Secret assets in an Illinois divorce

Russell Knight

Russell D. Knight has been practicing family law as a Chicago divorce lawyer since 2006. Russell D. Knight amicably resolves tough cases while remaining a strong advocate for his client’s interests.

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How To Hide Assets In An Illinois Divorce

Secret assets in an Illinois divorce

Has anyone really been surprised that they got a divorce? I don’t think so.

Instead, couples facing divorce plan for months or years for their divorce. They organize their schedule around the kids. They build up an emergency divorce fund. They compile evidence of their spouse’s misdeeds. People even try to hide assets they believe will be divided in the inevitable divorce.

Assets acquired during a marriage will be divided in an Illinois divorce.

An Illinois divorce court “shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors, including:…whether the contribution is after the commencement of a proceeding for dissolution of marriage or declaration of invalidity of marriage” 750 ILCS 5/503(d)(1)

 ‘[M]arital property’ means all property, including debts and other obligations, acquired by either spouse subsequent to the marriage” 750 ILCS 5/503(a)

How do you hide assets, money and valuables so that those assets will not be divided in an Illinois divorce?

The short answer is: you don’t hide assets in an Illinois divorce. Hiding (not disclosing any asset) not allowed under Illinois’ divorce laws and discovery rules.

The long answer is: you can’t hide assets in an Illinois divorce because assets are almost always traceable and when assets can no longer be found, their value can just be imputed via a dissipation claim.

Assets Must Be Disclosed In An Illinois Divorce

Every party to an Illinois divorce must list all of their assets on their financial affidavit which must be shared with the other party.

In all pre-judgment proceedings in which a party is seeking division of the marital estate, to establish, modify or enforce an order for maintenance, child support, or educational expenses pursuant to Section 513 of the Illinois Marriage and Dissolution of Marriage Act, support for a non-minor child with a disability pursuant to Section 513.5 of the Illinois Marriage and Dissolution of Marriage Act, disposition of property in a civil union, retroactive child support in parentage matters, or  attorney’s fees and costs against the other party, each party shall serve a completed  affidavit of incomes, expenses, debts, and assets  (“Financial Affidavit”) upon the other party on forms approved by the court.” Cook County Court Rule 13.3.1

“One form of financial affidavit, as determined by the Supreme Court, shall be used statewide” 750 ILCS 5/501(a)(1) 

That one form of financial affidavit can be found here: Financial affidavit form for divorce & family.

If someone lies, omits, or even forgets to put something on their financial affidavit there can be grave consequences.

“If a party intentionally or recklessly files an inaccurate or misleading financial affidavit, the court shall impose significant penalties and sanctions including, but not limited to, costs and attorney’s fees” 750 ILCS 5/501(a)(1)

Furthermore, each spouse has the ability to ask additional questions and for further proofs of assets (or lack thereof) through discovery.

Notices To Produce, Interrogatories, Subpoenas and Depositions can force a divorcing party to endlessly explain their financial situation.

Failure to cooperate with these discovery requests in whole or in part will result in the court denying the uncooperative spouse with the ability to put on his or her own case.

If a party “unreasonably fails to comply with any provision…of the rules of this court (Discovery, Requests for Admission, and Pretrial Procedure) or fails to comply with any order entered under these rules, the court, on motion, may enter, in addition to remedies elsewhere specifically provided, such orders as are just, including, among others, the following:
(i) That further proceedings be stayed until the order or rule is complied with;
(ii) That the offending party be debarred from filing any other pleading relating to any issue to which the refusal or failure relates;
(iii) That the offending party be debarred from maintaining any particular claim, counterclaim, third-party complaint, or defense relating to that issue;
(iv) That a witness be barred from testifying concerning that issue;
(v) That, as to claims or defenses asserted in any pleading to which that issue is material, a judgment by default be entered against the offending party or that the offending party’s action be dismissed with or without prejudice;
(vi) That any portion of the offending party’s pleadings relating to that issue be stricken and, if thereby made appropriate, judgment be entered as to that issue.” Ill. Sup. Ct. R. 219(c)

A sanction preventing the uncooperative spouse from presenting their own evidence would allow the other spouse to allege all kinds of assets are owned by the spouse refusing to cooperate with discovery. The spouse refusing to cooperate would be unable to rebut that testimony and would be ordered to tender the marital portion of those real or imagined assets.

