What is the difference between protecting assets and hiding assets?

Asset protection is a central issue in most high-asset divorce cases

People involved in complex divorces are often concerned with making sure their assets are protected. Especially in high-asset divorces, ensuring that a division of marital property does not unduly favor one spouse over the other is often a central point of contention. According to a recent article in Forbes, however, one difficult in properly dividing complex assets is that it can often be dangerously easy for people who are legitimately trying to protect their assets to inadvertently begin hiding assets. Since property valuation is so central in high-asset divorces, it is important to understand the importance of hidden assets in many such cases.

Asset protection

People with significant assets who are going through a divorce understandably want to mitigate the financial damage that their divorce may cause. As such, it is not at all unusual for people to take steps to protect some of their assets from being divided. In other cases, they may dispute with the former spouse the true value of a couple's estate. These asset protection plans are usually completely legitimate and do not risk running afoul of the law.

However, the danger comes when divorcing spouses go further and deliberately try to conceal assets from the court. As NJBIZ reports, this risk is especially common when one of the spouses is a business owner and the temptation to declare personal expenses as "business" expenses becomes too much. While such practices may be tempting, they are illegal.

Risks to outcome and reputation

Concealing assets is a serious offense. If it is discovered that one spouse tried to hide assets from the court then the chances of him or her being able to reach a favorable divorce settlement are significantly diminished. Judges, quite understandably, do not appreciate being deceived and they will sometimes punish a person who conceals assets by awarding most or all of the concealed assets to the other spouse.

The discovery of hidden assets can also create a feeling of distrust between spouses and make it difficult to negotiate openly in the future. The risk of concealing assets goes beyond the divorce settlement itself, however. For business owners, there is a danger that once hidden assets are discovered that their reputation will be severely damaged, which can result in a big financial impact in the form of lost clients.

Family law matters

Knowing where a legitimate asset protection plan ends and illegally hiding assets begins can be confusing and requires expert advise. One of the most important experts one can have during a divorce is a family law attorney. Especially during a high-asset divorce, an experienced attorney is often an invaluable source of assistance and information in such matters as asset valuation, property division, and other financial issues raised during the breakup of a marriage.