How To Spot Hidden Income And Assets In Divorce And Family Law Cases
Most People have no idea how common it is for parties in family law and divorce litigation to hide assets and income. Here is a detailed list of the ways they try this and how to spot them
One very common issue that divorce attorneys deal with in family law litigation is the situation where one spouse believes the other is hiding assets or hiding income. The means by which parties to litigation try to conceal assets and income range from very basic to very sophisticated depending on the facts of the case.
The two most common reasons people have to try to hide assets or income are to avoid splitting an asset in a divorce and to manipulate support payments in their favor. If your attorney is not paying close enough attention to the discovery in your case then you may not realize that the other side is hiding assets or not disclosing income.
This type of dishonesty is very common and I want to be clear that this article is in no way meant to teach people how to hide assets in family law cases in fact I earn a living by spotting these types of behaviors and bringing them to the attention of the court. You should always disclose all assets and income in your case if you don’t you face some harsh treatment by the court.
Precious metals. These days you don’t need to watch a lot of T.V. to have noticed that investing in gold and silver is a very hot trend right now especially as investors have very little trust in the stock market. With a few clicks of a mouse investors can purchase gold and silver bars in a wide array of sizes to be delivered right to their door within a day or two.
There are practically no reporting requirements for purchases of gold and silver under $10,000 which means that there may not be much of a paper trail, aside from the original purchase, by which to verify the existence and exact amount of these types of assets.
Another reason precious metals can be easily concealed in a divorce is the ability to hide the physical asset. A safe full of gold and silver bars can be placed at a friend or family member’s home, buried in the back yard, or placed is a safety deposit box and be very difficult to locate and to determine an accurate value. Sometimes the best and only way to show the existence and quantity of this type of asset is to go back through the bank statements and track the original purchase.
Stock certificates. When people own stocks in the traditional manner they are not hard to confirm existence by way of looking at tax returns for capital gains and/or dividends.
Many people do not realize that stock ownership can be done by way of holding a paper certificate which means that there are many ways in which to hide the existence of this asset unless your attorney knows exactly where to look.
Cash in a safe. Another issue that divorce attorneys see very often is the scenario where the parties had a large amount of cash or other valuables in a safe at home or in a safe deposit box. This is far more common than most people think especially in households of affluent, self employed people, and people who distrust banks.
The problem arises here when one of the divorcing parties claims that the other removed the cash from the safe. This will usually devolve into a situation where the parties are each aggressively accusing the other of taking the cash. The frustrating reality of this set of facts is that it is nearly impossible to prove, in most cases, which of the parties actually took the cash.
Even when one of the parties produces a photo of the cash sitting in the safe it only compounds the problem as it causes the other party to argue even more that the party who took the photo was the last one to see the money and that they must have removed the asset.
Real estate owned by business. A tactic sometimes employed by sophisticated self employed parties to divorce occurs where real estate is purchased in the name of the business. For this reason it is very important that attorneys and their clients do proper discovery to obtain and pay close attention to corporate tax returns to determine whether there is evidence contained in the tax return of real estate or any other types of valuable assets that may be concealed in the name of the business.
Unreported or Hidden Income
Cash Employment. This is the most common form of employment where lawyers see people try to hide or understate their incomes. These jobs can be as barbers, waiters, bar tenders, exotic dancers, lawn service providers, handy men, hair dressers, and any job where a substantial portion of pay is in cash.
While common, it can be hard to prove income for these types of jobs and the best way review the persons stated expenses in their financial affidavit such as monthly rent, utilities, car payments, payments to creditors, and other expenses. Total up these monthly expenses and you can typically argue that they at the very least earn enough to pay those bills.
Gift Card Scam. This is a less sophisticated practice where the self employed party seeking to conceal income will go somewhere such as their office supply store and regularly buy up gift cards for personal purchases. This creates the illusion of less personal income and thus reduces the individual’s exposure to child support or other types of support.
Personal Expenses on Business Credit Account. Another less sophisticated approach to hiding self employment income is where the self employed individual makes personal purchases on a business credit account. The goal here is, similar to the gift card scam, to give the appearance of less personal income.
This approach is often effective when these self employed scammers are dealing with the government in avoidance of taxes, however, savvy divorce lawyers can easily shed light on this type of conduct and show the judge the true income level in these cases.
Pay Taxes Forward. Often in divorce cases one of the parties will prepay their taxes making it appear that they have less income than they actually do. This is why it is important to examine pay stubs, W-2 forms, and bank statements to ensure that you have accurate income figures for the other side.
Unusually High Retirement Contributions. Many lawyers make the mistake of thinking that review of an opposing party’s tax return will provide an accurate account of income. The problem with this thinking is that the tax returns will not always show the total income amount earned before retirement contributions came out. This is why it is important to review the W-2 statement and pay stubs very carefully.
Countless other conduct to look for. The list I have provided here is only the tip of the iceberg. There are many more ways that crafty divorce litigants try to hide income and assets such as plainly not disclosing assets on financial statements, placing assets in the possession of friends or family members, deferring bonuses until after a divorce, holding onto paper checks until after the divorce, and many others.
One big indicator for someone who is hiding income is where the party claims to have no money or not enough money to survive, but, they have no debt. This is because the fact is that people who are in the habit of hiding assets and income do not like having debt. Further, if someone does not earn enough to survive then there will usually be some measure of debt to go along and if there is not then you should pay very close attention to the items listed here in this article.
The best way to make sure that you do not fall victim to these types of behaviors is to try to maintain a basic awareness of your family finances and make sure that your lawyer knows how to look for these types of manipulative behaviors.
Sean Smallwood is a divorce and family law attorney located at 390 N. Orange Ave. Suite 2300, Orlando, FL 32801 407-574-6155