Divorce Financial Affidavits and Hidden Assets
As part of normal divorce proceedings in Georgia, you and your spouse will each need to file a domestic relations financial affidavit (DRFA) listing all of your income and expenses. The purpose of this affidavit is to help the judge determine alimony (usually called “spousal support” to be more gender-neutral), child support, and/or separate maintenance payments, as well as the most equitable division of debts and assets. This legal document includes a verification (assurance of honesty) section which must be signed and notarized. Therefore, providing false information or concealing some assets or income from the listing can result in sanctions or even a charge of perjury.
The DRFA Document
A DRFA could be described as a personal budget. On the first part of the document, you list all sources of income, including but not limited to:
- wages, salary and bonus from primary jobs;
- wages, salary and bonus from secondary jobs;
- rental income;
- dividends from investments;
- annuities or trust income;
- and more sources of income as required by law.
Also, you should list your assets which include, but are not limited to:
- checking or savings accounts;
- stocks or other investments;
- real property, such as land and homes;
- retirement accounts, such as IRAs or 401(k)s.
Finally, you should list your debts and expenses. These include, but are not limited to:
- rent or mortgage payments;
- household expenses, such as groceries, water, power, and sewer;
- car payments and car maintenance expenses;
- payments to other creditors, such as student loans;
- health insurance, automobile insurance, and homeowner’s insurance.
Example of Filling out a DRFA
To help you understand the information provided above, this scenario describes a possible outcome:
A husband and wife are getting a divorce. They have some issues regarding assets, child support, and alimony that they will not be able to resolve. Therefore, they will each need to file a DRFA. He fills out a DRFA, listing his income from his job, his assets to include his checking and savings accounts, his 401(k), and stocks. He also lists his monthly expenses, including rent, car payments, food costs, and student loan payments. His wife also fills out a DRFA listing her income. She includes her individual checking account, her Roth IRA, and a money market account. She also lists her monthly expenses, the same as her husband’s, but also the costs of work-related child care. Once both parties have completed their DRFA, they sign a verification in front of a notary pledging to the court that the information in the DRFA is true to the best of their abilities.
Finding Hidden Marital Assets
Ideally, both you and your spouse will accurately disclose all of your income and assets, simplifying the process of dividing assets. In civil litigation, which includes all family law matters such as divorce, each party is expected to make honest and full disclosures because a DRFA is an affidavit, or sworn statement, which must be signed and notarized. However, rather than dividing assets as may be required by the courts, your spouse may wish to hide some of them as a means to keep them. Additionally, to reduce their burden for child support or alimony, a spouse may not fully disclose all sources of income. Parties rarely underreport their expenses, only their assets and income.
Due to your relationship, you will likely be aware of your spouse’s financial situation and will be able to tell if your spouse is leading a life inconsistent with his or her stated income and assets. Some signs that your spouse may be hiding assets from you include your spouse:
- not allowing you to access banking information;
- spending amounts which exceed known income;
- indulging in a sudden string of new purchases;
- increasing gifts to family and friends;
- using a separate bank account or mailing address;
- cleaning out a joint checking account prior to filing for divorce;
- allowing other people to reside in the marital residence post-separation without charging them rent;
- taking trips to countries with few or relaxed tax laws.
Those signs listed above may instead mean that your spouse is running up credit card debt or depleting the equity of the marital estate. Either way, you should report your suspicions to your attorney immediately. With your attorney’s help, you may be able to compile enough evidence to present to the court. Document any evidence of hidden assets, including photographs, screenshots of texts or other social media (such as dating sites like Bumble) which show your spouse spending time at a luxurious restaurant or vacation location, or written accounts of conversations with your spouse.
