Divorcing couples typically have a lot of contention over money. In many cases, this is the one issue that prevents couples from reaching an amicable divorce settlement and keeps divorce cases in court for years. Usually, there is a great deal of money, property, businesses, or other assets at stake. All too often, the thought of having to cash in these assets to split in a divorce is enough to make one spouse commit financial infidelity.
Financial infidelity is defined as one partner’s secretive act of spending money, having separate credit cards or accounts, or incurring debt without the other partner knowing. In divorce proceedings, it is common to employ an accountant to uncover financial infidelity. On the surface, it may be hard to uncover such behavior, but taking a closer look at certain transactions can shed light on what has been happening behind the scenes. Here are several way in which a spouse can hide assets:
- Overpaying the IRS – a spouse could overpay income taxes and instruct the IRS to use the overpayment against future tax payments;
- Accruing commissions – a spouse could instruct his employer to withhold paying out commissions until a later date;
- Forgoing promotions and raises – a spouse could ask for a promotion or raise to go into effect after a divorce is finalized;
- Making large purchases – a spouse could shield assets in a large purchase, like a piece of artwork or an antique. The spouse could also have this piece undervalued to shield more money;
- Transferring funds – a spouse could transfer funds to a friend to pay a fictitious debt or into a pension or 401(k) plan to cloak assets as valid outlays of money;
- Setting up secret accounts – a spouse could open up a separate account of which the other spouse is unaware. The spouse could even go as far as opening an account in another person’s name to shield assets; and
- Protecting assets through owning a business – for spouses that own a business, a number of assets can be protected behind the corporate entity. There are also a number of things a spouse can do to reduce the value of the business so it would affect the distribution of assets during the divorce.
Finding a Paper Trail
In many cases, a forensic accountant is necessary to help uncover everything a spouse has tried to hide. A forensic accountant can collect information from bank statements, tax returns, and investment account statements, along with other personal information and a lifestyle analysis to determine if assets have been hidden and how they have been concealed.
In Illinois, if a spouse is found to be hiding assets, there are several ways they could be held accountable. These include: the offending spouse being held in contempt of court; the judge awarding the other party the percentage of the asset that would have gone the offending spouse; the offending spouse’s share being forfeited,; and the offending spouse being sanctioned.
As if a divorce is not already complicated enough, uncovering assets that have been hidden creates an additional layer of challenges with which to contend. If you are considering a divorce and believe your spouse has been hiding assets, you need an experienced and knowledgeable attorney to help you navigate the divorce process. Contact our experienced DuPage County divorce attorneys for a consultation.