According to Beau Dietl & Associates, asset searches play a critical role in several legal proceedings, such as:
- Collecting awards and judgments
- Objections to Trusts and Estates
- Contested divorces
- Bankruptcy
- Subrogating claims
- Embezzlement
People often hide assets illegally to protect their personal and financial interests. Identifying these assets requires a comprehensive investigation, and in some cases, it is not only important to locate the assets but also to prove that the person in question had intent to hide them.
Here are three tips for proving intent to hide assets in court:
- Identify Badges of Fraud
In legalese, “badges of fraud” refer to circumstantial evidence of an illegal transfer of assets. Identifying the badges of fraud that relate to a particular transaction can help prove that a person had intent to hide assets. Badges of fraud include:
- How the recipient benefited or used the property in question
- Whether a threat of litigation existed before the defendant made the transfer
- The recipient was a family member or had an insider relationship with the defendant
- If a debtor was in a financial situation that would motivate a fraudulent transfer
- The chronology of events is consistent with fraudulent behavior
- The transaction was conducted in secret
- The transfer did not follow the usual course or method of business
- Investigate Nominee Ownership
One relatively easy way to hide assets is to employ a nominee to hold them and make purchases. The nominee possesses the bare legal title to an asset. For example, a spouse can transfer a property to a nominee in order to hide it. To recover these assets, which are usually property, you will have to prove that the owner deliberately transferred the asset in anticipation of a legal battle, and that the nominee received the asset without paying for it in full or at all.
- Evaluate Trusts
Trusts are among the most common avenues for hiding assets. In most cases, people hide assets through trusts for one of several reasons, the most common being:
- To depreciate private assets, such as a residential property
- To make deductions for personal expenses
- To share income with several entities
- To hide the true value of income for reporting purposes
- To avoid filing tax returns
- To use the bank secrecy laws of tax haven countries to protect transactions
- To send income overseas without reporting it
If someone abuses a trust to hide assets, it is still possible to recover those assets from the trust. There are several legal avenues for asset recovery in these cases, such as proving that a nominee owner holds the trust or that the trust received fraudulent transfers of assets.
