Financial Infidelity in Marriage: How to Handle Hidden Money Matters During Divorce

The Panama Papers scandal of 2016 revealed the thousands of individuals hiding assets in offshore accounts from the IRS, but also from their ex-spouses. In 2007, Anchorage-based plastic surgeon Michael Brandner embarked on a clandestine journey spanning over 4,000 miles from Washington state to Costa Rica. The trip came shortly after his wife of nearly three decades initiated divorce proceedings. Legal records later revealed Brandner had amassed $3 million in assets, which he converted into cashier’s checks before departing.

Upon arriving in Costa Rica, he deposited part of these funds into a local bank account and secured a thousand ounces of gold in a safety deposit box. Subsequently, he ventured to Panama to create an account under a fictitious entity, Dakota Investment, as per legal files. By 2008, he had added $4.6 million to the account. Furthermore, he failed to disclose these foreign accounts to the IRS. During his divorce case, he argued the money was invested and was then lost, making it non-retrievable.

According to the Justice Department,  actions were taken to hide assets to possibly be  allocated to his wife during the divorce. Eventually, U.S. authorities confiscated the concealed assets. Although Brandner pleaded not guilty, he received a 48-month prison sentence for wire fraud and tax evasion in April of the same year.

Discovering hidden assets during a divorce can feel like a daunting task. Often, one partner might not even be aware of the extent of joint financial holdings. One common method to start unearthing hidden assets involves a careful review of tax returns and bank statements. Another way to uncover hidden assets is to look at public records. Property deeds, business licenses, and vehicle registrations can all offer insights into a partner’s true financial situation. While these methods may not catch every hidden dollar or asset, offering a starting point for understanding the scope of marital assets and what might be at stake in a divorce proceeding.

Tracing Concealed Investments: Locating Hidden Stocks and Bonds

In a divorce, both partners may not be fully aware of each other’s investments, such as stocks and bonds. If there’s suspicion of concealed investments, several avenues exist for unearthing these hidden assets. Financial documents like tax returns often list income from investments, even if those assets are not immediately visible. Specifically, interest and dividends from stocks and bonds might appear on a Schedule B form attached to a tax return.

Additionally, annual or quarterly investment statements can provide a wealth of information. These papers usually list all holdings, transactions, and capital gains or losses, offering a glimpse into an investment portfolio. Spotting unexplained discrepancies in these documents can signal the presence of hidden assets.

Real Estate and Divorce: Identifying Undisclosed Property Assets

In the course of a divorce, real estate assets often become a point of contention. While the family home is usually known to both parties, other properties like vacation homes, rentals, or commercial spaces might be less obvious. To unearth undisclosed property assets, a review of tax records can be extremely useful. These records will typically indicate property taxes paid, thereby hinting at possible ownership of undisclosed real estate.

Checking county property records is another effective strategy. These records are public and can show under whose name a property is registered. If a property is owned by a business, then business records can further help identify the real owners.

Offshore Accounts: Impact on Asset Division During Separation

Offshore accounts can introduce a layer of complexity when it comes to asset division in a divorce. Unlike domestic accounts, these foreign accounts are not as easily accessible for review. Often operating under different jurisdictions and legal regulations, making it harder to trace or evaluate them. Tax returns can offer some insight, as income generated from these accounts should, in theory, be reported. Forms related to foreign financial assets may appear as part of a complete tax return.

Another angle for discovery involves foreign transaction fees on domestic bank statements. If a spouse sees frequent foreign transaction charges, it might hint at financial activities happening abroad. Similarly, correspondence from foreign financial institutions can sometimes be found among personal or digital files, providing further evidence of overseas assets.

Retirement Plans and Pensions: Discovering and Dividing Long-term Investments

When divorce occurs, retirement plans and pensions might not immediately come to mind, but these long-term investments often represent significant assets requiring careful consideration. Normally, contributions to these accounts made during marriage are considered joint property, regardless of whose name is on the account. Uncovering these assets often involves reviewing work-related documents or financial summaries provided by the employer or financial institution.

Typical documents to scrutinize include annual statements from retirement accounts such as 401(k)s, IRAs, or other pension plans. These statements provide a snapshot of contributions, growth, and withdrawals, which can help paint a picture of each spouse’s financial future.

Role of Forensic Accountants: How Experts Uncover Financial Infidelity

When suspicions of hidden assets or financial deception arise in a divorce, forensic accountants often step in to provide expertise. Specializing in financial investigations, these experts scrutinize a range of documents—tax returns, bank statements, investment portfolios—to trace irregularities and unexplained income or expenses. Forensic accountants can also delve into business records if one spouse owns a business, helping to determine its true value and cash flow.

Beyond traditional accounting, these professionals use various analytical methods to identify discrepancies or anomalies in financial behavior. For instance, sudden changes in spending patterns or irregular large transactions could be flags indicating concealed assets.

Legal Recourse: Actions to Take if a Spouse is Found to be Financially Deceptive

When a spouse is discovered to be financially deceptive, several steps can be taken to ensure a more equitable asset division during divorce. One common action involves seeking a court injunction to freeze assets, preventing any further attempts to conceal or transfer property or funds. Legal measures such as contempt of court charges can also be pursued against a spouse who intentionally hides assets.

In some instances, the court might decide to award a larger share of marital assets to the deceived spouse as a form of redress. Penalties can also include repaying the deceived spouse for investigation expenses, such as the cost of hiring a forensic accountant. Though a challenging experience, unveiling financial deceit and pursuing appropriate legal recourse helps ensure a fairer outcome in asset division during divorce.

If you are going through a divorce, please seek a qualified divorce attorney in Louisiana by calling at 504-780-8232 or contact us online.