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Tuesday, 18 December 2012 07:34

Discovering Hidden Assets

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In your divorce case, you may hear your lawyer talk about the “discovery process.” Discovery is essentially the legal process by which lawyers can obtain information necessary for your case (such as assets, debts, income, and other factual information). This often will involve written requests to your spouse to produce certain documents, a request for them to file written answers to the lawyer’s written questions (called interrogatories), subpoenas for documents from banks, credit card companies, etc.

Often lawyers will use multiple methods of discovery in an effort to obtain complete information. I have had clients ask me not to pursue discovery for fear of the costs that would be incurred. This is often short sighted. An example from a recent case I had is instructive.

I was representing a wife in a divorce case. The husband had complete control of all of the finances and the wife was not even aware of all of the assets. Through the discovery we sent to the husband he produced a spreadsheet that he claimed were the assets. The wife was surprised at the amount of assets that were disclosed. They were much more than she thought they had. But, the husband showed what he claimed to be the fair market value and the loans owed on them. In all, he showed a net equity of less than $500,000. It was more than the wife suspected, but something told me it was less than it should be. So, we subpoenaed his bank records.

The bank produced documents to us that included the husband’s loan application and the net worth statement that he provided to the bank. And, you’ve probably guessed the punch line – the net worth statement he provided to the bank included assets that he had not disclosed on the financial statement he provided to us, and the values were higher. In all, the difference was that he showed a net worth on the financial statement provided to the bank that was nearly $2.5 million dollars – increasing the marital estate for the divorce judge to divide by about $2 million!

My client now understands it was to her benefit to make sure we did a thorough job of discovery. Obviously this example (though completely true) is not what usually happens – at least not to this degree. But, the lesson is a good one – make sure that your lawyer does a thorough job of discovery. And, make sure that you let him.