Example of Finding Hidden Marital Assets
To help you comprehend the information provided above, consider this scenario:
A husband and wife are getting a divorce. They have some issues regarding assets, child support, and alimony that they will not be able to resolve. Therefore, they will each need to file a DRFA. The husband truthfully fills out a DRFA. His wife fills out an incomplete and misleading DRFA. He has suspicions that her DRFA is not complete or correct, but he is unsure because they kept their finances separate. However, when he asked her to let him see her bank statements, she refused. Additionally, she appears to be spending more money than her salary would allow. He realizes that he cannot rely on the information provided in his wife’s DRFA to give him an accurate idea of what her assets and income are. He enlists his attorney to help him conduct an inquiry into his wife’s assets and income.
Professional Help to Find Assets
In many cases, it may be difficult to find documentable proof your spouse is hiding assets. However, the first tool a professional family law attorney has to discover assets is “discovery,” the process by which documents and information are formally requested in a lawsuit. Through one type of discovery document — a request for production of documents and notice to produce — your attorney can request the other party’s bank records, credit card statements, retirement statements, etc.
Because a party’s bank is not involved in the divorce, banks and other financial institutions are non-parties to the lawsuit. However, the Georgia Civil Practice Act permits the parties in a divorce to submit third-party discovery on a non-party. This non-party is required to produce such documents or else provide a good reason why not. In this age of online accounts, these types of documents should be available for you and your attorney to review.
Your attorney will then review these documents to see if the paperwork matches what is listed on the DRFA. If the documents do not match the DRFA, your attorney can do a deeper dive to see where the discrepancies are. For example, if there appear to be large transfers of money from a bank account to an unlisted bank account, your attorney can demand that the documents related to the unlisted account be provided. If your spouse refuses to do so, your attorney can seek to have the court order your spouse to provide the documents and enforce other sanctions, including incarceration in extreme cases.
If you are still struggling to find proof, or simply want to strengthen your case, your attorney can advise you in locating and hiring a reputable forensic accountant to help track down hidden marital assets. This accountant will closely examine your spouse’s income and expenditures, looking for inconsistencies indicative of a source of income not listed in your divorce proceedings. The forensic accountant will be able to assemble evidence acceptable under the law in court. This helps ensure that you will be able to uncover the hidden asset(s).
Example of Professional Legal Help in Finding Income and Assets
To help you understand the information offered above, review the scenario below:
A husband and wife with property and children are divorcing. She fills out a complete and accurate DRFA. He fills out a misleading and incomplete DRFA. She tells her attorney that her husband makes more money than he is claiming and is hiding assets. Her attorney sends the husband a request for production of documents and notice to produce requesting copies of all his bank records, credit card statements, and tax documents. He provides only the credit card statements and bank records. The credit card statements show that he has expenditures beyond his wages, yet pays off his balance every month. This convinces his wife’s attorney that he has income he did not list on his DRFA. Also, the bank records show that the husband moved a substantial amount of funds via electronic transfer to an account listed as *0001, but did not provide records of that account. Therefore, the wife’s attorney mails a Rule 6.4(b) letter putting the husband on notice of his failure to comply with discovery requests, which gives him a second chance to provide these documents. If he fails to provide them after a specified period of time (usually one week), the wife’s attorney may file a motion to compel to seek those documents. The court orders the husband to turn them over.
Once the documents are received, the tax documents show that the husband has additional income he is reporting to the IRS. Furthermore, the bank records for account *0001 show that he opened a new account and moved money into it to conceal that money from his wife and the court. Furthermore, the documents received show that there may be even more hidden income and assets, but to what extent remains unclear. His wife and her attorney retain a forensic accountant who, by reviewing the paperwork and “following the money,” tracks down even more assets and accounts the husband was trying to conceal. Her attorney moves for court sanctions against the husband for his deceit.
Penalties for Hiding Assets
The most common penalty for hiding assets is being forced to pay the other party’s attorney’s fees. Under O.C.G.A. §9-15-14, courts can order that a party who is stubbornly litigious and who is causing undue delay in the litigation to pay the other party’s attorney’s fees. In cases in which one party is hiding income or assets and filing misleading or incomplete documents, having to reimburse the opposing party for their attorney’s fees is a real possibility. This is one way for you to recoup your attorney costs during the pendency of the litigation.
