Legal Definitions - secret equity

Secretion of Assets

Secretion of assets refers to the deliberate act of concealing property or wealth, typically with the specific intent to prevent an opposing party in a legal dispute or a creditor from accessing those assets. This action is usually taken to avoid financial obligations, such as paying a debt, satisfying a court judgment, or dividing marital property in a divorce.

• Example 1: Divorce Proceedings

  During a contentious divorce, one spouse, knowing that their assets will be subject to division, transfers a significant portion of their investment portfolio into an undisclosed offshore account. They also "sell" a valuable antique collection to a close friend for a nominal sum, with an unwritten agreement that the friend will return the items after the divorce is finalized.

  This illustrates secretion of assets because the spouse is deliberately hiding property (the investment portfolio and antiques) with the intent to defraud their adversary (the other spouse) by making these assets unavailable for equitable distribution in the divorce settlement.

• Example 2: Avoiding Creditors

  A small business owner faces imminent bankruptcy and owes substantial amounts to various suppliers and a bank. To protect personal wealth, the owner quickly transfers the title of a luxury vacation home, which was purchased with business profits, into a trust established for their children. They also divert incoming payments from clients into a newly opened personal bank account that is not disclosed to the bankruptcy court or creditors.

  This is an example of secretion of assets because the business owner is intentionally hiding property (the vacation home and client payments) with the purpose of defrauding creditors (suppliers and the bank) by preventing them from claiming these assets to satisfy the company's outstanding debts during bankruptcy.