Common Ways Business Owners Hide Assets From Their Spouse and How To Uncover Them

Author: Miod & Company
Date: August 24, 2022
Category: Business Valuation, Family Law, Litigation
Average Time Reading: 6 minutes

Financial challenges may arise when hidden assets are involved. The division of marital property is one of these obstacles and the most essential step in every divorce. It’s common to receive an equal trade-off, but some situations aren’t so simple. 

Things can get quite complicated when a spouse refuses to divulge the information needed. They can hide shareable assets and transfer them away in secrecy, depriving you of your own property. 

Let’s talk about marital property, how it’s split, and what to do if your spouse is hiding it.

What is Marital Property and How is it Determined?

Marital property is the property that is owned by both spouses after they are married. Property can be bought or sold and must have value, such as a house, bank accounts, 401K plans, and businesses.

Just as you and your partner separate during a divorce, so will your marital property. It’s important to work with an expert to help determine whether your assets are considered marital or separate.

Outside-of-court negotiations with a third party can save you time and money. However, you may need a courtroom and a judge if your settlement meetings lead to many headaches later. 

Either way, the property division process must go through these three steps:

  1. Determining if it’s community or separate property
  2. Agreeing on property valuation
  3. Property division

In the state of California, property acquired before the marriage or familial inheritances/gifts is considered separate property, whereas all property acquired during the marriage is marital or community property. 

Any property obtained before the finalized divorce but after the couple’s date of separation is considered separate property as well.

When determining the value of each asset, the couple can decide on their own or with the help of another party. For example, you can receive an appraisal on a house and talk with a CPA or an accountant about business values. 

You can value personal property through three methods: the bank deposits method, the expenditures method, and the asset method.

Using the bank deposits method, a forensic accountant can determine whether or not a company has been negligent in its financial reporting. The bank deposits method involves reconciling bank statements and other records. To perform this forensic accounting method, the forensic accountant will need access to bank statements and other financial records, such as payroll and invoices.

Forensic accountants use the Expenditures Method to determine the origin of cash, property, and other assets. The Expenditures Method is also known as the “Cash Flow Analysis,” “Activities Based Approach,” or “Analysis of Activities.”

The Expenditures Method is based on the concept that all transactions are exchanged for money, goods, or services. Therefore, expenditure must be properly recorded to determine whether an expense has been made on behalf of the company or individual.

The asset method is another way to determine the amount of money that is available for distribution between two parties in a divorce. This method uses the value of the assets owned by both spouses and then divides them up based on who owns more of each asset.

The first step in this process is to make an inventory list of each party’s assets and liabilities. Then, the forensic accountant will determine each item’s value using its market price or replacement cost.

When it’s time to divide the property, many routes are available to you. Some couples may be able to sit down and assign certain assets to each other, including buying out the other spouse’s share or selling assets to each other. 

Unfortunately, sometimes people may find that their spouse was dishonest and hiding assets. 

Here’s how to address that issue.

Business Owners’ Hidden Assets

As mentioned before, businesses are subject to property division in a divorce. 

That doesn’t mean everyone is as willing to give up their possessions easily. Some spouses try to undervalue property or outright hide assets.

If you were the “out-spouse” or the one kept out of the financial conversations, you may not have had access to this information. To gain access, you must ask your spouse for these documents or records. If your spouse is willing to help, then great! But that isn’t always the case, and spouses who refuse to help are most likely hiding some assets in the dark. 

Deferring money can temporarily decrease the cash value of the business or income. Similarly, spouses that undervalue assets will diminish the amount of property that can be shared with you in the divorce. 

Even though concealing assets and forging tax returns are illegal, some spouses will do whatever they can to prevent equitable division. 

If your spouse doesn’t willingly share your financial records, then you’ll need an accountant to find them for you. In the discovery process, the expert will get you what you need, whether by document or inspection demands, written questions, or oral depositions.

What You Can Do

Hiring an accountant who can help you uncover secret accounts or whatever your spouse is hiding is the best option for you. 

Your spouse may have reasons for keeping you in the dark, but that doesn’t justify their actions. Legal separation is already a process, and we’re here to make it easier for you. 

Here at Miod and Company, we are happy to help you through this process and make it as simple as it can be. Schedule a Free Consultation Today.

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