If you’re involved in a high-conflict divorce, there is a fair chance your ex will try to conceal income or assets in order to reduce their obligations.
If you suspect this could be happening, discuss your concerns with your divorce attorney. They can review your finances for evidence of suspicious activity and bring in a financial expert, such as a forensic accountant, if necessary.
What should you look for if you suspect hidden money?
It may be common for one spouse to handle the finances, but an acrimonious divorce is not the time to be in the dark. If you are unfamiliar with your financial picture, familiarize yourself now. Get copies of a few years’ worth of tax returns and their underlying documents. If you don’t understand them, get help from your divorce attorney or another appropriate professional.
You should see all of your income and your spouse’s income — including tip income — listed appropriately on your income tax return.
Pay attention to Schedule B, which covers interest and dividends earned. Do the numbers make sense? Also look at Schedule D, which covers capital gains and losses. These come from selling assets. Has your spouse been raiding the brokerage accounts?
Another important thing to check for is a Form 1099-R. This form indicates there has been a distribution from a retirement account.
If your spouse is an entrepreneur, look for any opportunities they may have had to transfer business money into personal accounts or vice-versa. Corporate entities are common places to funnel assets. Make sure you know about all entities under your spouse’s name and examine the tax returns for those entities.
Keep an eye out for these red flags
Hiding income and assets can start as soon as your spouse begins considering divorce. If you notice your spouse’s spending habits have changed, find out why.
Another red flag is when your spouse gives you an allowance instead of engaging you in the overall finances. If the allowance is generous, you may be disinclined to dive into the finances — and they could be counting on that. Similarly, consider it a red flag if your spouse wants to go to financial planning meetings without you.
Watch out for money being transferred from one account to another. There are a few legitimate reasons for this, such as transferring credit balances to a lower-interest card. That said, many transfers are suspicious, especially between personal and business accounts.
Routinely monitor your retirement and investment accounts yourself. You need to know if your spouse is contributing a reasonable amount and if they have been taking disbursements.
If you find suspicious activity, the first place to go is your divorce attorney.