Texas Divorce: If You Think Your Spouse Is Hiding Assets

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Brett Pritchard Law

Updated on April 26, 2023

The one divorce term that every divorcing couple faces is the division of marital property, which also tends to be one of the most challenging terms.

In Texas, the assets that you and your spouse come to own while you are married are considered marital, and upon divorce, you will need to distribute these assets – or their value – between you fairly. If you are not fully aware of what you have and what it is worth, obtaining a fair distribution of assets is much more complicated.

Divorce is hard on everyone, and the stress gets to the best of us. However, the division of marital property will directly affect your financial rights, and if your spouse is hiding assets, it is more than just a symptom of his or her stress. Your divorcing spouse’s actions could cheat you and your children out of assets that belong to you, and hiding assets should not be tolerated.

Rooting out fraudulent activity is complicated. Turn to the professional legal counsel of an experienced Killeen divorce attorney for the help you need.

The Division of Marital Property in Texas

In the State of Texas, marital property (called community property) must be divided in a manner that is deemed fair (in the eyes of the law) upon divorce. Everything that you and your spouse acquired over the course of your marriage is considered marital property. The only exceptions are inheritances or gifts that came to either of you in your name only.

Separate Property

Those assets that either of you brings into the marriage with you will remain your own private property as long as you are able to keep the assets separate throughout your marriage, which can be exceptionally challenging.

If separate assets become entwined with your marital assets, they lose their separate classification. As such, the separate nature of assets is often hotly contested during the divorce process.

Separate and Marital Assets

Some assets are distinctly separate, such as retirement accounts that either of you brings into the marriage. However, as they grow in value over the course of your marriage, the increase in value is considered marital and must be divided between you. The same is true of any increase in value of a business or real estate holding kept separate during the marriage.

Keeping Separate Property Separate

It is important to consider separate property carefully and to note that if the spouse to whom it belongs is not careful to keep it distinctly separate while you are married, it is very likely to become a marital asset. For example, if one of you brings a business into your marriage with you, any of the following factors can affect its separate nature:

  • If the spouse who owns the business failed to pay himself or herself an appropriate wage (or any wage), the family’s finances likely subsidized his or her earnings – thus smudging the dividing line between separate and marital.

  • If marital funds helped to grow or maintain the business, its separate nature is unlikely to hold.

  • If both spouses run the business together, it becomes more difficult to claim as separate property (and makes it more difficult to address in the division of marital assets).

  • If the business’s finances became intertwined with the family’s in any way, it might not retain its classification as separate.

Determining whether a property is separate or marital can be a serious battle in and of itself. Work closely with a divorce attorney to determine which assets will be considered separate and marital in your divorce proceedings.

Factors Guiding the Division of Marital Property

The factors that guide the equitable division of assets in Texas include the following considerations and many others:

  • The overall size of the marital estate

  • Each spouse’s separate property

  • Any disparity in the spouses’ earnings or earning potential

  • Each spouse’s age and overall health

  • Any gifts or inheritances anticipated by either spouse

  • The tax considerations for a proposed property split

  • Any wasting, spending down, hiding, or otherwise dissipating marital funds

  • Any additional factors the court considers relevant

Fault

If you are able to demonstrate that your spouse attempted to hide assets in your divorce, the court will take this fact into careful consideration in the division of your marital property.

Your divorce does not have to be based on fault – which most are not – in order for the court to address the matter of your spouse’s marital misconduct when dividing your assets. The court has the discretion to consider whatever factors it deems relevant to your unique case when determining an equitable division of your marital property.

Assessing Your Marital Assets

When it comes to the division of marital assets, you need a basic working knowledge of what you have to start with. This process begins with gathering a wide range of documentation. While not every category will apply to you, this comprehensive list is a good starting point that allows you to explore your own unique marital assets.

As always, make sure to consult with a divorce attorney to ensure that you understand how what you find will affect your divorce case.

