How Can a Business Be Used to Hide Assets in a High Net Worth Divorce?

 Posted on September 09, 2020 in Family Businesses

There are a variety of financial issues that may need to be addressed during a high-asset divorce, and one of the key considerations for many spouses is the possibility that their former partner may be attempting to hide assets. This is often done with the intent of influencing the property division process or to reduce the amount of spousal support or child support payments that a person would be required to make.

When spouses have a high net worth, complex property litigation may be needed to sort out multiple different types of assets and ensure that they are divided properly. Litigation may also address any attempts to conceal assets or income. Concerns about hidden assets are likely to arise if one spouse is a business owner. Some common ways that a business may be used to hide assets include:

• Misreporting income and expenses - A business’s financial records can be used in a variety of ways to conceal assets, such as by failing to report cash payments or reporting fraudulent expenses.
• Paying nonexistent employees - A business owner may claim that they are paying a salary to an employee while funneling this money into a private account. In some cases, a person may employ a friend or family member and overpay them as a way to have them hold money until the divorce is complete.
• Depreciating business assets - A person may claim that assets owned by a business, such as equipment, vehicles, or real estate, are worth less than their actual value. By attempting to reduce the overall value of the business, a spouse may attempt to avoid dividing this or other marital property fairly.
• Overpaying taxes - A business owner may purposely pay more taxes to the government than are owed with the intent of receiving a refund after their divorce has been finalized.
• Delayed transactions - A person may wait to sign business contracts or complete major transactions until after a divorce has been completed, allowing them to avoid reporting this income or any increase in the value of the company during the divorce process.
• Transferring business assets to others - A spouse may give an ownership share of their business to a family member or friend, or they may transfer other assets into someone else’s control. This may be done with the intent of removing these assets from the marital estate while planning to resume ownership of the assets after the divorce has been finalized.

Contact Our Austin, Texas Business Valuation Lawyers

If your spouse is a business owner, you will want to make sure all of the financial issues related to the business are considered properly during your divorce. At Powers and Kerr, PLLC, we will work to make sure all business assets and financial records are uncovered during the discovery process, including working with forensic accountants to gain a full understanding of the value of business assets and all forms of income and cash flow. We will help you determine how these matters should be addressed during the divorce process, and we will work to protect your rights and financial interests at all times. Contact our Austin high asset divorce attorneys today at 512-610-6199.

Sources:

https://www.forbes.com/sites/catherineschnaubelt/2019/03/08/finding-hidden-assets-in-a-divorce/#42ca7c976fd1

https://www.wife.org/ss-hiddenassets.htm