Hiding assets during a divorce is sneaky, unethical and illegal –but it happens much more frequently than most people think.
Couples today have complex financial portfolios. Your list might include things like your marital residence, rental and/or vacation properties, bank and brokerage accounts, retirement and pension plans, stock options, restricted stock, deferred compensation, life insurance with cash value, perhaps a business or professional practice . . . and potentially much more.
Hiding assets can be easy to do – especially if one of the parties handles the finances and the other spouse is unaware, uninvolved, uniformed and perhaps even uninterested in the details of the family finances.
One of the benefits of Collaborative Divorce is that there is usually a CDFA™, Certified Divorce Financial Analyst on the team to assist couples in understanding their financial situation. All information is shared within the team so if the Financial Expert who is trained to look for inconsistencies suspects something, he or she will bring it up. A lifestyle analysis is often conducted during the divorce process to establish a clear understanding of the standard of living during the marriage.
Not only can lifestyle analysis be used to help determine spousal maintenance and child support, but it also serves as an invaluable tool to help determine if there could be hidden assets and/or income. When we analyze a couple’s marital living expenses and connect those expenses to all known sources of income, assets and loans, it is fairly easy to see if there is a mismatch. If the amount of living expenses exceeds the amounts of known income, assets and loans, a giant red flag appears! Discrepancies like this are one telltale sign of concealed income and/or assets. The goal of a lifestyle analysis in essence, is to determine if the amounts of reported income, assets and liabilities were sufficient to fund their marital lifestyle.
Here are some tell – tale signs your spouse may be hiding assets:
1. Bank and other financial statements are no longer being delivered to the home. You may be told by your spouse that they have gone “paperless” but they are not sharing the code for you to get in and check the accounts.
2. A sudden decrease in salary – your spouse may be deferring their salary until some time in the future – or they may be having commissions and bonuses held until after the divorce is final.
3. Overpayments to the IRS with refunds to one party after the divorce is final. Also there can be underreporting of income. If it is not reported, it can’t be used in financial analysis.
4. No new clients – but new employees. When one spouse owns a business – there can be many ways to “cook the books”. They may pay a friend or family member who does not work in the business but who agrees to hold the money until after the divorce is final. I have seen situations where a doctor has sold his practice for a quarter of its value only to buy it right back after the divorce.
5. Secretive or defensive behavior. If your spouse is defensive, controlling or argumentative about the family finances- they may be hiding something. If your intuition tells you something is not right then there is probably something going on.
6. Creating a phony debt. I have seen people collude with family members and friends that a debt is owed to establish a bogus loan or payments that can be returned after the divorce is final.
7. Stash money in a safe deposit box, somewhere in the house or elsewhere. Think through your spouse’s recent habits and activities. Does anything lead you to believe he/she is hiding assets in actual cash?
The list goes on and on . . . and it certainly begs the question: Why would a person do any of these things? There are many possible reasons. A partner may fear not having enough money after the divorce or maybe they feel they can get revenge for an infidelity. Maybe they are just greedy and feel they deserve it! Whatever the reason, hiding assets, income and debt is not only unethical; it’s also illegal and subject to severe penalties if discovered. Having a CDFA™ involved with help to minimize this possibility.
Janet Baker, CDFA
Divorce Financial Consultants, LLC.