During a divorce, spouses are legally required to disclose all assets, income, expenses, and debt. Unfortunately, some just can’t resist the temptation to lie or cheat in order to keep more for themselves. Read on to learn how you can beat the cheat who is hiding assets during divorce – by yourself and with expert help!
There may be money squirreled away by a sneaky spouse, or other valuable assets you haven’t even thought of during your divorce. We’ll go over places you can look for signs that your spouse is hiding assets during divorce and tell you who to call to look for those hidden assets.
Forensic Accountants are Asset Detectives
Just like forensic examiners that look for clues in a murder investigation, Forensic Accountants are qualified to examine financial and business records in a divorce, and give expert testimony in court about assets hidden during divorce.
What the Expert Had to Say
Melissa Loughlin-Sines, a Manager in the Henry & Horne Litigation and Valuation Services Group, is an expert at finding hidden assets during a divorce. With more than 20 years experience in accounting, she is often called upon to conduct fraud investigations and other forensic accounting services.
I reached out to Loughlin-Sines to find out more about her role as a forensic accountant when one spouse suspects the other is hiding assets during a divorce.
Are hidden assets an issue you encounter a lot?
Not a lot, but it does happen – probably not as much as some spouses think it does.
Should spouses worry about it?
Spouses should be aware of the marital financial position. If one spouse is not willing to communicate about finances with the other spouse or suddenly becomes secretive, then the other spouse should be at least a bit concerned.
It does happen, but more likely there has either been mishandling or overspending by one spouse. There may be issues with gambling, spending on an extramarital affair, etc.
If a spouse is hiding assets during divorce, how is it typically done? Undisclosed bank accounts? Hiding cash?
It could be bank accounts, cash, or even transfers to accounts in the names of other persons. If the spouse owns a business, it could be held in a business account or transferred to another company name. It could even be expenses run through the business.
What are some telltale signs that a spouse is hiding assets during divorce?
Communication. If the level of communication has changed or if one spouse has always been less than forthcoming with financial information.
Changing patterns could also be a sign. If cash was always available to the marital community but suddenly during divorce proceedings, one spouse is claiming to be broke.
If you suspect your spouse is hiding assets, are there any steps you can take on your own to uncover them? Or is it better to hire a professional?
Review bank and credit card statements for unusual activity, review tax returns for interest and dividends from unknown accounts. Depending on the number of accounts, years suspected of hiding, etc. it can be very time-consuming.
If the proceedings will be likely to go to court or is at all contentious, it is better to have an independent professional prepare an analysis.
As you can imagine, divorce is very personal, and sometimes the parties involved get so caught up in what they think happened that they don’t see what is right in front of them. There may be a legitimate explanation that they cannot see on their own.
Can you give an estimate of what it might cost to hire a pro?
It is very hard to estimate costs because of the various factors including the number of accounts, years of suspected transfers, etc. It also depends on the parties and their attorneys. Fees could range from $3,000 to $50,000 depending on scope, analysis, etc.
Talk to your attorney about the best way to proceed. I have seen people spend a lot of money to recover very little. On the other hand, I once worked with a client who was convinced her husband was hiding money. She spent over $50,000 with the firm I was with at the time, but she was able to settle for over $3 million, which was way more than half of the marital assets.
How Forensic Accountants Work
Here are just a few of the techniques that a forensic accountant may use to determine whether a spouse is hiding income from the court:
- Compare bank deposits of a business owned and operated by the spouse to the amount of revenue reported on the tax return of the business. Deposits significantly higher than revenues reported on the return may be an indicator that money is being hidden. Alternately, they may be legitimate, such as funds from loads to the business.
- Compare several years of profit and loss statements to note whether revenues are showing dramatic decreases or expenses are showing unusually large increases from year to year.
- Determine whether personal expenses are being run through the expense account of the business.
- Analysis of individuals and businesses to whom checks are written out of the business. Are they legitimate? Or could they be relatives or related businesses of which the other spouse is not aware?
- Check internet sites for other businesses in which the spouse has an ownership interest.
- Calculation of gross income based on the type and amount of monthly expenditures reported on the Statement of Financial Condition provided by the court
- Review of business credit card statements for non-business expenditures
Hidden Assets in Plain Sight
Sometimes, certain assets are forgotten or overlooked in the divorce process while the parties focus on larger community assets such as real estate, retirement accounts, and the family business. Some easily forgotten assets include:
- Stock options
- Vacation or bonus pay (earned but not yet paid)
- Tax refunds
- Contingent settlements from lawsuits or insurance companies
- Prepaid expenses including property taxes, insurance, and tax estimates or overpayments applied forward from the previous year
- Season tickets
- Timeshare units
- Custodial/educational accounts for children
- Valuable coins, artwork, and collectibles
- Cash surrender value of life insurance
Some of these assets may be difficult to value, but working with a qualified forensic accountant and valuation analyst can ensure that these assets are properly disclosed, valued, and divided in the divorce settlement.
What You Can Do Now To Look For Hidden Assets
Worried your spouse might be hiding assets but you’re not yet sure whether it’s worth it to call in a forensic accountant? One simple step you can take is to review your most recent jointly-filed tax return. Look out for these items that may indicate the presence of hidden assets:
- Look at real estate taxes and mortgage interest deductions on Schedule A for any undisclosed properties
- Look at Miscellaneous Itemized Deductions on Schedule A for safe deposit box expenses for hidden assets stored in a safe deposit box
- Review the names of all payers of interest and dividend income on Schedule B for any unknown accounts
- Look for a foreign bank account disclosure which could indicate hidden assets in offshore accounts
- Review gains and losses on Schedule D for an undisclosed liquidation of stocks and securities
- Review all S-Corporation and Partnerships reported on Schedule E to see whether all ownership interests have been disclosed
Do you suspect your spouse is guilty of hiding assets during divorce? Have you considered hiring a forensic accountant? Please share your experiences and concerns in the comments below!
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