by Jeff Landers, CDFA
from www.forbes.com/forbeswoman 3/14/2012 @ 10:36AM
Could your husband be hiding assets? And if he is hiding assets, does that mean you won’t get the divorce settlement you deserve?
If you’re a woman going through divorce, you need to ask yourself those two tough questions, and while there’s obviously no way I can know the answers that apply in your case, I CAN tell you this:
Hiding assets during a divorce is sneaky, unethical and illegal –but it happens much more frequently than most women expect.
Think about it. Many couples today have complex financial portfolios. (Your list might include 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 probably much more, too.) Even in the best of times, it can be extremely difficult to keep track of all these moving parts. When a couple decides to divorce, that task can get exponentially more complicated.
Unfortunately, as you go through the divorce process, your husband may try to take advantage of the situation by hiding income and/or assets. How can you tell? Are there steps you can take to help ensure you have an accurate accounting of your family finances?
For starters, be on the lookout for certain telltale signs that your husband has some dirty tricks up his sleeve. And, make sure you work with a qualified divorce team to help ensure that you have the professional expertise and support required to receive a fair settlement.
(For example, in many divorces, a lifestyle analysis will be conducted by your divorce financial planner to establish a clear picture of your standard of living during the marriage. Not only can this lifestyle analysis be used to help determine alimony and child support, but it also serves as an invaluable tool to help determine if there could be hidden assets and/or income. The reason is simple. Once you analyze the 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.)
After that, you also need to be fully aware of the most common unethical practices husbands use. Here is a small sampling of some of the tactics that can come into play. If your husband wants to undervalue or disguise/hide marital assets he may:
Purchase items that could easily be overlooked or undervalued. Maybe no one will notice that expensive antique/carpet that’s now at his office? Were you wondering why he recently made several significant additions to his coin/stamp/art collection?
Stash money in a safe deposit box, somewhere in the house or elsewhere. Think through your husband’s recent habits and activities. Does anything lead you to believe he is hiding assets in actual cash?
Underreport income on tax returns and/or financial statements. If it’s not reported, it can’t be used in a financial analysis.
Overpay the IRS or creditors. If your husband overpays, he can get the refund later, after the divorce is final.
Defer salary, delay signing new contracts and/or hold commissions or bonuses. This sneaky trick means this income won’t be “on the books” during the divorce proceedings.
Create phony debt. Your husband can collude with family members and/or friends to establish phony loans or expenses. Then, he can make payments to the family members or friends, knowing that he’ll get all the money back after the divorce is final.
Set up a custodial account in the name of a child, using the child’s social security number. He could also use his girlfriend’s social security number, in which case it might be difficult to locate the account.
Transfer stock. Your husband may transfer stock/investment accounts into the name of family members, business partners or “dummy” companies. After the divorce is final, the assets can be transferred back to him.
The list goes on and on . . . and it certainly begs the question: Why would a husband do any of these things? There are many possible reasons. He may fear not having enough money after the divorce. He may feel he’s getting revenge for an infidelity. Maybe he’s just greedy and feels that he deserves it! Whatever the reason, hiding assets, income and debt is not only unethical; it’s also illegal and subject to severe penalties IF discovered.
But even so, the burden of proof is often on the spouse with less financial resources (typically the woman) to prove any such unscrupulous behavior. That’s why women must play it smart. They must become knowledgeable and keep their eyes wide open. And ideally, they must be financially aware and involved from the onset of their marriage. Consistent involvement from the get-go is critically important for two reasons: 1) If your husband has been hiding income/assets over years or decades, it will become virtually impossible to trace/find them, and 2) Being financially aware and involved is in the foundation of happy marriages where a divorce is not even a possibility. Should your husband become incapacitated or die, a working knowledge of your assets/liabilities and income/expenses and where all your accounts and important documents are located will be vitally important.
As Miles Mason, Sr., JD, CPA, founder of Miles Mason Family Law Group, PLC, in Memphis, Tennessee, points out, women who have a working knowledge about their family finances can help identify changes that may signal a husband’s misdeeds.
“To detect schemes using financial statement manipulation, timing is important. Benchmarks are key,” Miles explains. “At one point in time, the target was not scamming, the marriage was solid, and generating income was a good thing. Finding that benchmark point in time helps figure out ways to “triangulate” what is truth and what is deception. Red flags describe noticeable changes in the financial status quo. Somewhere between the cause and effect, the red flag sticks out.”
(Stay tuned. Miles, who is the author of The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers and I will explore many of these issues in more depth in next week’s blog post.)
But please, don’t misunderstand. I’m not recommending that you snoop. Scrolling through your husband’s private emails, listening to his calls or voicemails, or anything of that nature can land you in serious legal trouble, too. (You’ll need to consult with your divorce attorney so you understand precisely what is –and what is not –permissible under the laws in your state.)
Rather than snooping, you’ll need to find legal ways to protect yourself. If you believe your husband has financial dirty tricks up his sleeve start organizing your personal finances and important documents under the guidance of a qualified divorce financial strategist. You’ll need to Think Financially, Not Emotionally® so you can keep your finances intact during the divorce proceedings while planning for a secure financial future, as well.
Jeffrey A. Landers, CDFA™ is a Divorce Financial Strategist™ and the founder of Bedrock Divorce Advisors, LLC (http://www.BedrockDivorce.com ), a divorce financial strategy firm that exclusively works with women across the nation, who are going through, or might be going through, a financially complicated divorce.
He also advises happily married women who have seen their friends blindsided by a divorce initiated by their husbands and wonder (wisely) how financially vulnerable they’d be in that situation. Jeff developed the nation’s first Just in Case(TM): Secure Your Financial Future, a one-hour program, which quickly shows married women how to be prepared in the event of a future divorce with immediate, practical steps. He can be reached at Landers@BedrockDivorce.com.
All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.