What hidden asset could possibly be worth such a consequence?

Furthermore, if the asset is later discovered to have existed…the divorce judgment can be vacated and the whole divorce will restart based on fraud for failure to disclose.

“To prove fraud [for the purposes of vacating a judgment], the complainant must show that the other party falsely stated a material fact or concealed a material fact that he had a duty to disclose; the fact was intentionally misstated or concealed to induce the complainant to act; and that the complainant detrimentally relied upon the misstatement or the nonexistence of the fact.” In re Marriage of Travlos, 218 Ill. App. 3d 1030, 1035 (1991).

When Assets Are Missing Or Hidden In An Illinois Divorce

Even if assets are hidden, they can be relatively easily traced.

Unless it’s cash, money arrives into an account. Money can’t leave an account…unless there’s an accounting of that transfer or withdrawal.

After the transfer or withdrawal, the moneys absence has to be explained.

Failure to adequately explain the disappearance of any kind of money will result in the other party filing a Notice of Dissipation Of Assets.

Dissipation of assets is the claim that something has gone missing or was spent on a non-marital purpose and, therefore, the missing asset’s value must be used when equitably dividing the marital estate.

“Dissipation is defined as the use of marital property for one spouse’s sole benefit for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown.” In re Marriage of Tietz, 605 NE 2d 670 – Ill: Appellate Court, 4th Dist. 1992

“[A] notice of intent to claim dissipation shall be given no later than 60 days before trial or 30 days after discovery closes, whichever is later;

(ii) the notice of intent to claim dissipation shall contain, at a minimum, a date or period of time during which the marriage began undergoing an irretrievable breakdown, an identification of the property dissipated, and a date or period of time during which the dissipation occurred;

(iii) a certificate or service of the notice of intent to claim dissipation shall be filed with the clerk of the court and be served pursuant to applicable rules;

(iv) no dissipation shall be deemed to have occurred prior to 3 years after the party claiming dissipation knew or should have known of the dissipation, but in no event prior to 5 years before the filing of the petition for dissolution of marriage” 750 ILCS 5/503(d)(2)

Dissipation claims have their limits. The marriage has to be failing (however that is defined), the asset has to have gone missing in the last 3 years (if known) and not be missing greater than 5 years.

Who could possibly hide assets in contemplation of a divorce 5 years from now? In my experience, lots of people plan for divorce with a future timeline of years and years.

In such cases where dissipation of marital asset’s timelines have expired, the suspicious spouse will need to employ the skills of a forensic accountant.

Forensic accounting combines the work of an auditor and a private investigator. Unlike auditors whose goal is focused on finding and preventing errors, the role of a forensic accountant is to identify instances of fraud.

The same tools to detect an embezzler’s fraud can be used to determine where a divorcing party’s assets went.

The forensic accountant will then be called upon as an expert witness to explain how they can be sure the assets are actually controlled by the asset-hiding spouse.

Fraudulent Transfers And Hiding Assets In An Illinois Divorce

There usually isn’t a secret bank account that is in one spouse’s name. Instead, people who try to hide assets usually take it one step further and put the hidden money in someone else’s name, usually a relative or a new boyfriend/girlfriend. Some people even get so clever (by half) that they put their money in a trust thinking that the trust will shield the assets from division in divorce court.

Upon discovery of a hidden asset in someone else’s name, the asset can be forced back into the marital estate for eventual division.

The person or entity holding the formerly marital property must be impleaded into the divorce case.

“The court may join additional parties necessary and proper for the exercise of its authority under this Act.” 750 ILCS 5/403(d)

After including the person holding the property as a party to the divorce, an Illinois divorce court simply order that person to turn over the assets after sufficient proof that the assets belong to the spouse.

An Illinois court can “[c]ompel any person cited, other than the judgment debtor, to deliver up any assets so discovered, to be applied in satisfaction of the judgment, in whole or in part.” 735 ILCS 5/2-1402(c)(3)

Furthermore, an Illinois court can force a person to sign a deed, dissolve a trust or do just about anything to enforce a judgment against another.

