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Hiding Assets in Divorce Is Not Worth the Risk

You may not be surprised to hear that clients and potential clients frequently want to know how to avoid dividing a particular asset with their wife in a divorce. This is sometimes due to anger, fear, and/or a feeling of resentment that she didn’t “contribute” anything toward that asset.  Once they’ve learned that the Court normally equally divides assets and debt accumulated by the parties during a marriage, the next question we sometimes get is, “what if I just transfer [whatever asset] to someone else’s name?”  The short answer is that not only is it unlikely you will get away with it, but if/when you do get caught, you  risk losing not just the half that would normally have been given your wife, but possibly the entire hidden asset.

There are several things at play here.  First, your attorney cannot ethically assist you in hiding an asset and, thereby, defrauding your wife or the Court.  So if your lawyer knows you’re trying to hide an asset, the Michigan Rules of Professional Conduct state that he or she must withdraw from your case rather than being put in the position of assisting you.  If withdrawal is not possible and the fraudulent conduct persists, the lawyer’s ordinary duty to keep the client’s information confidential is waived, and a lawyer may reveal the client’s otherwise confidential information “to the extent reasonably necessary to rectify the consequences of a client’s illegal or fraudulent act in furtherance of which the lawyer’s services have been used.”  [Michigan Rules of Professional Conduct, Rule 1.6(b)(3).

Second, failure to disclose an asset may render any property settlement with your wife null and void.  It is an essential part of any contract that there be full and accurate disclosure of all relevant facts surrounding that contract.  A contract induced by fraud which prevents the other party from understanding in a reasonable manner the nature and effect of the act in which he or she is engaged will not hold up.  In other words, if your wife settles the case not knowing that there was an asset you transferred or otherwise hid, then the settlement will not stand.

Third, Michigan law imposes significant sanctions if a party is found to have committed perjury or fraud.  Judges can assess attorney fees against the offending party. Judges can also find the lying witness to be in contempt of court and impose additional penalties associated with that.  Moreover, in a case called Sands vs. Sands, the Michigan Supreme Court and Michigan Court of Appeals upheld a sanction against a party who intentionally hid assets from his wife and the court which was equivalent to 100% of the value of those hidden assets.  Well written judgments of divorce, therefore, include a warning to the parties that undisclosed assets may result in these types of sanctions to the defrauding party.  These are commonly referred to as “Sands sanctions.”

These rules make it essential that a client disclose any and all assets and liabilities that he has.  Whether answering interrogatories, testifying at a deposition, or negotiating at mediation, great care must be taken to ensure that everything is on the table.  Hiding assets, or even wasting assets for a non-marital purpose, can lead to huge problems down the road. 

While it was stated above that the starting point of dividing assets is a 50/50 approach, there are exceptions which a qualified attorney can help you pursue.  Michigan is an “equitable distribution of property” state and not an “equal distribution of property” state.  This means that the court is supposed to evaluate the fairness of a property division by considering many factors, including, but not limited to, the length of the marriage, the individual needs of the parties, the source of the property, the individual earning power of the parties, who contributed to the accumulation of the asset, and the cause of the divorce, including misconduct which leads to the breakdown of the marriage (sometimes referred to as fault).  Moreover, care should be taken to ensure that your wife is disclosing and/or properly valuing assets in her name, which would offset the assets that you may have to share.  Proving your case pursuant to these factors will be much more effective and less risky than trying to cheat the system.

About ADAM (American Divorce Association for Men)

The American Divorce Association for Men (ADAM) is a group of highly qualified attorneys who advocate for men’s rights in divorce, child custody and parenting time, paternity, support, property settlement, post judgment modifications, and other family law matters. Since 1988, ADAM has been aggressive, diligent, and uncompromising when representing their clients. A team of compassionate and skilled family law attorneys, ADAM is dedicated to being Michigan’s leading divorce attorneys for men

 

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