The Great Divide

A lot of the time, CPA and certified divorce financial analyst William H. Miller Jr., who works for Kirkpatrick Phillips & Miller, CPAs, already knows the financial assets of his divorcing clients – they were clients before the divorce, he said. But that doesn’t mean that he hasn’t uncovered a hidden nest egg or two.

“Discovering financial assets is something you run into every once in a while. And a lot of times, it’s just going through a lot of financial loose ends. One thing could lead you to another thing,” said Miller.

Searching for assets

Intentional hiding of assets comes with penalties. Attorney Richard Van Pelt of Van Pelt & Van Pelt said that unearthing hidden assets during a divorce case can be done in a variety of ways.

More commonly used methods include interrogatories, which are written documents that ask specific financial questions and become signed, sworn statements; discovery, which involves requests for financial statements, including bank account statements and tax documents; and depositions, which are done under oath, in front of a court reporter, Van Pelt said.

In some cases, an attorney may suspect one spouse isn’t telling the truth. “Those cases may need more dramatic measures,” which sometimes involve depositions from third parties, Van Pelt said.

In extreme cases, when there is a strong suspicion that someone is hiding assets, an attorney may retain a certified fraud examiner, Van Pelt said.

“I always tell clients the best thing to do is get all your assets on the table and not play games,” Van Pelt said.

An attorney could be disbarred if he or she helps or participates in the hiding of assets, Van Pelt said. “There are professional rules of conduct,” he added.

Making sense of finances

Larry D. Ellison, also a CPA with Kirkpatrick Phillips & Miller, is a certified fraud examiner, and his workload includes forensic accounting in divorce cases. “I examine the financial facts and try to make sense out of them,” Ellison said.

Many times, Ellison’s services are retained by attorneys, but he said he’s seeing more instances where both spouses come to him as an added safety practice, as it helps to keep costs down, since both sides won’t need to pay individual experts.

Ellison said he may examine a business involved in a divorce, for example, paying particular attention when the company has reported lesser incomes for the past year or two.

A closer look at financial records may reveal travel receipts or transfers of money that one spouse wasn’t aware of.

One person may hold an individual bank account that he or she doesn’t tell anyone else about or may hold investments in one name only, Ellison said.

Attorney Gregory Dorshorst of the Law Office of Gregory Dorshorst said that sometimes one spouse will move various accounts or money into another person’s name, or, if a business is involved, there may be an increase in expenses right before or after someone has filed for divorce.

A person might even take physical objects and tuck them away in storage units, Van Pelt said.

“But hiding is not as common as undervaluing or not bringing up an asset,” Ellison said. He’s seen people forget to include assets like leased cars, or unintentionally misrepresent a property they perceive as having little value. For example, that farm property that sits on a large lake may have been claimed as a farm, but forgetting to mention the lake could significantly affect the value of the asset, he said.

“Probably, the assumption (that one spouse is hiding assets) is more prevalent than the reality,” Miller added.

There are other reasons a person may be mistakenly believed to be hiding monies or properties.

A spouse may not disclose complete financial information during the division of assets because of misinformation, Dorshorst said. The term “nonmarital property” holds a certain definition within the legal community, but he said clients will use it thinking they know what it means.

“We need to hear about everything, and then we’ll advise you … . That’s what you’re paying us for,” Dorshorst said.

According to an article on the American Academy of Matrimonial Lawyers Web site, www.aaml.org, some assets that are overlooked have only come into divorce litigation since the 1990s.

Earned rewards for credit card usage, season ticket options, personal computers, timeshares and club memberships all fall within that “millennium assets” category.

During a divorce case, the court has the ability to make a fair and equitable decision, and if one party is found to be hiding assets, the judge may be more apt to make an award that favors the other side, Van Pelt said.

Even if a divorce is finalized and hidden assets come to light later, Van Pelt said, certain actions can be taken if fraud was perpetrated on the court.