How to Avoid Getting Ripped off in a Divorce - Duncan Calder

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How to Avoid Getting Ripped off in a Divorce -
Duncan Calder
Duncan Calder
DEALING WITH ATTEMPTS TO HIDE VALUE Could your
spouse be hiding assets? Hiding assets during a
divorce is sneaky and unethical but it happens
much more frequently than most people expect.
Concealing money, property, and liabilities is
illegal, but that doesnt always act as a
deterrent.
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If you have always left money matters to your
spouse and are now either considering divorce or
in the middle of one, financial infidelity can
affect what assets you receive and how much you
are awarded in alimony and child support. Here
are some ways that your spouse could potentially
hide money and assets from you. ? Skimming cash
from the business. This is especially prevalent
wherever cash transactions can happen. ?
Underreporting income on tax returns and/or
financial statements. If its not reported, it
cant be used in a financial analysis. ?
Delaying signing business contracts until after
the divorce in order to lower the value of the
business during the valuation process and also to
present the business as being in a vulnerable or
declining financial position for the purpose of
reducing spousal maintenance or child support. ?
Overpaying creditors including the taxman. He/
she can get the refund later, after the divorce
is final. ? Creating phony debt or transferring
assets. Your spouse can collude with family
members and/or friends to establish fake loans or
expenses knowing that all the money will be
returned after the divorce is final.
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? Paying money from the business to a trusted
third party such as the spouses father, mother,
girlfriend, boyfriend or close associate. ?
Deferring income entitlements such as bonuses and
payments from debtors until after the divorce
settlement is negotiated. The likelihood of
uncovering these various schemes increases
dramatically IF you use of a skilled forensic
accountant with substantial experience in
business valuation and accounting. Once the
forensic accountant analyses a couples marital
living expenses and connects those expenses to
all known sources of income, assets and loans, he
can 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. Remember
- At one point in time, your spouse was not
scamming the marriage was good. Finding that
benchmark point in time is one way a forensic
accountant will figure out ways to triangulate
what is truth and what is deception. VALUATION
ISSUES The most significant asset in a marital
estate is often the family business. A fair
resolution hinges on its accurate valuation. That
can be achieved by working with an experienced
valuation expert who understands how courts
handle challenging divorce issues and the
application of established, appropriate valuation
practices.
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The problem of different knowledge levels One
spouse may often have had little to do with the
business, will often either have a grossly
inflated idea of its value, or massively
undervalue it. Due to their lack of involvement,
they realistically do not know what the business
is truly worth. Some may attempt to assess the
value of a business based purely on the evidence
of ongoing contracts, and while it can be
tempting to say there is no good will in the
absence of these contracts, this often is not the
case. This is why an expert valuation is required
to assess the true value of the
business. Businesses can also be used to hide
money. If one of the parties retains the business
it can become tricky because they can potentially
manipulate their income, sometimes through
increased expenses, to dramatically reduce child
support payment obligations. Even if a business
may not be valuable to sell, it can still be a
valuable asset because it is likely to deliver an
income. Business valuations are usually
contentious during a divorce. The person who
wants to keep the company puts a low value on it
to minimize the cost to buy out the other
spouses interest. The person who is not keeping
the business wants a high value to maximize the
amount of buyout received. Spouses rarely agree
on the value of a business.
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Courts are aware that the profit and loss
statements are usually less than accurate in a
small business because of things like personal
expenses masquerading as business expenses,
discretionary expenses, and business perks. The
divorce court will consider the amount of money
the couple or family took out of the business as
income, as well as personal expenses, perks, and
other items. Sometimes it is worth more to the
spouse who does not get the business to adjust
the value of the business a little lower in
exchange for bumping up the income of the other
spouse to increase the alimony. The difference in
alimony can more than offset a lower business
interest buyout. There can sometimes be
legitimate reasons for the reduction in
performance (and hence value) of a business. The
emotional and financial burden created by divorce
can impact an owner's ability to manage the
business and adversely affect productivity,
profitability, and employee morale.. FIGHT,
NEGOTIATE OR JUST CONCEDE? Collaborative divorce
tackles divorce outside of the courts so that
agreements can be reached around a conference
table and thus be resolved with more dignity and
respect. By the end of the divorce trial, spouses
can become enemies - Litigation makes people be
mean to each other. People are raiding their
retirement accounts just to pay for divorces
Going to court can be more expensive, more time
intensive and corrosive for children.
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IGNORANCE IS NOT A VIRTUE If you have ever been
concerned with marital finances before, now is
the time to get involved. Dont accept the
financial disclosures of your future ex at face
value search the records for joint holdings and
if necessary get advice from a financial advisor
and your attorney. Its critical that you have an
experienced divorce attorney on your team to help
you spot and resolve any attempts by your spouse
to conceal money in order to gain a better
settlement. COSTS OF THE PROCESS ARE INEVITABLE
BUT CAN BE MANAGED Lawyers charge by the
hour. The court system is notoriously slow. These
two factors can create significant
costs. Divorce is going to take longer and cost
more than you ever imagined. It is going to be
more emotional and more difficult than you want.
