More Spouses Hide Assets From Their Partners!

An study by Forbes asked over 400 U.S. citizens, male and female, with net worth varying between $1 million to over $10 million, various questions but for me the most interesting fact to emerge was that of the women surveyed, some 56% admitted to hiding assets from their husbands. The men surveyed did the same thing but in lesser numbers, 36% rather than the 56% of women.

Amazingly - perhaps until you consider why - those with assets in excess of $10 million were three times, that’s right, three times more likely to hide assets than those with assets under that magic threshold.

We are not considering legal devices but what is euphemistically called "wealth preservation strategies". In other words, good old fashioned "self protect" mechanisms such as hidden bank accounts in an "off-shore" jurisdiction, for example in the Caribbean or in Switzerland.

So, why do they do it? Well, I suspect there are as many reasons as there are "hiders" but one has got to be fear of eventual marriage break-up. Courts in most western countries are perceived as punishing the richer of the two parties in a divorce and making the poorer walk away with – in the case of these high net worth marriages – millions. The gossip magazines are full of stories of the latest break-ups and speculation about who will pay what, whether it is Michael Jordan in the States or Paul McCartney in the U.K. Speculation reaches fever pitch about who will move ahead of Neil Diamond in becoming the biggest payer in divorce history, a very dubious honor I suspect!

In this framework, is it any surprise that a rich partner wants to squirrel away a "war chest" or something for that rainy day? Maybe the asset was inherited but, depending on State law or the length of marriage, it still may go into the family melt down pot. Perhaps the "hider" feels they pull more than their weight in the marriage and it s only right that they get to keep some of the "marbles" for themselves. Then again, maybe – they just aren’t that happy and intuitively know that things may not last in the long term because they just don’t trust their partner. All these can be motivations for engaging in "wealth preservation strategies."

If you are like me you next wonder how they do it? Again there are as many devices and tactics as there are people engaging in the practice. Of course at the lower end of the scale there is the simple device of just not telling the full truth about your salary or that annual bonus you never mention. These however are simple and generally unsuccessful tactics when it comes to divorce because one of the first things a divorce lawyer will do is on "discovery" obtain copies of wage slips or tax returns and then, the cat is out of the bag and all revealed.

Again – and especially with inherited wealth which can leave a remarkably sparse paper trail, it may just never be mentioned that you inherited "Uncle Harry’s" shares. In this case the tactic will probably work provided the "hider" keeps their mouth shut and doesn’t mention it to anyone. A friend of mine, Doctor Ditcher, who works as a wealth preservation and divorce strategist puts it this way; "What your friends and family don’t know, won’t hurt you!"

Others do similar things with secret bank accounts and other mechanisms; they just never mention them. They use them to hide spare, occasional or off-shore income and just never mention the account’s existence. In this case the key is not only keeping quiet about the accounts but also minimizing the paper trail. It has to be done carefully because in a divorce a lawyer will get an accountant to track money and any strange or unusual transfers will be closely examined.

I asked my friend the Doctor D' what can be done to minimize the paper trail; "It depends on the circumstances; not everything works all the time, but some things work some of the time and that is the best you can do. The truth is that wealth preservation is something that needs to be done over as long a period as possible to minimize the possibilities of discovery of assets. When a marriage is almost over you are limited; some things may work but you have reduced the options because you have a reduced time frame."

In today’s world of big divorce settlements, I am sure that one thing will continue and grow even more common, namely the hiding of assets from a marriage partner. It makes sense financially! Maybe it is dishonest and less than the true open relationship we all hope for when exchanging vows, but is it any more dishonest than the decision of courts that a partner who never contributed financially is entitled to a share of an inheritance or that - as has been held by the U.K. courts - an offer of £20 million to an ex-wife was not enough!

As Doctor Ditcher puts it; " Is there anything more dishonest than a court effectively stealing one party’s hard earned cash to give it to someone who doesn’t deserve it? Do we think the people getting the big settlements on divorce today always deserve it?"

The truth is that no one - apart from the "ex" concerned - feels this is fair or reasonable. Until settlements begin to reflect what is fair, assets will continue to be hidden.