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When a divorce takes place, it is much more than a legal matter.

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The ending of a marriage, even under the most amicable circumstances, is fraught with deep emotional upheaval underscored by psychological pain and suffering.  When a marriage, which most likely began as one of life’s most hopeful and joyful occasions, is over, the finality of the situation can create havoc and sadness, as well as anger.

Anger, stoked by resentment, may build as the divorcing parties begin to nurture a deep distrust of each other. In the worst-case scenario, this can manifest itself in a desire to hurt the other party – which is often accomplished in a variety of ways, including through exploiting relationships with family members and friends, or even manipulating, or hiding, financial assets.

Why is the distribution of marital assets a challenge?

Most tangible assets that are accumulated during a marriage are shared between the partners. In the absence of any specific directions that might have been included in a pre-nuptial agreement, those assets are then subject to division at the time of a divorce.  But when there is no sense of trust that the parties are being honest with each other, concern over hidden assets can become a very real threat. The desire to hurt the other party by preventing them from getting an equitable share of the marital assets can result in extremely destructive behavior.

This scenario becomes even harder to manage if one spouse has been actively hiding or dissipating assets for years in anticipation of filing for divorce.  This spouse may have already opened a new bank account and started the process of quietly transferring assets without the other’s awareness. In addition to siphoning cash from one account to another, a spouse who has the opportunity may collude at the workplace with the company’s Human Resource Director or management to falsify his or her W-2 wage report or to significantly alter the compensation package or bonus structure so that the other spouse is unaware of the couple’s accurate annual earnings and retirement benefits. The list of misleading activities is long and may include schemes such as making payments to phantom vendors or employees, hiding money in a business, pre-paying taxes, or putting property such as real estate or a car in a third party’s name without the other spouse’s knowledge or consent.

How do you trace assets?

Tracing assets can be a time-consuming and costly undertaking. It can involve searching through years’ worth of bank, investment, and credit card account statements, tax returns, lock boxes, insurance policies, ownership titles, public records, and other financial documents. Even though many of these records are now available online and in electronic format, the data from various sources must be normalized, combined, and reconciled, and then you follow the money.  One may also need to consider and search through digital communications platforms, such as emails and texts, to uncover clues as to how and where assets have been spirited out of the marital estate.

The matter is further complicated when there is a possibility that there may be fraudulent business transactions taking place along with the systematic maneuvering of personal finances.  It cannot be overlooked that the reporting of phony or complex corporate transactions may be used by one of the divorcing partners as a red herring to distract or confuse the other.

Private investigators may also be hired to conduct surveillance, search public records, and interview witnesses to identify clues or uncover evidence of deceitful measures. 

No matter what process is used, or how the game of deceit may be played, the goal is always the same. The objective is for one spouse (usually the ‘monied’ partner) to use some form of trickery to create a false narrative regarding the couple’s true worth. By doing so he or she is able to dupe the other and keep him or her from receiving their fair share of the assets.

How is the concern of hidden assets most effectively addressed?  

The first word of advice for everyone is to create a personal data retention policy. This is a good rule of thumb for all important documents, but most especially it is useful to have original, authentic data pertaining to financial matters, investments, bank accounts, loans, and titles kept in a safe place, well-organized for easy access. Paper has been giving way to digital documents, decreasing the amount of physical space needed to retain copies of bulky items such as bank statements and tax returns, so it is much more convenient these days to store electronic copies of important documents on a secure medium. Easy retrieval of vital information is key to protecting oneself in any situation, including a divorce.

An information imbalance in a marriage, i.e., one spouse handles all of the finances while the other is totally in the dark about financial matters, is a recipe for disaster. While some view this as a matter of doling out the marital responsibilities to those best suited to them, each individual in a relationship should make an effort to ensure that they understand the basics about the family finances, if for no reason other than the fact that life is risky, and the spouse handling the finances may be hit by a bus one day, leaving the other in a tough spot trying to figure out how to make ends meet because they did not know about the savings account in another bank.

Tracing assets is tough, and you may need professional help.  

Even if there is a careful record keeping process in place, asset tracing can be complicated, time consuming, and costly. As such, it is often deemed necessary, to hire a CPA or a forensic expert to help the divorcing parties prove the total assets that are to be considered appropriate for inclusion as marital assets. 

Whether all of these resources are leveraged or not, the most successful situations depend on access to smart, seasoned, objective advisors; accurate records that reflect several years of activity; and transparent conversations with employers, family members, professional and personal contacts. All of these can help to highlight the inaccuracies and put the pieces of the puzzle together in a way that results in a successful conclusion for all. 

For more information contact Rebecca Fitzhugh at 973-994-9494 or rebecca.fitzhugh@sobelcollc.com

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