If you know that from the start, and you dont
expect it to be fast or cheap, you will be way
ahead of the game. The burden of proof is often
on the spouse with less financial resources
(typically the 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.
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Even if your spouse has been kind, considerate
and respectful, dont assume that those character
traits will carry through to the divorce process.
If you want to come away from your divorce with
an equitable settlement you need to anticipate
how your spouse will choose to defend his/her
position during the process. And, whether or not
the process will mean a drastic change in
personality traits. Just because your spouse was
not aggressive during the marriage doesnt mean
they wont be during divorce. BULLYING If your
spouse was the one with the power during the
marriage, divorce isnt going to change him/her
into someone willing to give up their power. If
anything, divorce will make them more relentless
when it comes to retaining both financial and
emotional power over you. The more anxious you
are to get it done, the more willing you will
become to give your spouse anything and
everything, just to get your divorce over with.
There is something very sad in caving in to
conclude a settlement quickly to find that in 12
months time, you resent the compromises you have
made. The difficulties created are worse if the
ex is toxic or narcissistic. Don't be
intimidated by your ex's behavior. You will go
into divorce settlement negotiations with your ex
on the same footing. You both have the same
rights. Don't allow yourself to buy into threats
about "taking the children" or, "leaving you
destitute." An angry ex likes to intimidate by
threats. Don't reply to threats! Take them to
your attorney and let him/her deal with your ex.
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You cant control your spouse. Even if you were
able to control your spouse during your marriage,
once you start down the road of divorce you can
kiss any thoughts of control good-bye. If your
spouse is telling you that you are never going to
get a dime in the divorce, or that you are a
home-wrecker and your kids are going to hate you
forever, or any one of the thousand other
horrible things that angry spouses yell at each
other when they are hurt dont listen! Hang up
the phone. Leave the room. This is not productive
conversation GENERAL ISSUES With the ubiquitous
nature of social media such as Facebook and
Twitter, it is also important to remain
professional online. If possible, keep all the
details of your divorce and separation agreement
off the Internet. If you do make any posts
referencing your divorce or soon-to-be ex-spouse,
avoid venting, ranting, or name-calling. These
posts can easily reach your spouse or his or her
attorney and be used against you in
co UNCOVERING YOUR SPOUSES RUSES TO RIP YOU
OFF How can hidden assets, hidden sources of
income or understated income come to light during
divorce proceedings? ? Forensic accountants are
routinely engaged in divorces to look for these
things such as unreported income and under the
table cash. How are they going to find that? o
Looking at cash flowing out of business accounts
or into private accounts
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o A good forensic accountant is going to be
analysing all sources of business income and look
for examples of increasing the expenses or cash
outflows of the business during the post
separation and divorce period to decrease
business profitability in an attempt to minimise
the marital settlement. The ATO is also likely to
look at these areas of misreported or
underreported income. They are going to ask about
cash transactions, cash on deposit, asset and
share transfers (with and without
consideration). o If the Forensic Accountant
asks questions in a court context or pursuant to
an ATO investigation, the spouse may be forced to
commit perjury in order to conceal the actions
taken to artificially (and temporarily) reduce or
shift the value of a business DEALING WITH A
SPOUSE WILLING TO TELL LIES IN COURT AND IN COURT
AND MEDIATION DOCUMENTS When you are dealing
with a spouse who is willing to lie to attorneys
and the court, protecting your rights can be
difficult without an attorney and you can,
unintentionally, make yourself look vindictive.
Hiring a lawyer can help you understand the best
way to present your evidence, protect your
rights, and ensure that your spouse does not get
a divorce settlement based on lies or
misrepresentations. There are no solutions for
personal disagreements in a law court or in a
lawyers office.
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The discovery process is a good way to get
financial information from an uncooperative
spouse because the court has the power to compel
compliance. For example, if your spouse fails to
produce documents, you can ask a judge to order
your spouse to do so. If your spouse disobeys the
order, a court may punish your spouse by imposing
a sanction, which can include monetary fines or
even a judgment against your spouse on a
particular issue. A business-owning spouse may
be so inclined to protect his or her own
financial interests that he or she may commit
fraud. A business owner going through a divorce
may attempt to conceal or transfer assets,
understate revenue, or overstate expenses. If you
or a client suspects such behavior, you may also
require the assistance of a forensic
accountant. Making the disclosure that your
former spouse engaged in tax fraud can
theoretically open the door to the depletion of
marital assets. Furthermore, the disclosing
spouse may implicate him or herself in the
alleged tax crimes.
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Watching Duncan Calder PO Box 1431, South Perth
WA 6951 duncan.calder_at_manna.org.au https//www.man
na.org.au/