Your Home

Your home – and everything in it – is a primary asset that should be given considerable attention. If you plan on remaining in your family home – perhaps as the primary custodial parent – your home may hold even more value for you than its listing price.

Taxes

Your yearly taxes are a primary source of information, and you should gather all the following documentation:

  • Your federal taxes as filed over the last several years

  • You and your spouse’s W2s

  • Any tax liens that apply

  • All additional IRS-related documents

Cash and Financial Accounts

A thorough reckoning of all your cash accounts, including checking, savings, commercial, and credit union accounts, is important. This should also address all retirement accounts, such as IRAs, 401ks, CDs, and pension plans. For each, gather all the following information:

  • The name, address, and telephone number of each financial institution

  • The amount in the account at the time of marriage and the amount currently in the account

  • The account number and the name(s) on the account

  • Statements from each account for at least three years back

  • Any information related to company loans and all documents related to work benefits

We tend to use our checking accounts as the cash flow that keeps our homes running, but it is also important to assess how much cash you have. Cash can play an important role in the division of your marital assets.

Cars and Other Motor Vehicles

You and your spouse likely each have your own vehicles, and you may think that is the end of the matter. However, if your spouse has a much more valuable vehicle or has multiple vehicles, you should not ignore this discrepancy in value. There are also boats, recreational vehicles, motorcycles, snowmobiles, and bikes to consider. For example, if your spouse has a boat that you both think of as belonging to him or her, it does not alter the fact that it is very likely a marital asset.

Regarding the cars and other motor vehicles you own, put together a list of the following information:

  • The year, make, and model of each vehicle

  • The name or names on each titleVINumber of each vehicle

  • The fair market value of each vehicle

  • The balance owed on each vehicle and any monthly loan payments (including car payment invoices for the last three years)

  • Net equity in the vehicle at the time of divorce

Household Assets

It is also important to recognize that there are likely items of significant value within your home that you should not lose sight of. You should do a walkthrough of your home and pay careful attention to all items of value, including items in these categories:

  • Furniture, appliances, fixtures, and furnishings

  • Computers and other electronics

  • Antiques, artworks, jewelry, watches, and collections (including appraisals)

  • Family heirlooms

  • Firearms and other sporting equipment

  • Musical instruments

Failing to assess what is in your home accurately can lead to a lopsided division of assets.

Real Estate Properties

You should have an updated list of the addresses and locations of any real property that you own, including any vacation and commercial properties, timeshares, and lots. Be sure to include the following documentation:

  • All deeds of trust

  • All relevant notes, such as equity loans and second liens

  • Legal descriptions of the properties

  • Current fair market values and appraisals

Closely Held Business Interests

If either of you is involved in any business interests, be sure to capture all the following specifics:

  • The name, address, and phone number of the business

  • The type of business

  • Percentage of ownership

  • The number and value of shares owned

  • A list of company assets

  • Cash flow reports

  • Balance of accounts receivable and liabilities

If you own a business, obtaining a fair business valuation is a primary concern. This valuation will allow a fairer assessment of how you will divide the asset upon divorce. If your spouse is more involved with the business than you are, this valuation becomes that much more important. Businesses tend to involve considerable movement in terms of financing, which can make it much easier to hide assets and much more difficult to find them when they are hidden.

If the Business Is a Separate Asset

If the business in question is your spouse’s separate asset that they kept strictly separate throughout your marriage, the business will remain theirs alone, but any increase in its value over the years you were married is a marital asset. Further, factors like the following can erode the dividing line between separate and marital property:

  • If your spouse used family funds to help grow the business

  • If your spouse used family funds as a source of cash flow for the business

  • If your spouse failed to pay themself a fair wage for running the business – diminishing family funds in the process

Forensic Accounting

If a business is involved in your divorce, you may need to engage a forensic accountant to help ensure that its books are in order and that you receive your fair allotment of value in the division of your marital assets. If your spouse is a partner in a joint business venture, a fair assessment and fair division can be even more challenging.

