Why Hiding Divorce Assets Offshore Not An Option

Off the slopes and away from the rink, the Sochi Winter Olympics features a very fierce battle being waged. However, this race is not for a gold medal, it’s a divorce dispute involving Russian billionaire Vladimir Potanin, who is said to have funded the bulk of the Sochi Games and Natalia Potanin, his wife. Adamant that her husband is hiding assets that could be considered marital property, and therefore subject to division and distribution in their divorce settlement, Ms. Potanin is fighting to have her husband’s complex business dealings around the world undergo thorough accounting. In a major first victory for her, a U.S. Federal judge is ordering execs at New York-based company Altpoint execs to identify Mr. Potanin’s American-held assets.

The United States getting involved in a Russian divorce? While the context of this divorce — involving billions of dollars — is far from the norm, it does serve to showcase how the law views the issue of spouses hiding assets during divorce, including offshore assets. Bottom line? If you hide assets, you’re on the wrong side of the law.

In New Jersey, married couples have a legal relationship to one another known as a fiduciary duty. What this means is that from the time they get married, both spouses have an obligation to care for the assets and rights of the other person. A fiduciary duty is the highest standard of financial trust and confidence that continues through the period of marital separation and, in many cases, until the couple’s property is equitably distributed and their divorce settlement finalized.

What happens if you violate this duty and hide assets? In short, you may turn your divorce into a disaster. As the precedent setting NJ court case, Wiengarten v. Wiengarten, 234 N.J. Super. 318 (1989), sets forth, the Appellate Division may declare your divorce case reopened as long as your former spouse can provide the Court with compelling evidence that he or she has been defrauded. For you, this can mean more money spent in litigation. If proven that you did hide assets, you may be assessed fines, made to pay your former spouse’s court fees, and possibly find the judge less than sympathetic in dividing up the asset.

Still think you can away with it? Consider the ways most spouses get a tip off their spouse is hiding assets. It’s often in the form of a piece of junk mail that somehow gets forwarded, the bank statement you mistakenly left in that coat you left hanging in the front closet when you moved out, or a disgruntled former employee or former paramour who wants revenge may decide to spill the beans.

Are you the spouse who believe their spouse is being less than truthful is declaring assets? Spouses may hide money through a wide variety of fraudulent and illegal practices, including:

Employment: A spouse may delay his or her bonus or raise, adjust employment benefits, hide retirement benefits, tweak stock options and more.

Closely-held businesses: A business-owning spouse may doctor business records, illegally transfer money, make sudden payments to employees, delay business contracts and more.

Relatives and friends: A spouse may transfer money in a friend or relative’s name to make the transfer appear legal.

Financial accounts: A spouse may hide money in foreign/offshore bank accounts or secretly hold other bank accounts or credit cards.

For more, please see Six Places Spouses Hide Assets