can still observe lifestyle changes or discrepancies from the other party that may signal the existence of hidden assets.

Key legal strategies for tracing and uncovering hidden assets

There are asset tracing techniques that can be used independently by a party and their legal team, or with the support of the Court and other experts (i.e. forensic accountants). Here are some of the most effective key legal strategies that can be used to trace and uncover hidden assets during or following financial settlement proceedings:

Utilise interrogatories during formal discovery

Parties must share financial documents during formal discovery pretrial or even before mediation sessions to ensure requirements for financial disclosure have been met prior to settlement proceedings. If you have reason to suspect the other party may be hiding assets even during formal discovery, then we recommend that you and your legal team use interrogatories (comprehensive written questions) and depositions (sworn testimony) to force the disclosure of any suspected hidden assets prior to trial. Maintaining attention to detail and asking the right questions during formal discovery can help drastically reduce risks of parties heading into settlement proceedings with undisclosed assets.

Issue subpoenas for banks, employers, and business partners

If another party is still failing to disclose assets even following formal discovery, your legal team can issue subpoenas to that party’s bank/s, employer/s, business partner/s, and any investment partners they may have to effectively uncover undisclosed accounts, income, money transfers, investments, etc.

Conduct a public records search

Your legal team can conduct an investigation via public records databases (i.e. by referring to ASIC company records, land titles, vehicle registrations, etc.).

Issue an Anton Piller order (search order)

An Anton Piller order is a search order granted by the Court that provides a party with the right to urgently search premises and seize evidence to prevent the destruction or concealment of that evidence. If you have reason to suspect that financial records detailing hidden assets are at risk of being destroyed, you can apply to the Court to secure an Anton Piller order if needed.

Secure a forensic report from a forensic accountant

A forensic accountant can prepare forensic reports detailing expert evidence they’ve identified that effectively substantiates your claims that the other party may be hiding assets and has thus violated their requirements for financial disclosure.

Penalties and consequences for parties found to be hiding assets

If a party has been found to be hiding assets, they’ve effectively failed to meet their legal responsibilities regarding financial disclosure. As a result, they may receive the following court penalties or experience the following consequences:

Court sanctions

The Family Court of Australia treats asset hiding like they do any other case of misconduct (i.e. failing to comply with Court orders, procedural rules, abuse of the legal system, etc.). If a party has been found to be hiding assets, the Court may impose sanctions they deem to be fair upon the other party and their legal team, as their legal team would also be responsible for assisting their client in hiding assets. 

These sanctions may include fines both to the other party and to their legal team that must be paid to the Court. The total dollar amount of these fines is typically calculated to balance out the value of Court resources wasted on investigating hidden assets and reopening financial settlement proceedings.

Orders to pay for the other party’s legal fees

Reopening a financial settlement isn’t just cost-intensive for the Court – it’s also expensive for the under-resourced party. With this in mind, the Court may also order the at-fault party to pay for the other party’s legal fees, ensuring no personal expense is required to attain justice and a fair and equitable outcome in financial settlement proceedings.

Forfeiture of hidden asset/s

In some cases, the Court may even order total forfeiture of the hidden asset/s as a severe penalty for the act of asset hiding. With the potential to receive this penalty, the overall financial risks of asset hiding are effectively extreme. 

Ensure you’re well-prepared for your financial settlements with support from our Oxford Partners Lawyers

Financial settlements are an integral component of the marriage and separation process. In cases where a party has been financially dependent on their spouse (i.e. due to raising children, illness, injury, etc.) or cases where parties are still caring for dependents and navigating child support or even spousal maintenance, fair and equitable financial settlement proceedings help ensure that the needs of both parties are being met effectively.

Whether you’re preparing for a financial settlement or have reason to suspect another party may have hidden assets during a financial settlement and you’re wishing to reopen proceedings, our team of Family Lawyers can support you in meeting a fair and equitable agreement. Get in touch via our website or by calling (03) 9670 7577 to speak directly with a member of our legal team today, or to schedule your free 30 minute preliminary consultation at our CBD offices.