Is Your Spouse Hiding Assets?

One often wonders once a Petition for Dissolution has been filed, or perhaps before it is filed, “Is my spouse hiding something?” It is all too common during the pendency of divorce for one spouse to believe the other is undervaluing or hiding assets in order to avoid their disclosure or reveal its true value at the time of settlement. Such cases usually require the use of a forensic accountant to investigate the parties’ finances and find the answers to the foregoing questions. The forensic accountant, when hired for these purposes, can track changes in spending habits of the parties prior to the date of separation and trace the parties’ financial habits, breaks in those habits, as well as determine cash flow.

For instance, the accountant may want to determine whether the managing spouse of a community business is removing business assets. The following is a list of common questions a forensic accountant may ask regarding a community business:

∙ Who are its customers?

∙ Has the level of business from these customers been stable?

∙ What products or services does the company provide?

∙ How do trends affect the company’s income?

∙ Have major clients been leaving the company for a single competitor or a new company?

∙ Have there been changes from year-to-year balance sheets? And in main areas?

Answers here may provide valuable information. It could be determined that the managing spouse has set up a competitive business which has removed accounts from the community business in order to reduce its value at the time of settlement.

Further, a forensic accountant may look at statistics from similar companies. Companies with similar business levels will have similar expenditures. If one (business) is spending twice what the other (similar business) spends for items, this could be a “red flag.” The business owner/managing spouse may be removing assets from the community business and covering his/her tracks via “creative bookkeeping” practices.

Lastly, you must remember if you are the non-managing spouse and believe your husband or wife is hiding, removing, and/or undervaluing assets, it is important you gain full knowledge of all the community assets, liabilities, income and expenses whether or not the Petition has already been filed. Thus, it is important you have access to tax returns, as well as bank, investment, retirement and other account records. These can often be located online. If you are already in the middle of a dissolution and you find something out of place or an account that was not disclosed, it may be time to contact a forensic accountant to assist you and/or your attorney to investigate your finances.