Even without the added dynamic of hot tempers, hurt feelings, and trampled pride, sharing with your spouse can be tough. For some, however, the prospect of splitting their hard-earned property during divorce is more than just uncomfortable, it’s downright impossible. Mired in this uncomfortable situation, it can be very tempting to try and hide some of your assets from the court, in hopes of saving more for yourself.
We’ll be blunt. This tactic isn’t smart.
While you might believe that your spouse doesn’t deserve anything, unfortunately, the state of Texas doesn’t agree with you, and trying to conceal property from the court can have some serious consequences.
Here’s a little more about how Texas courts deal with previously undisclosed property in divorce, and why you might want to rethink your game of “hide-and-go-property-seek.”
What is “Previously Undisclosed Property”?
To start out, previously undisclosed property refers to property that wasn’t disclosed during divorce proceedings, which should have been accounted for when dividing up marital property.
Undisclosed property doesn’t have to be a hidden love nest or an offshore account, either, but can refer to any number of things, including:
- Undervaluing an item or business asset;
- Failing to disclose ownership in real property;
- Declining to report a retirement account, investment, or interest;
- Overpaying taxes;
- Moving money into a friend or family member’s account; or even,
- Not telling your spouse about recent lottery winnings.
Essentially, previously undisclosed property can be any action (or inaction) that ultimately undermines value in the community property pot. And why is that bad?
Answer: because community property belongs to both of you.
Theft From the “Community”
Texas is a community property law state. This means that anything either of you acquire after saying “I do”—be it a house, paycheck, debt, or a dog—belongs to both of you. It doesn’t matter if your accounts are separate, or if only one of you signed the mortgage. Once the knot is tied, in the eyes of the law, you share everything. (Welcome to marriage!)
These jointly owned assets are called “community” or “marital property,” and in Texas, must be divided equally between partners upon divorce.
There are, of course, certain exceptions (such as inheritances, gifts, awards of personal injury, etc.), and this “separate property” is exempt. However—short of a valid prenuptial agreement that states otherwise—everything else is owned equally, and therefore must be divided between spouses upon divorce. Ergo, a failure to disclose property or assets isn’t just a harmless mistake that won’t hurt anyone. Instead, you’ve essentially committed theft against the marriage.
In other words: you stole from your spouse.
Reclaiming Previously Undisclosed Property
If you believe your spouse hid assets from the court, you will need to file a “Suit to Divide Undivided Property.” This will allow you to try and recoup losses that were not reported in your spouse’s original inventory of property.
The Texas Family Code requires that in order to claim a share in previously undisclosed property, you must show that the property in question:
- Existed during the marriage; and,
- That the failure to disclose had a detrimental impact on the division of marital property.
Showing the existence of unreported property is one thing, however; proving it was fraudulently concealed from the court is an entirely different matter.
Fraud or Faux Pas?
It’s hard to see how—in our day of modern technology—someone could “accidently” fail to report property. Still, it does occasionally happen. Hence, in order to prove the existence of fraud, you’ll need to show that the concealment was intentional.
One way to do this would be to review the official inventory that your spouse submitted, at the time of divorce. This sworn statement itemizes and appraises all finances and assets, including things like:
- Bank accounts and statements;
- Credit card reports and loans;
- Real property;
- Stocks, bonds, and investments;
- Paycheck stubs;
- Tax returns; and even,
- All your payment history from apps such as PayPal, Venmo, and GooglePay.
As a signed, sworn statement, this document is considered part of the official record, and as such, lying here about your assets would be considered perjury (a criminal offense).
If the court determines that the omission was intentional, deliberate, and done with the intent to defraud community funds, then it’s likely you’ll be convicted of fraud.
The Consequences of Fraud
The consequences for concealing property from the court range in severity according to the offense, and also—to a large extent—the mood and opinions of your particular judge.
At the very least, you will be required to compensate your ex for their share of the property, although, it’s much more likely that a judge will disproportionately allocate funds to your ex as punishment. (For example, splitting the property 70/30 in their favor.)
In addition, the court may levy sanctions and other fines against you. If your attorney discovers that you’re trying to conceal property during divorce proceedings, they may be obligated to withdraw representation for ethical reasons. Your actions might also draw the wrath of outside entities, such as the IRS, which will have their penalties to deal with.
And all of this is to say nothing of the criminal charges we mentioned earlier, including perjury, fraud, and possibly contempt of court. These offenses often result in hefty fines, and—in some instances—even jail time.
Bottom line? It’s usually just better to avoid the whole sneaky ordeal, altogether.
Previously Undisclosed Property: Taking Protective Measures
As the saying goes, “The best offense is a good defense,” and one way to protect yourself against the headache of having to litigate previously undisclosed property is to take protective measures.
Two of the most effective are:
- Be on the lookout for signs; and,
- Include a provision in your divorce order.
I Saw the Sign
We live in a time of unprecedented technology. It takes effort and forethought to conceal property, and these actions are noticeable if you’re paying attention.
If you’re concerned your spouse might be trying to hide assets, look for red flags in their behavior, such as:
- A sudden, unexplained reduction of income;
- A mysteriously disappearing yearly bonus;
- Missing funds from your bank accounts;
- Sending mail to another address;
- Opening an overseas account;
- “Paying back” a friend a large sum of money;
- Overpaying on taxes; and,
- Investing in things like cryptocurrency.
These are all signs that your spouse might be up to something shady, and will give you a good idea of where to start discovery during your divorce.
Include a Provision in Your Divorce Order
Another failsafe would be to include a provision in your divorce order, one that addresses how undisclosed property will be handled, in the event either spouse tries to hide assets.
This is one of those things that’s not technically necessary—after all, it’s still illegal to withhold property, whether or not you have a provision in your agreement. However, sometimes just having that extra precaution in writing helps drive home the severity of an issue.
If you are worried your spouse might be trying to hide assets from your divorce proceedings, it’s best to talk to your attorney about what the next best steps should be.
Previously Undisclosed Property Attorneys in Texas
Hiding assets from divorce court is a difficult and costly crime. Luckily, it’s one you can also recover from. If you have been the victim of previously undisclosed property in divorce, the team at Neal Ashmore is here to help you.
Call us today at (972) 436-8000, or schedule a consultation online, and let us help you recover what you’re owned.