Early in the divorce process, both parties are required to disclose all information about community property. Community property is defined as property or assets acquired over the course of the marriage, with a few exceptions such as an inheritance.
“Fraud on Community”
Since Texas is a community property state, the court determines a fair—though not necessarily equal—split of this property between the two parties. In an attempt to cheat a spouse from their rightful share, some people have been known to hide assets or undervalue them. In Texas, this practice is called “fraud on community” and it is illegal.
Significant Consequences for Hiding Assets
In 2015, Dr. Michael Brandner, M.D. an Alaskan plastic surgeon, was convicted of four counts of wire fraud and three counts of tax evasion for concealing over $5 million dollars in assets from the IRS and his wife, whom he was divorcing. He was sentenced to 48 months in prison, two years of supervised release, more than $25,000 in court costs, $500,000 in additional taxes, and possible restitution to his ex-wife. Additionally, the $4.6 million dollars he’d initially hidden overseas was seized by federal agents.
Obviously, those who conceal assets during divorce proceedings face significant consequences. In Texas, if fraud is uncovered, even after a divorce, the courts will calculate the actual value of the assets and re-determine a true and equitable division. Additionally, a judge can choose to enter a monetary judgment against the offending spouse to be paid to the former spouse.
Honesty Is the Best Policy
Hurt, anger, and a desire for retribution can be powerful emotions during a divorce. While it can be tempting to withhold information about marital assets, witnesses, co-workers, bank statements, e-mails, texts, and more leave are easily traced.
Chances are good that the party withholding assets will get caught and the punishment will be severe. It’s best to be honest and upfront about all marital assets so your divorce can proceed, and you can get on with your life.
If You Suspect Your Spouse Is Hiding Assets…
If you suspect your spouse is hiding assets, it’s important to gather a team of experts to assist you in locating them. A qualified divorce attorney along with a forensic CPA can work on your behalf, locating assets that have been concealed through court orders, audits, and interviews.