Insurance Policies

Keep track of all the following regarding each of your insurance policies:

  • The name of the insurance company, the policy number, and the person insured

  • The type of insurance (whole, term, or universal)

  • The date of the policy’s issue

  • The policy’s face value

  • The cash surrender value

  • The current surrender value

  • All designated beneficiaries

Publicly Traded Assets

Also, take stock of your publicly traded assets, such as securities, stocks, and bonds. Do not forget to address the matter of securities not in a brokerage, retirement account, or mutual fund. Having a record of all the following for each will help:

  • The name of the exchange where listed

  • The type of security, the number of shares, and the value per share

  • The certificate numbers

  • The date you acquired it

  • The tax basis

  • Whether any have been pledged as collateral

  • The current market value

  • Stock option plans

The more considerable your financial portfolio, the more room there is for financial shenanigans.

Liabilities

In addition to your assets, it is critical that you have a complete list of your liabilities, including your mortgage(s), personal loans, car loans, student loans, credit card debt, and more. For each, be sure to record all the following information:

  • The name, address, and phone number of the loan holder

  • Your most current statements and account statements for the last several years

  • Your account number

  • The amount owed

  • Your monthly payments

  • Any property used to secure payment

Wills and Trusts

Obtaining copies of any wills and trusts, including all attachments that reflect holdings, is essential.

Separate Property

It is also important to address the matter of separate property by designating what you consider to be your own separate property. This makes gathering the documentation necessary to support your claim more straightforward.

Additional Considerations

Additional considerations include items such as the following:

  • Possessions held in a safety deposit box

  • Possessions kept in a storage facility

  • Burial plots and documents of ownership

  • Club memberships and travel award benefits

  • Any payments either of you is expecting, including tax refunds

  • Assets specific to your line of work and business

The amount of information needed may seem overwhelming, but the better acquainted you are with your finances, the better prepared you will be to move forward with confidence and purpose – and to spot any hidden assets if it becomes necessary. Work closely with your divorce attorney to ensure that you aren’t missing any important assets that could affect your case.

Factors that Increase the Risk of Hidden Assets

If your spouse is unscrupulous and is invested in hiding assets, they will find a way to do so, which makes paying careful attention to the matter paramount. There are a variety of factors that can increase the risk that your spouse will have ample opportunities to hide assets.

High Assets

The higher assets you have overall, the easier it is to lose sight of them – and the easier it is to disappear, hide, give away, or otherwise get rid of these assets before they are missed in the divorce process.

The more thorough you are with your documentation and careful assessment of your assets, which can require a forensic accountant, the better off you will be when protecting your financial rights moving forward.

Business Ownership

Businesses are complicated financial matters – even when they are small mom-and-pop affairs. If you are selling a business, its value is determined by what the market will bear. Most divorcing couples do not choose to sell their businesses outright. However, in most cases, one spouse will probably need to walk away – and be compensated accordingly.

Determining a value of your business that you can both agree to can be exceptionally challenging (even when exacting valuations are involved). Business partnerships can make it that much more difficult to get an accurate reading of the value that belongs to you as a married couple.

If both of you run the business together during your marriage, dividing the business in divorce can be that much more complicated. However, if your spouse is far more involved in the financial end of your shared business, the complicated financials allow him or her far more opportunities to hide assets.

Dividing a Business

Generally, selling a business to divide the proceeds in a divorce is not a financially sound approach, which means that one spouse must find a way to buy out the other’s ownership. Consider these commonly used solutions:

  • Buying out directly

  • Ensuring that the allotted portion of marital assets makes up for the value relinquished in the business

  • Taking out a loan to buy interest in the business

  • Buying out over time

The Signs

Divorce is stressful, and your thoughts are likely to be all over the place – rather than focused on signs that your spouse may be hiding assets. Your dedicated divorce attorney will help ensure that your marital assets are all well accounted for, but there are several signs that should arouse your suspicion.

