One of the most important aspects of my work is that of lifestyle analysis. We prepare financial documents, compare income statements & balance sheets, analyze financial disclosures & determine need versus ability for spousal support.
During this discovery phase is when I most often determine if a spouse is trying to hide assets. Hiding assets during a divorce has major implications on both proper estate division & spousal maintenance. Additionally, if the assets are income-producing, the spouse receiving support may receive a lesser amount than what he(she) is entitled to.
Some of the most common personal and business assets hidden during a divorce are:
- Offshore bank accounts
- Real estate that doesn't produce income
- Rare livestock
- Assets transferred or sold to related parties & entities
Additionally, there are numerous ways someone may try to hide assets. Pay special attention to the following situations:
Cash is really easy to hide and lacks a paper trail. Thus it is one of the most common methods someone might use. Cash could be hidden in a house, safe, safety deposit box or with trusted friends & family.
Using cash to purchase assets. Pay attention to large cash distributions as these could be red flags for major purchases of valuable items which could be sold at a later date. Additionally, the cash could be used to open secret accounts or purchase income-producing assets.
Purchasing overlooked or undervalued items
Vehicles, real estate and other large obvious purchases could be significant red flags in your divorce. Other items could be art, expensive furnishings, jewelry or electronics. Quite often these items are overlooked in discovery. Pay special attention to your household items as this may pave the path towards an equitable division of your estate.
Paying down loans
At first, it may not seem all that bad. But reduced cash in exchange for higher equity in certain assets, such as real estate, can easily be overlooked.
Does your spouse own a small business? Quite often money can be hidden in the form of business expenses & payroll liabilities. Money can be transferred in the form of shares, payroll, barter, and many other ways.
Where do I start?
If you're facing divorce, make sure you properly identify and classify your assets which should include:
- Bank accounts
= Investment & brokerage accounts
- real estate
- Personal possessions including household furnishings
- Tools and equipment
- Whole life (or Universal, Variable, Indexed) life insurance
- Lines of Credit
- Credit Cards
Also, you must review your tax returns. Tax returns, income statements & balance sheets tell a significant story about your income & assets. Last, make sure you have access to both yours & your spouse's credit reports. This will tell you about any recent credit activity.
If you don't know where to start, consider hiring a professional who understands both taxation & divorce.