The Dangers of Hiding Funds in Divorce

Divorce is a major financial turning point. Decisions made during this process can affect you for years.

In Massachusetts, both spouses have a strict legal duty to be honest about their finances. Trying to hide money or assets during a divorce is illegal and extremely risky. It can lead to fines, court penalties, and even criminal charges.

This article explains:

• Why financial transparency is required
• What Massachusetts law demands
• How courts uncover hidden assets
• The serious consequences of hiding money

Financial Disclosure Requirements in Massachusetts

Massachusetts law requires full and honest financial disclosure during divorce.

Under Supplemental Probate and Family Court Rule 401, both spouses must file a sworn financial statement early in the case. These statements are signed under oath and submitted under penalty of perjury.

Financial Statement Forms

• Short Form: For individuals earning less than $75,000 per year
• Long Form: For individuals earning $75,000 or more per year

Each spouse must disclose:

• All income
• All assets
• All debts and expenses

Judges rely on this information to divide property fairly.

Why Transparency Matters in Divorce

Massachusetts is an equitable distribution state. This means marital property is divided fairly, not always equally.

To do this correctly, courts need a complete and accurate picture of the marital estate. Rule 401 prevents one spouse from gaining an unfair advantage by hiding information.

In the past, one spouse often controlled the finances. Today, courts strictly enforce disclosure rules to protect fairness.

Failure to comply can result in:

• Court sanctions
• Reopened divorce judgments
• Financial penalties
• Criminal referrals

How Financial Disclosure Laws Developed

Earlier divorce laws relied heavily on voluntary disclosure. This often led to unfair outcomes.

As divorce became more common and financial roles changed, courts recognized the need for strict rules. Massachusetts responded by creating Rule 401.

Key cases reinforced this duty:

• Grubert v. Grubert (1985): Penalized asset concealment
• Kittredge v. Kittredge (2004): Allowed courts to reopen cases after hidden assets were found

Today, transparency is a cornerstone of Massachusetts divorce law.

What Rule 401 Requires You to Disclose

Rule 401 requires broad and detailed disclosure on your financial statement including:

1. Assets

• Homes and other real estate
• Bank and investment accounts
• 401(K) accounts, pensions and other types of retirement plans
• Business ownership and interests
• Cryptocurrency and digital assets

2. Personal Property

• Vehicles
• Jewelry and valuables
• Artwork and collectibles

3. Liabilities

• Mortgages or secured lines of credit
• Credit cards
• Student loans
• Tax debts

4. Income

• Salary and wages
• Self-employment income
• Bonuses and commissions
• Rental and investment income

Financial statements must be updated if circumstances change. Accurate income disclosure is also critical when courts evaluate alimony obligations in a Massachusetts divorce.

Pro Tip:

1. Lying on a financial statement is perjury.
2. Lying to your lawyer can be just as damaging.

Courts can reopen cases even after divorce is finalized if hidden assets are discovered.

How Massachusetts Divides Marital Property

Massachusetts law governs asset division under M.G.L. c. 208, § 34, which emphasizes equitable distribution based on several factors:

• Length of the marriage
• Each spouse’s age and health
• Income and future earning ability
• Financial and homemaking contributions
• Conduct affecting marital assets

Importantly, all property acquired during the marriage is marital property, regardless of whose name is on it. Accurate disclosure is essential for a fair outcome.

Common Ways People Try to Hide Assets (and Why It Fails)

Some spouses try to hide money during divorce. These choices often start small, but they can quickly create serious legal problems.

People may delay bonuses or underreport income to make finances appear lower. Others move money or property to friends or family and plan to move it back later. Some overpay debts, overpay taxes, or withdraw cash to hide assets.

Business owners sometimes manipulate records by hiding revenue or inflating expenses. Others believe cryptocurrency can stay hidden in private digital wallets. Valuable personal items, such as jewelry or collectibles, may be undervalued or left out entirely.

A quick reality check:

These strategies are rarely effective.

Courts and attorneys rely on bank statements, tax records, and digital trails to spot inconsistencies.

Forensic accountants are trained to identify spending patterns that don’t match reported income. Subpoenas can also uncover third-party transfers, even when assets are moved out of a spouse’s name.

The Legal Reality:

With modern disclosure rules and investigative tools, the risk of being caught is high and the consequences can be severe.

How Hidden Assets Are Discovered

Massachusetts courts rely on established discovery procedures to ensure accurate financial disclosure during divorce.

Parties may have to answer sworn written questions and provide financial documents, such as bank records and tax returns. These documents help attorneys and the court compare reported income with actual financial activity.

Courts may also require depositions, where parties give sworn testimony. If financial disclosures are incomplete or raise concerns, courts can issue subpoenas to banks, employers, and other third parties to obtain records directly.

In cases with complex finances, forensic accountants may be brought in to review transactions, follow the movement of assets, and identify irregularities. Courts also review digital evidence, including online financial activity and cryptocurrency.

When concealment is established:

Judges may modify property division, reopen prior judgments, impose monetary sanctions, or refer the matter for criminal review. Undisclosed income can also directly affect child support calculations, which rely on accurate and complete financial information.

What Courts Say About Hiding Assets

Massachusetts courts take a zero-tolerance approach.

Past and recent cases show:

• Judges reopen finalized divorces
• Courts impose financial penalties
• Concealing spouses lose credibility

National cases, like In re Marriage of Rossi, highlight how severe penalties can be when dishonesty is discovered.

The Real Risks of Hiding Money in Divorce

Hiding assets creates serious consequences:

Simply put, hiding assets almost always backfires.

Better Alternatives to Hiding Assets

There are legal ways to protect your financial future.

Best Practices

• Fully disclose all finances
• Work closely with your attorney
• Update financial statements when needed

Legal Options

• Mediation or collaborative divorce
• Fair alimony or support requests
• Prenuptial or postnuptial agreements
• Legitimate trust and estate planning

These options protect you without risking penalties (not hiding assets).

Choose Transparency for a Better Outcome

Honesty is not just required, it’s the smartest approach.

Massachusetts courts are well-equipped to uncover hidden assets. The consequences of dishonesty far outweigh any short-term benefit.

By choosing transparency, you:

• Protect your credibility
• Reduce legal risk
• Achieve a fairer resolution
• Move forward with peace of mind

Need Help With Divorce Financial Issues?

If you believe your spouse may be hiding assets or you want to ensure your own financial disclosures are accurate, Wright Family Law Group can help.

We represent clients throughout Massachusetts, including Middlesex, Essex, Suffolk, Plymouth, Norfolk, Bristol, Worcester, and Barnstable counties, with offices in Danvers and Tewksbury.

Schedule your free 15-minute discovery call today to get clear guidance and take the first step toward a secure future.