When your self-employed spouse is hiding money

| Nov 25, 2016 | Family Law |

How do you get a fair divorce settlement when your spouse has always run a significant portion of his or her business in cash that never quite makes it onto the books?

It can be difficult to determine exactly how much income a business brings in even when every dollar is carefully documented. Sole proprietors often have legitimate ways of reducing their countable income for tax purposes. On paper, that can make a business seem far less profitable than it really is. If your spouse fails to document cash transactions, that can make what paper documentation you do have fairly useless.

Even worse, business owners in the middle of a divorce frequently develop business woes. It’s such a common occurrence that divorce attorneys and forensic accountants even have a nickname for it: Sudden Income Deficit Syndrome.

A business that has steadily provided a nice living for years promptly begins to struggle. Your spouse pleads near poverty in court and can’t possibly afford the reasonable financial split you propose. Given the sorry state of the business, he or she can’t afford spousal support either.

How can you and your attorney prove otherwise?

Generally speaking, if your spouse is lying about income and assets, the goals are fairly predictable. He or she wants to hide or undervalue as many assets as possible, inflate any debts and expenses and report lower-than-actual revenues.

Forensic accountants can be used to piece together a more accurate financial picture. Loan applications, credit card bills and business appointment books are just some of the things that can help uncover hidden income.

Private investigators are also sometimes used to gather evidence of wealth. If your spouse is being cagey about his or her new address, it might be because he or she is still maintaining that comfortable lifestyle — despite a supposedly failing business. Photographic evidence of your spouse enjoying luxury dining and vacations can make claims of poverty seem foolish. A private investigator may also be able to track down assets your spouse has hidden away under a parent’s or sibling’s name.

Don’t give up on a fair divorce settlement because your spouse operates a cash business. While no attorney can promise you results, divorce attorneys see these sorts of games all the time and can help come up with a strategy to uncover the assets and get your equitable share.

Source: Harris & Literski, “Hidden Assets In Divorce,” accessed Nov. 25, 2016

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