In Texas divorce proceedings, each party has a duty to disclose all community assets. Unfortunately, not everyone plays fairly. It’s not uncommon for one spouse to attempt to hide, transfer, or underreport assets in order to keep more than their fair share. Whether it’s secret bank accounts, hidden cash, cryptocurrency, or business income funneled through third parties, these tactics can have serious legal consequences and courts are empowered to correct the imbalance.
Texas Is a Community Property State but Equity Still Matters
Under Texas law, all property acquired during the marriage (except gifts or inheritance) is presumed to be community property, regardless of whose name is on the title. At divorce, the trial court must divide the community estate in a manner that is “just and right.”
(Tex. Fam. Code § 7.001)
When a spouse conceals assets, they interfere with the court’s ability to make a fair division. In response, Texas courts can reconstitute the estate, award a disproportionate share, or impose other equitable remedies.
What Does “Hiding Assets” Look Like?
Hidden assets can take many forms. Common red flags include:
- Transferring funds to friends, family, or shell companies
- Understating business income or over-reporting debts
- Using cryptocurrency to obscure transactions
- Failing to disclose offshore accounts or investment portfolios
- Deliberately undervaluing real estate or business interests
Sometimes, the spouse may not physically hide the asset, but may refuse to produce documents, delay discovery responses, or give incomplete financial disclosures—all of which may indicate an attempt to conceal assets.
Proving Fraud on the Community
Fraud on the community can be actual (intentional deception) or constructive (when a spouse unfairly deprives the community without full disclosure). Courts look at several factors, including:
- Whether the asset was concealed or transferred without the other spouse’s knowledge
- Whether the transfer served a legitimate purpose
- The size of the transaction relative to the estate
- Whether the spouse who transferred the asset received any benefit
Evidence often comes through financial records, subpoenas, depositions, forensic accountants, and detailed discovery responses. For this reason, it’s critical to work with legal counsel experienced in uncovering and proving hidden assets.
Legal Remedies When Fraud Is Proven
Texas courts strictly guard against fraud on the community. When one spouse proves that the other wasted, fraudulently transferred, or concealed community assets, the court can:
- Reconstitute the estate to reflect what should have been in the community pot
(Tex. Fam. Code § 7.009) - Award a disproportionate share of the existing estate to the innocent spouse
- Enter a money judgment against the offending spouse
- In extreme cases, impose sanctions, award attorney’s fees, or refer the matter for criminal prosecution (e.g., perjury or fraud)
One leading case is Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998). In that case, the husband attempted to transfer community assets—specifically, shares of stock—to relatives without his wife’s knowledge in an effort to place the property beyond her reach. The wife challenged the transfers, arguing that her husband had committed fraud on the community estate. The Texas Supreme Court agreed that when a spouse engages in such conduct, the trial court has broad authority to grant relief, including reconstituting the estate and awarding a disproportionate share to the innocent spouse. The case of Schlueter shows that courts will not allow one party to manipulate or conceal assets in a way that deprives the other spouse of a fair division.
Protect Yourself: What to Do If You Suspect Hidden Assets
If you believe your spouse is hiding assets, do not wait to act. Here’s what to do:
- Tell your attorney immediately. They can issue discovery requests, subpoenas, and potentially seek a court order for forensic review.
- Preserve financial records. Bank statements, tax returns, real estate documents, and even text messages may be useful.
- Consider temporary restraining orders. Courts can freeze accounts or prohibit asset transfers during the divorce.
- Don’t confront the spouse directly. They may further hide or destroy evidence.
Final Thoughts
Texas courts take asset concealment seriously. A spouse who tries to game the system can end up worse off than if they had been honest. By raising the issue early and relying on skilled legal counsel, the innocent spouse can protect their rights and ensure a fair division.
Every situation is unique, and so is the solution. If you want to know how the law applies to your circumstances, get in touch with our team today.