How to Safeguard Your Assets in a Divorce

With approaching dissolution of the marriage, one or both spouses may try to hide assets from the other. One spouse, for instance, may sell stocks or bonds, or withdraw savings and claim the proceeds were spent or lost. Divorce courts, of course, see such tactics daily and may severely penalize the spouse suspected of such conduct. Do not let that happen to you. Play fair and you will come out further ahead. That does not necessarily mean your spouse will be as honest. Your goal must be to protect marital assets until they can be equitably divided by the court or an agreement is reached. Consider the following:

  • Remove all jewelry, artwork, and other valuable but movable objects to a secure place beyond the reach of your spouse. Do give your spouse a complete inventory of what was taken so you cannot be accused of concealing marital assets.
  • Place all cash, securities, stocks, bonds, and notes or mortgages due you in a secure location. If these assets are in your joint names, notify your stock broker or transfer agent not to put through any transfers without your written consent.
  • If you and your spouse hold joint insurance policies, draw down any cash value for safekeeping.
  • If your spouse owns real estate in his/her name only, you will need your lawyer to file in court for a restraining order preventing transfer of the property. You may instead file a lis pendens against the property. This puts any prospective buyer on notice of your claim to the property. This effectively encumbers the property so you do not lose your rights to it, even if it is sold.
  • Business interests are best protected by a restraining order preventing your spouse from transferring his or her interest. You may also seek a restraining order against the corporate entity itself, thus preventing actions out of the ordinary course of business that may dissipate the value of the business.
  • Empty checking accounts and savings accounts that your spouse can sign on.
  • Escrow these funds pending the divorce.

Timing is the key to asset protection when a divorce is imminent. Do not wait for your spouse to act first�there may then be very few assets left to protect. There are several ways one or both spouses in a divorce can play "hide and seek" with property:

  • Relocate property to a safer location. This may mean transferring assets to offshore accounts where privacy is assured.
  • Camouflage ownership. Did one spouse "sell" an interest in a business for cash or other consideration of little value? Fraudulent transfers of assets�particularly business interests�are notoriously common in a divorce. The defrauded spouse can attempt to prove a fraudulent transfer, but such an effort can be quite difficult and expensive.
  • Delay receiving income, inheritances, or assets from other sources until the divorce is final. An accommodating employer may assist by deferring salary increases, bonuses, or commissions until the divorce is final. Substantial income can also be secreted in defined-benefit pension plans. These hidden payments may be as much as 100 percent of the person's income.

Endless possibilities abound in a divorce for one or both parties to hide assets or income. Such actions may seem smart, but in practice you will be in an even better position by remaining honest. Divorce courts award a disproportionately large share of assets to the innocent spouse when the other spouse is believed to have secreted assets. For example, if your spouse can prove that you transferred cash to an offshore account, the court may well award your spouse equal or greater amounts of other marital assets. As you can see, it matters little that courts cannot attach some assets when they can divide others.