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Community property laws create incentives to hide marital assets

On Behalf of | Sep 9, 2022 | Division of Assets

Divorce laws can be vastly different depending on where you live when you file. Arizona is one of only nine states to adopt community property law as the manner of determining equitable distribution of marital assets and obligations.

Under community property rules, and with few exceptions, assets acquired during the marriage are presumed to be community property. Each spouse has a right to receive an equitable share of those assets, even if one spouse earned far more than the other during the marriage. In nearly all situations, “equitable” division means the assets are to be equally divided.

Those community property rules are intended to help make the asset division in divorce fair despite differences in the spouses’ economic contributions during the marriage. Unfortunately, they can also create a powerful incentive for someone to try to hide assets.

Why hidden assets are a problem

One spouse might report that their personal belongings aren’t worth much money or might even fund an undisclosed bank account with income earned during the marriage. Although Arizona state law requires that both spouses disclose all assets to their spouse, some people believe they can get away with intentionally misrepresenting their financial circumstances to limit what they share with their ex.

Attempts to hide assets can range from secret bank accounts and storage units where people hide valuable merchandise purchased online to asset inventory reports that drastically underestimate the true value of someone’s property.

If you locate hidden or undisclosed assets and inform the courts of your spouse’s suspected misconduct, the court can impose sanctions on your ex. Although this discovery might not result in receiving a larger share of those hidden assets, the statute does provide for those assets to be divided after the fact.

How do you find hidden assets?

A very careful review of the documents your spouse provides during the discovery and disclosure process is an important starting point if you suspect that they want to deprive you of some of the marital estate. If your marital holdings are complex, or if you have a lengthy marriage, you might consider seeking professional assistance, such as a forensic accounting, to locate and analyze evidence of financial misconduct in your upcoming divorce.

While there may be effort and expense involved in locating and valuing hidden assets, doing so is almost always more beneficial than ignoring financial misconduct by your ex for the sake of expediency. Learning more about the basics of property division rules in Arizona can help you identify and avoid common pitfalls in the process.