Hunting High and Low: Seeking Assets in Difficult Circumstances

Welcome to the June 2024 edition of our newsletter!  In this issue, we’ll examine the role asset tracing can play in family disputes such as matrimonial or probate actions.

Shades of Grey: Varying Levels of Disclosure for Family Related Assets

When interpersonal friction extends into litigation, or the prospect of litigation, the emotions of the parties involved adds another layer of difficulty.  Whether finalizing a divorce or mourning the passing of a loved one, the collision of passionate emotion and practical matters can be trying on all involved.  When it comes to adversarial components such as one spouse trying to find assets of another, a thorough and dispassionate approach is essential.

Every case varies in complexity and scope.  For example, a hedge fund manager likely will have numerous limited liability companies – or overseas equivalents – through which they manage assets for themselves and their clients.  Often, such high net worth individuals will also establish trusts for the benefit of family members or a favored charity.  In other instances, local laws and regulations will dictate the use of trusts to hold property, as is often the case in California due in part to its broad community property laws concerning marital assets.  Although real property held by such trusts is often a matter of public record, the existence of the trusts themselves often is not, unless they have previously been the subject of discovery in litigation.

Probate and estate actions also present asset-related challenges.  Although a last will and testament is typically drawn up prior to a person’s death – often many years before – in many cases such filings are not admitted to a probate or surrogate’s court until after a death, and then only if a creditor seeks repayment of a debt or otherwise contests part of an estate’s distribution.  The vendor seeking payment can be of any scope – in prior research we have seen an unpaid cable bill of less than $100 serve as the basis for a probate action petition.

Thorough due diligence is paramount in all such situations, as divorcing spouses may seek to transfer assets to friends, paramours or business associates temporarily as a means, however unsophisticated, or keeping assets out of their estranged spouse’s reach.  With respect to probate actions, once made public a review of the inventory — and understanding of who the party seeking to administer the estate is — are both key to helping clients assess the risks involved with collecting a debt.