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When you are in the midst of divorce, it is necessary to protect your rights from all angles, especially when it comes to finances. The lengths you go to in order to secure your financial well being and how you handle those proceedings will determine a great deal in terms of your quality of life and your overall lifestyle once the marriage has officially ended.

Why You Should be Concerned About Marital Assets

There are multiple reasons you should be aware of the possibility of hidden assets within your marriage as you undergo divorce. While it is obvious that every spouse should naturally be concerned about finances during a split, if you are not vigilant, hidden assets, in particular, can significantly affect your bank account, investments, and other financial resources after the divorce is final.

When your spouse conceals assets, it places you at risk for losing large chunks of marital property that you would otherwise be eligible to claim. This loss of property can affect everything from your day-to-day bills to your general financial stability. It can also trigger more long-lasting consequences, such as creating obstacles to your future financial plans, as retirement funds, savings accounts, and more can be affected.

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TX divorce lawyerThere 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.

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TX divorce lawyerWhile most wealthy couples in Texas will have more than one retirement account that will be subject to division in a divorce, it is important to understand how the court is likely to treat your 401(k) accounts, and how those accounts can be divided without incurring substantial penalties. You should learn more about the classification of 401(k) accounts in a community property state like Texas, and whether there are options for preventing the distribution of your 401(k) accounts in your divorce case. When you have questions or need assistance, you should reach out to a Texas high asset divorce lawyer for help. In the meantime, the following includes information about 401(k) classification in Texas and details about distribution.

Community Property and Your 401(k) Account

As you likely know, 401(k) plans are a particular kind of defined-contribution retirement account, and employers offer them to their employees. The term 401(k) refers to the Internal Revenue Code section that governs these plans. With a 401(k) account, employees make automatic contributions from their paychecks, which are then matched by an employer (the percentage of the match depends on the employer). In traditional 401(k) plans, funds are not taxed until they are withdrawn, although withdrawals from Roth 401(k) accounts are not taxed since those are funded with “after-tax” contributions.

For most married couples in Austin, at least a portion of their 401(k) accounts will be classified as “community property.” According to the Texas Family Code, there is a presumption that assets acquired after the date of marriage are community property unless one of the spouses can prove by clear and convincing evidence that the asset is separate property. Then, community property will be divided in a manner that is “just and right” based on the circumstances of the parties. To be clear, any contributions to a 401(k) account during the marriage will most likely be classified as community property.

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b2ap3_thumbnail_filing-divorce.jpgWhen you are planning to file for divorce in Austin, TX and you know that you and your spouse have significant earnings, or that you have substantial and valuable assets, you may have heard the phrases “high asset divorce” or “high net worth divorce.” Yet you may be wondering whether these terms do indeed apply to you and, if so, what they mean for your ultimate divorce process. Under Texas law, regardless of whether you have a high asset divorce, your property will be classified either as community property or separate property, and all community property will be divisible. When community property is of high value, often nearing or upwards of $1,000,000, there will be particular considerations you will want to take into account.

For example, in a high asset divorce, you may need to hire a property appraiser with expertise handling niche property, or you may need to seek multiple estimates for real property to ensure that it is appropriately valued and classified. Moreover, you may need to work with a forensic accountant who can uncover hidden property that one of the spouses was attempting to conceal. An experienced Texas high asset divorce lawyer can tell you whether you should anticipate a high net worth and what you should expect. In the meantime, the following are types of community property that may signal a high net worth divorce and the need to seek advice from a high asset divorce lawyer in Austin.

High Earnings

If either you or your spouse has had particular high earnings after the date of marriage, then you should likely be anticipating a high asset divorce that may involve additional complications.

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TX high asset lawyerIf you are planning to file for a high asset divorce in Austin, or if you or your spouse recently filed for divorce in Texas, we know that you likely have questions about what the division of community property will look like when your investments, including mutual funds and stocks, are worth much less than they were even a month ago. You may be wondering if it could make sense to put your divorce on hold until the stock market resurges, or you might be thinking that you could end up faring better in the long run if you can ensure that community property from your marriage gets divided before the stock market resurges. Divorces are stressful enough without the added anxiety of a declining stock market and a global pandemic.

We want to discuss some of the issues concerning high net worth divorce when the stock market is in decline. If you have questions or need assistance with your divorce during this complicated time, an experienced Texas complex litigation attorney at our firm.

