Many states are international multi-ethnic communities, and this office consults throughout the U.S. and Caribbean. This question arises with virtually every divorce matter referred to this office.
The process of determining whether a spouse is “hiding” marital assets is a multi-step one. It begins with securing and analyzing the travel records of the spouse under suspicion. This includes but is not limited to: securing a passport photocopy, and securing the business and personal travel record payment history both domestically and internationally for at least three years preceding a divorce filing.
Furthermore, an investigation and analysis into possible related party transactions may be necessary. In some cases, spouses hiding assets form entities outside of their state or the U.S. for the purpose of protecting those assets from potential creditors — including disgruntled spouses. Many times, the evidence of asset protection entities is found in the business and personal disbursements of spouses.
A tactic commonly used by business owner spouses is to delay the filing of business tax returns. Experience teaches that it is during the period of non-filing that business related marital assets are “wasted” through disbursing cash, transferring hard assets, or the purposeful delay of sales and revenue recognition. A method for countering this is for a forensic accountant to prepare an analysis and estimated tax return of the business in question from historical and current business records. These records may be obtained from the business, the IRS, and the business’ banks through subpoena, if necessary.
This process can be both time consuming and complex. It requires close cooperation between attorney, client, and forensic accountant.
Stanley I. Foodman, CPA, CFE, CFF, managing director of Foodman Forensic Accounting, a South Florida-based public accounting firm.