This post shows how business owners shield assets. Also, the post examines how divorce lawyers and forensic accountants uncover concealed assets. The consequences for deceiving spouses and probate judges will be discussed.
Techniques to conceal business assets abound. Some common ways business owners hide money include:
- Cash transactions.
- Bartering for services.
- Omitting transactions from company books.
- Depreciating business assets to claim no value.
- Selling assets or a business share under value.
Cash transactions are harder to track than check or credit card payments. Direct deposit of salary can also hide income.
Bartering for services, such as a divorcing deli owner swapping a sandwich with a barber for a haircut, has value. Bartering yields no cash to toss into the marital estate pot.
Business owner spouses can use methods that don’t hide money. Rather, these actions delay the money’s arrival until a divorce is final. Overpaying taxes, for example, and requesting a post-divorce refund temporarily hides money. Likewise, pre-paying employee benefits and other business expenses makes for less visible income.
Letting customers and clients defer paying invoices until the marital estate settles makes a spouse seem cash-poor. So, too, does increasing sales share by decreasing prices, but then hiking costs and reaping profits post-divorce.
Some steps business owner spouses take to hide money are more blatant. Such measures may include renting a safe deposit box, or opening an online bank account without disclosing it to one’s spouse. Making large cash purchases of prepaid gift cards is another trick. Diverting business earnings to fund personal expenses or buy lavish gifts for a lover are commonplace.
Less than arms-length transactions might involve selling undervalued assets. Often, business owners will give money or other property of the business to friends or family to hold while their divorce is pending. The transfer may be under the guise of repaying a phony debt or for services not performed. In extreme cases, owners might destroy property rather than have it become a divisible marital asset.
Hiding cash and other business assets is illegal. Such conduct amounts to perjury and willful nondisclosure. Misleading the court invites a contempt of court ruling. Probate judges will punish the business owner spouse who conceals money. A judge may award a larger share of the marital property to the innocent spouse. A court can re-open a closed case and redistribute marital assets if it learns a spouse misled it about business assets.
Uncovering Hidden Cash
Skilled divorce attorneys have professionals in their stable, such as private investigators and forensic accountants, to help uncover hidden business assets. Additionally, subpoenas and other divorce litigation discovery tools can yield a treasure trove of financial documents. Tax returns, bank statements, personal net worth reports and credit card receipts can reveal hidden money.
Forensic accountants know their way around accounting practices that depreciate business assets to claim no value. Fake transactions, shell corporations and other devices can be rooted out. Financial experts can pore over pay stubs, tax returns and other financial records. Business valuation methodologies will uncover inconsistencies and raise questions about a business’ cash flow. Offshore accounts and suspicious activity do not escape the attention of experienced divorce attorneys.
Family lawyers do not overlook the value of social media in finding business owners’ hidden cash. Facebook, Twitter, Instagram and LinkedIn offer a great way to discover exotic vacation images of the purported “cash-poor” spouse or of revealing extramarital “friends.”
Why Hide Assets?
Why do some business owner spouses hide money in secret bank accounts or conduct company business off the books? Child support guidelines are calculated based on spousal income. Likewise, the parties’ income is a statutory factor a probate court judge must weigh when dividing marital property and assigning alimony. Therefore, an incentive to lower one’s earnings exists.
A marriage break-up is emotionally devastating and financially harmful. Some business owners hide cash from their spouse out of vindictiveness more than greed. Intentionally concealing business assets and hiding cash is not difficult to do. Fortunately, hidden cash is not hard to discover either. A business owner spouse caught hiding money from the probate court will lose credibility with the judge distributing the marital estate. Moreover, the deceitful spouse will be exposed to sanctions, such as contempt.
If you have any questions about divorce, custody, or family law issues, you may schedule a free consultation with our experienced attorneys. Are you looking for an experienced Newburyport or Andover divorce lawyer? Call (866) 995-6663 during regular business hours and we will respond to your phone call promptly.