An Illinois court may also “[c]ompel any person cited to execute an assignment of any chose in action or a conveyance of title to real or personal property or resign memberships in exchanges, clubs, or other entities in the same manner and to the same extent as a court could do in any proceeding by a judgment creditor to enforce payment of a judgment or in aid of the enforcement of a judgment.” 735 ILCS 5/2-1402(c)(5)

Finally, an Illinois court can impose a constructive trust upon the conveyed property and can tell the new owner, “turn over the alleged gift.”

“A constructive trust is created when a court declares the party in possession of wrongfully acquired property as the constructive trustee of that property, because it would be inequitable for that party to retain possession of the property…A constructive trust is generally imposed in two situations: first, where actual or constructive fraud is considered as equitable grounds for raising the trust and, second, where there is a fiduciary duty and a subsequent breach of that duty. A constructive trust may also arise when duress, coercion or mistake is present. Some form of wrongdoing is a prerequisite to the imposition of a constructive trust.” Suttles v. Vogel, 126 Ill. 2d 186, 193, 533 N.E.2d 901, 904-05 (1988).

If the parent is hiding assets for the purpose of avoiding child support obligations, Illinois courts have explicit instructions.

“The following circumstances are sufficient for a court to order discovery of the assets of a person, persons, or business entity and to compel the application of any discovered assets toward payment of the judgment for support…the non-custodial parent transfers assets to the person, persons, or business entity with the intent to perpetrate a fraud on the custodial parent.” 750 ILCS 5/505(b), 750 ILCS 46/805(b)(3)(C)

Cash And Divorce In Illinois

There’s a big exception to my thesis that “everything is traceable in an Illinois divorce.”

Cash earned is not traceable. The person who paid the spouse in cash is not going to account for all those cash payments. The spouse who got the cash is not going to disclose their cash.

If a spouse earns cash, it will be their word against yours in an Illinois divorce.

If the spouse is spending the cash, then the expenses can be proof of cash income.

If a spouse is saving the cash…there is no proof. My only suggestion is that if you ever get a chance to see your spouse’s cash…take a picture of the cash.

Can I Tell My Divorce Lawyer About My Hidden Assets?

If you have hidden assets and want to keep them hidden from the divorce process, you may be tempted ask your divorce lawyer for advice regarding those hidden assets.

Anything you tell your divorce lawyer will be a secret between you and your divorce lawyer.

“A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent” Ill. R. Prof’l Conduct R. 1.6 (eff. Jan 1, 2016)

“The purpose of the attorney-client privilege is to encourage and promote full and frank consultation between a client and legal advisor by removing the fear of compelled disclosure of information.” Consolidation Coal Co. v. Bucyrus-Erie Co. (1982), 89 Ill.2d 103, 117-18, 59 Ill.Dec. 666, 432 N.E.2d 250.

Once your divorce lawyer knows about your secret, hidden assets, your divorce lawyer cannot participate in your divorce any longer unless your divorce lawyer is allowed to disclose the hidden assets.

“A lawyer shall not knowingly…offer evidence that the lawyer knows to be false. If a lawyer, the lawyer’s client, or a witness called by the lawyer, has offered material evidence and the lawyer comes to know of its falsity, the lawyer shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal. A lawyer may refuse to offer evidence, other than the testimony of a defendant in a criminal matter, that the lawyer reasonably believes is false.” Ill. Sup. Ct. R. 3.3

If your divorce lawyer has any ethics, they will promptly withdraw from your divorce case in order to protect their license and, thereby, protect you.

Even after withdrawing from your case, your Illinois divorce lawyer must keep the information about the secret assets a secret.

“All matters that are privileged against disclosure on the trial, including privileged communications between a party or his agent and the attorney for the party, are privileged against disclosure through any discovery procedure.”  Ill. Sup. Ct. R. 201

If you have hidden assets and are ready to properly disclose them or you suspect your spouse has hidden assets, contact my Chicago, Illinois family law firm today to learn more about how to handle unknown, secret or hidden assets in an Illinois divorce.