A Change in Income

Any noticeable change in earnings or income should give you pause, especially if your spouse is self-employed or owns a business. Cooking the books or hiding income is an easy way to squirrel away funds for oneself and can also help divert attention away from the business’s actual value. Be on the lookout for any unusual activity in terms of earnings.

Unexplained Withdrawals

A common tactic for hiding assets is simply siphoning off relatively small amounts of cash –┬áthat go unnoticed – over a long period of time. The truth is that some spouses keep banking accounts that their partners are completely unaware of, which can leave you on an uneven playing field.

A Lavish Lifestyle

If your ex claims to have very little but is living the good life in the meantime, you should pay attention. Examples include taking lavish vacations, making expensive purchases, and splashing out generally.

Any one of these actions can increase your marital debt, which is also shared, or can spend down your marital assets. This behavior is indicative of a spouse who is being less than truthful.

A Change in Banking Activity

If your spouse's banking activity looks different than it normally does, there is likely a reason for that, and it may prove underhanded. For example, if he or she is suddenly paying for everything in cash, it makes it more difficult to track the spending, which can be to your financial disadvantage.

Banking tends to demonstrate consistent trends over time; any change in these trends is worth noting.

Secretiveness

If your spouse has become suddenly cagey about finances, it could be a sign that he or she is attempting to get a larger piece of the pie. Both parties to a divorce are required to provide one another with important financial documentation during the discovery process, and suddenly becoming secretive is not a good sign.

The same is true if your spouse is suddenly eager to have you sign financial documents or engage in financial endeavors. Divorce is the time to extricate your finances from one another – not to muddy the waters further – and signing anything without your divorce attorney's guidance is ill-advised.

Suspicious Activity

Suspicious financial activity during a divorce can come in many forms, but some top contenders to be on the lookout for include the following actions:

  • Unusual spending on credit cards

  • Unusual gift giving

  • Any unusual movement of funds

  • Any signs of spending down

  • Any signs of new financial accounts, such as mail from unfamiliar banks

Missing Assets

If it suddenly occurs to you that assets you thought you owned are no longer in the picture, do not brush the matter off. If you notice one asset has gone missing, there might be others. If your spouse has far more involvement in your family’s finances, this brand of asset hiding is easy to accomplish and can be difficult to spot.

Cash Dealings

If you run a business that generates a good deal of cash or your spouse takes it upon himself or herself to make cash his or her primary financial tool, it builds in considerable wiggle room for hiding assets. Cash tends to be very difficult to track, making it the best friend of those who engage in unfair dealings.

If You Have a Feeling

If you have a feeling that your spouse is up to something, do not ignore it. After all, you know him or her only too well. Further, it does not take a financial wizard to spot financial discrepancies in your bank accounts, bills, and family finances.

As you pour over the numbers, make a note of anything that strikes you as odd. There may be a perfectly innocent explanation, but there may not be. If you recognize a financial trend, take action by consulting with your dedicated divorce attorney about the matter.

Do Not Forget Online Activity

It is 2022, and you should have access to each and every one of your financial accounts and assets online. There are also online accounts, such as PayPal, Venmo, and Zelle, to take into consideration. If your spouse will not provide you with the information necessary to access this information, consider it a red flag.

Further, if your divorcing spouse’s online history on a computer that you share gives you pause, pay attention.

Keep Your Eye on the Mail

People often forget that the U.S. Mail can tell stories. If you see information arriving from bank accounts, credit cards, or anything else that you do not recognize, it may be time to do some investigating.

If, on the other hand, your spouse does not seem to be getting his or her mail at home anymore, it can mean that he or she has rented a post office box in an attempt to keep his or her activities private.

Discuss Your Concerns with an Experienced Killeen Divorce Attorney

If you suspect your spouse of hiding assets, Brett Pritchard at The Law Office of Brett H. Pritchard – proudly serving Killeen, Texas – is a seasoned divorce attorney who is well acquainted with less-than-honest divorce practices and is well prepared to help protect you from them.

We are on your side, so please do not wait to contact us online or call us at (254) 781-4222 for more information today.

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