As part of the divorce process, a simple formula can be used to expose the possibility of hidden assets or provide a basis for an accusation of missing assets:
+ Assets (including income)
= Hidden Assets
The first part of the equation requires that the existence of an asset be established. That is, in order to be hidden an asset must first exist. For example, assume that a wife won $10,000 in a state lottery according to a list of winners published in the newspaper. The first part of the equation has been satisfied because there is evidence of a $10,000 asset.
The second part of the equation signifies that in order to be hidden, the asset cannot have been spent. Continuing with our example, assume that the bank statements of the couple had been received in the normal course of legal discovery by the parties. A review of the bank statements, however, failed to show a $10,000 deposit had been made to the couple’s joint bank account. Thus, we know that an asset exists, and we know that the couple did not spend it. In other words, the asset existed under the wife’s control and is missing.
This formula also applies to the income or earnings generated by a couple. The income of the parties is determined; the expenditures of the parties are determined; and the difference either confirms or denies the possibility of hidden assets.
The formula can be as simplistic as the example provided above or can encompass dozens of assets and numerous income streams. It can be used to provide the basis for a continuing investigation. That is, the formula may indicate assets are missing, and that further investigation should be performed. The formula can also be used to curtail an investigation when it illustrates that hidden assets are unlikely. Finally, the formula can be an end in itself. In our example, a court may deem that the completion of the formula is enough to assess the wife the $10,000 in the marital estate division. That is, the existence of the asset is shown; the expenditure is not; therefore, the wife is assumed to have the asset.
As with many “simple” formulae, the real-life application of this formula is not always as neat and tidy as it is on paper. For one thing, there is a correlation between the amount of money an individual or a family earns and the amount of money they spend on their standard of living. Simply put, the more money earned, the more that is spent to increase the standard of living. There are exceptions of course, but couples must make extraordinary efforts to break this pattern.
For example, a couple can agree that all salary increases after a particular date will be placed into savings for the children’s education. They may succeed in this endeavor, but there will be significant pressure on the couple to use the money for emergencies, perceived emergencies, or other expenditures that can be rationalized as being for the children. Therefore, investigators might expect that a large proportion of hidden asset claims will be nothing more than a skewed perception of the amount of money earned versus the amount of money spent.
The other economic reality that impinges on the formula involves the nature of the people involved and the environment of a divorce. People seeking a divorce are not usually career criminals. Therefore, their attempts to conceal assets will probably not be sophisticated, elegant, or hard to detect. They are likely to be simplistic, direct, and, at times, merely desperate. Consequently, investigators pursuing the obvious will probably have better results than those looking for (or expecting) convoluted schemes. The divorce environment is one of limited time and high stress. Complex plans often take time and logical thinking to put into play. A person under high stress with little time may not be able to formulate schemes that will avoid detection. Again, looking for the obvious first will increase the odds of finding hidden assets.