Uncover Hidden Assets & Income in Divorce with These Documents

The Forensic Accounting Deskbook by Miles Mason, Sr. JD, CPA, published by the ABA Family Law Section

What important documents are best to review to find hidden income and assets? Discovering undisclosed assets?

For a much more detailed discussion, see The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers, Second Edition, authored by Miles Mason, Sr. and published by the ABA Family Law Section.  This updated edition of one the ABA’s most popular resources explains the practice of forensic accounting and business valuation and how to apply it in family law cases. It provides a practice-focused introduction to the core financial concepts in divorce, such as asset identification, classification, and valuation, income determination, expenses, and more.

VIDEO TRANSCRIPT:

Tracy Coenen:             Can you tell us about a few of the important documents that you’ve used to your advantage in a divorce case when there’s been some hidden income or assets?

Miles Mason:              One of my favorites is the interrogatory. And that is, it’s a straightforward document that in almost all states, I would imagine probably all states, you can ask the other side, “List all your assets.” I love it when the other side didn’t list an asset and we find out about it because then it becomes an undisclosed asset.

Now, 50% of the time they just left it off by accident because they weren’t thorough, but regardless whether somebody unintentionally or intentionally omitted it, I still get to claim it’s an undisclosed asset. And anytime in court after that, I’m going to say that.

One of my favorite places is to issue subpoenas to credit facilities, banks, and other lending institutions trying to find a loan application. Hopefully the loan application includes a financial statement, and because financial statements in general must be answered under oath, or there’s a state law where if you lie on a financial statement or a loan application of a bank, it’s a crime.

Also, we look for luxury spending. Obviously the car, the luxury timeshare, something that’s out of place, that’s inappropriate to the staff, or what we’re looking for is documents that will help us prove that the net worth claimed is incorrect based on taking an initial financial statement, looking at the tax returns that we know, give us the information we need, less the expenses, which we may know all the expenses from the canceled checks, bank statements and credit card slips, and work our way through the analysis to figure out beginning balance plus income minus expenses equals what are we supposed to have today. And if a person’s claiming a much different amount of assets than what is appropriate for today, the IRS calls that the net worth method, we’re going to have an analysis that could really put a divorcing spouse in a box.

Thank you to Tracy Coenen, CPA, CFF for inviting me to join her in this video series. Tracy is a nationally recognized forensic accountant practicing in Milwaukee and Chicago.