Furthermore, O.C.G.A.§ 9-11-37 defines the powers a court has to compel and punish a party to a lawsuit to comply with discovery requests. This code section, among other things, grants the court the right to punish a party who failed to file discovery responses or filed incomplete or evasive responses. First, the court would order the party not complying with discovery requests to properly answer discovery, per O.C.G.A. § 9-11-37(a)(2) and O.C.G.A. § 9-11-37(a)(3). With this order, the court can include an award of expenses and fees under O.C.G.A. § 9-11-37(a)(4).
Once you have an order, if the opposing party still refuses to comply, further sanctions are available to force compliance and damage the other party’s case. They include:
- Holding the opposing party in contempt, which can include possible incarceration O.C.G.A. § 9-11-37(b)(1);
- An order that the negative facts related to interrogatories asked are presumed to be true O.C.G.A. § 9-11-37(b)(1)(A);
- An order that does not allow the opposing party to use certain evidence at trial O.C.G.A. § 9-11-37(b)(1)(B);
- An order that dismisses part or all of the opposing party’s case or claims O.C.G.A. § 9-11-37(b)(1)(C);
- More attorney’s fees O.C.G.A. § 9-11-37(b)(1).
Therefore, if you or your attorney make discovery requests to the opposing party and they fail to provide sufficient responses, you can use O.C.G.A. § 9-11-37 to force them to sufficiently reply. The process to use O.C.G.A.§ 9-11-37 includes sending a demand letter (6.4(b) letter), filing motions to compel, and likely having a hearing on said motion.
Furthermore, because hiding assets to lower earning capacity deleteriously impacts you, the party who is asking the court for alimony, the judge may find that this misconduct warrants awarding more marital assets to you, since the conduct of both parties can be considered in the division of debts and assets. Moreover, if a jury is involved, a judge may issue an instruction to them that they may presume the hidden documents reflect negatively on that party and their case, which may ruin that party’s chances of receiving marital assets or alimony.
Finally, if your spouse fails to accurately represent his or her assets and income in divorce proceedings, and his or her DRFA is filed with the court, he or she can be charged with perjury. This crime can result in a fine of up to $1,000, imprisonment for between one and 10 years, or both.
Example of Penalties for Hiding Assets
To help you understand the information provided above, consider the situation described below:
A husband and wife are divorcing. They have property and children. She fills out a complete and accurate DRFA. He fills out a misleading and incomplete DRFA. She tells her attorney that her husband makes more money than he is claiming and is hiding assets. Her attorney sends the husband a request for production of documents and notice to produce requesting copies of all his bank records, credit card statements, and tax documents. He provides only the credit card statements and bank records. The credit card statements show that he has expenditures beyond his wages, yet pays off his balance every month. This convinces his wife’s attorney that he has income he did not list on his DRFA. Also, the bank records show that the husband moved a substantial amount of funds via electronic transfer to an account listed as *0001, but did not provide records of that account. Therefore, the wife’s attorney mails a Rule 6.4(b) letter requesting that the documents be provided. When the husband fails to provide such documents, the wife’s attorney files a motion to compel to seek those documents and attorney’s fees. As a sanction, the court orders the husband to turn over those documents and pay some of his wife’s attorney’s fees, specifically the fees related to compelling her husband to make an accurate and full disclosure of his assets and income. Her attorney requests that the judge refer the husband’s perjury on his DRFA to the district attorney so that he or she may choose whether to bring charges. The judge will decide whether to refer the case to the district attorney and the district attorney’s office will decide whether or not to prosecute the husband.
Contact an Attorney
If you suspect that your spouse is hiding assets during your divorce proceedings, contact the attorneys at Stearns-Montgomery & Proctor immediately. We will help you prove that your spouse’s financial affidavit is not accurate, helping you get the divorce settlement you deserve.