Accounting for Divorce: Identifying Assets and Liabilities for Division

In a Texas divorce, identifying and dividing community property is one of the first steps in the process. Identifying marital property is often accomplished through the legal process of discovery. As part of a divorce, both spouses will complete personal financial statements and sworn inventories and appraisement forms to disclose all of their assets and liabilities.  

A survey conducted on behalf of the National Endowment for Financial Education found that among those adults surveyed that combined finances, 37% hid a purchase, bank account, statement, bill, or cash from their spouse or partner. 

You can take these steps to determine whether your spouse has completed his or her financial disclosures honestly and completely:

  • Conduct a public records search to see if your spouse owns any undisclosed real estate or has incurred any debt subject to deeds of trust, security agreements or other evidence of collateral assignment.
  • Review your spouse's tax returns and 1099 forms to discover any unreported income or accounts, including business tax returns.
  • Look for suspicious purchases or transfers made from any known bank or brokerage accounts.

A spouse may not disclose all community, or separate property, assets in his or her financial disclosure. Common ways a spouse may hide or undervalue marital assets include:

  • Transferring marital property to another person, usually a family member
  • Colluding with an employer to delay bonuses, stock options or raises until after the divorce
  • Making payments from a business to a family member, girlfriend or boyfriend for services never rendered
  • Setting up a custodial account in the name of a child using the child's Social Security number
  • Delaying long-term business contracts until after the divorce is final. (This may seem like smart planning, but if the intent is to lower the value of the business, it could be evidence of hiding or misrepresenting assets.)
  • Post-dating investments until after the divorce
  • Skimming cash from a self-owned business
  • Repaying a phony debt to a family member or friend
  • Hiding or failing to disclose cash on hand, jewelry, gold/silver bars, stock certificates or negotiable instruments such as cashier’s checks and bearer bonds. (These assets are more difficult to find by tracing bank and brokerage account deposits and withdrawals.)
  • Transferring assets overseas. (It is difficult, if not impossible, for Texas courts to get control over these assets to divide in a divorce.)

If you believe your spouse is hiding community assets, you may benefit from hiring a forensic accountant to review accounts and financial documents and identify suspicious activity or trace the whereabouts of missing funds.

For information and assistance, contact us. We are here to help.

 

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Helga Zauner

Helga Zauner

Managing Director, Forensics and Litigation Services

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Helga A. Zauner, CVA, CFE, MAFF, is a testifying expert witness with 27 years of experience in litigation consulting, financial…

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