Can my spouse hide assets during a divorce?

Divorces are seldom easy. Emotions run high, and there are far-reaching financial impacts. Your assets, including your home, investments, bank accounts, savings, retirement funds, and business interests may be divided, depending on your marital regime. If you are married in community of property, assets are divided equally. If you are married out of community of property with accrual, one spouse will have a financial claim against the other for the difference in the growth in their respective estates.

Your spouse may be motivated to hide some of their assets or income to reduce the maintenance or divorce settlement. This is deceitful and illegal.

Hiding assets during divorce is illegal

There are several laws that govern divorce settlements, including the Divorce Act, Matrimonial Property Act, Maintenance Act, Pension Fund Act, and Deeds Registry Act. In accordance with these laws, full and honest financial disclosure must be made during the divorce process to ensure that assets are divided fairly.

In certain courts, such as in the Gauteng Division of the High Court, financial disclosure forms must be completed and filed as part of any divorce or Rule 43 of the High Court proceedings. If these forms are not filed, the matter can be struck from the roll.

Being dishonest carries harsh repercussions, and the court may impose a punitive financial award, granting one spouse a larger share of the assets. The dishonest spouse’s credibility may also suffer, potentially impacting other aspects of their life.

How assets are hidden

Divorcing spouses use many different tactics to hide assets and may even involve other people and lies which may even be told under oath.

Some specific ways that income or assets are hidden include:

• Giving an asset to someone else until the divorce is finalized, at which point it is returned
• Hiding unrecorded cash in a business
• Creating bank accounts in the name of a child or friend to conceal funds
• Overpaying or prepaying suppliers in a business, to be refunded later
• Adding a family member to the business payroll for “consulting” to increase costs, or delaying signing new contracts which may increase revenue
• Using available debt to increase liabilities and hide cash
• Lending money to family and friends, for repayment after the divorce
• Making deposits at casinos
• Overpaying tax owed to the South African Revenue Service (SARS), to be refunded later
• Setting up a trust to exclude assets from a spouse’s personal estate. The court may disregard this legal structure if the intent is to hide assets or if the trust has been abused

Red flags

Your spouse may work hard to conceal assets, but there are some red flags you can watch out for:

• Pressurising you to sign documents without giving you time to read through them
• Proposing mutual power of attorney for estate planning
• Unusual complaints about money or debt
• An unexpected failure or downturn of their business
• A sudden computer crash that results in the loss of crucial financial information
• Expensive purchases that can be returned or sold
• Being defensive or vague when financial issues are discussed
• Payments to accounts you do not recognise
• Large withdrawals from joint bank accounts
• Taking total control of bank accounts and banking passwords
• Using multiple cellphones in a short period of time to conceal interactions

What to do if you suspect a spouse is hiding assets

You should have a good understanding of your standard of living during the marriage, and the link between your income and expenses. If the current income, assets and loans declared by your spouse are vastly different, it could indicate he or she is concealing income or assets.

Gather proof, including bank statements and other financial information. Look for evidence of hidden assets, such as unusual expenses or movement on your bank accounts. Closely monitor your bank accounts, credit card statements, and investment portfolios.

Consult a professional attorney who is experienced in complex asset division, and share your information with them. The situation could be complex if trusts, businesses and international holdings are involved.

You can hire a forensic accountant to conduct financial audits, locate hidden assets, do valuations, and determine income and expenditure. This may be an extra expense but is worthwhile if the shared assets are significant. 

The court’s role in exposing hidden assets

Court proceedings can help maintain transparency during the fact-finding activities. As part of the discovery process, a court can issue a legal order compelling an individual to provide all physical evidence, including documents, reports, data messages, or tape recordings, to the court, and in some situations, complete financial disclosure affidavits early in the divorce proceedings.

The court may even grant an interdict to freeze property transfers or prevent business assets from being transferred or business income from being diverted into a separate account.

How to fix unfair settlement due to concealed assets

If you discover that assets were hidden after your divorce is finalised and this affected your settlement, consult an attorney who will enlist a forensic accountant to investigate. If there is sufficient evidence, the court can revise the asset division, taking the hidden assets into account.

The court may also penalise the dishonest former spouse by requiring them to forfeit assets or set aside any sales of joint assets which were concluded in order to conceal these assets.