Benefiting and Suffering from Falling Stocks During Your Divorce Case

Depending upon the types of investments you have, some spouses could stand to benefit while the other spouse suffers from falling stock prices during a divorce in Texas. One of the spouses might have specialized knowledge about investments while the other spouse has none of that knowledge at all, and the first spouse might use that knowledge to his or her advantage in order to come out with a community property distribution or settlement that stands to benefit that spouse in the long run.

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TX divorce lawyerDivorces can be extremely contentious regardless of the income levels of the spouses or the amount of assets they share. However, high net worth divorces in Texas often are among the most contentious, given that the parties have more to lose financially than other couples who are going through the divorce process. When one or both parties realize that divorce is likely in their futures, issues about hidden assets may start to arise. If you have concerns about your spouse hiding property or trying to prevent certain assets from being classified as community property, you should reach out to a Texas high asset divorce attorney as soon as possible. At Powers and Kerr, PLLC, we routinely assist clients with this very issue and can discuss options for working with a forensic accountant to locate hidden assets.

In the meantime, we want to provide you with some useful information about recognizing when a spouse may be trying to hide assets before a divorce.

Why Would a Spouse Attempt to Hide Assets?

Why would any spouse in Austin, Texas try to hide assets before a divorce case? As you may know, Texas is a community property state. What this means is that, under Texas law, nearly all property acquired by either spouse after the date of the marriage will be classified as community property and will be subject to division in the divorce case. A spouse might try to hide assets to prevent those assets from being classified as community property and divided. There are many different ways that people can try to hide assets, and it is important to recognize the signs. If you do have concerns, you should speak with your divorce lawyer as soon as possible.

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TX divorce lawyerWhen you are planning for a high asset divorce in Austin, Texas and know that your retirement accounts will be classified as community property and subject to division under Texas law, you will need to have a plan in place to divide those retirement benefits. For wealthy couples anticipating a high asset divorce, the amount of money in retirement accounts can be substantial. Using a Qualified Domestic Relations Order (QDRO) to transfer retirement benefits as part of your divorce could end up saving tens of thousands of dollars (or even more depending upon the amount of money in your retirement accounts and the amount that needs to be distributed to your spouse).

We want to tell you more about QDROs and how they work, and to provide you with examples that demonstrate the importance of having a QDRO in a high net worth divorce. An Austin high asset divorce lawyer is here to assist you.

What Is a Qualified Domestic Relations Order in a High Asset Divorce?

What is a QDRO? The Employees Retirement System of Texas (ERS) explains that a QDRO is a legal order subsequent to a divorce or legal separation that splits and changes ownership of a retirement plan to give the divorced spouse his or her share of the assets. In order to qualify for a QDRO, the ERS’ General Counsel must receive a certified copy of the divorce decree, and the ERS’ General Counsel must review and approve the QDRO.

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TX divorce lawyerHigh asset divorces in Austin, TX are complicated for numerous reasons, from matters of property division to alimony. One of the more complex and contentious issues that can arise in a high net worth divorce is the matter of hidden assets. Particularly in high asset divorces where one of the spouses was the primary earner during the marriage, the other spouse may have concerns about hidden or concealed assets. When the non-primary earner does not control the finances of the marriage and does not regularly manage business issues or jointly owned accounts, it can be difficult to know exactly what the assets from the marriage look like in sum. Yet discovering hidden assets can be extremely important given that Texas is a community property state.

Under Texas law, couples who get divorced in Texas should know that community property is owned equally by the spouses. Accordingly, courts divide the property recognizing that both spouses have an equal interest in it while also taking into account what kind of division would be fair to both parties. If there are substantial hidden assets, one of the spouses could end up losing out on property to which she or he is entitled. While assets can be hidden in any divorce—regardless of the extent of the property owned by the married couple—hidden assets in a high net worth divorce can total tens of thousands of dollars. As such, it is essential to ensure that neither spouse is hiding assets in the divorce.

Know Where to Look for Hidden Assets

Even if you do not immediately suspect your spouse of hiding assets, it is important to know where to look for “red flags.” For example, itemized deductions in Schedule A in past tax returns could reveal property that you did not know existed. Or, for instance, details about assets that have generated interest and dividends (located in Schedule B) could reveal that your spouse has more money than she or he has listed. Tax returns can also provide information about business profits and losses (Schedule C), as well as capital gains and losses (Schedule D). Information about capital gains and losses can provide information about certain securities in which your spouse has invested, as well as stocks or real estate.

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