High asset divorces are complicated and heated. When the main focus is on who gets what, spouses try to get creative by hiding assets, but hidden assets cause complications not only for the spouse doing the hiding, but for the entire case itself. Is it okay to search for hidden assets?
According to experts, yes, it is okay. And one of the first places you should look is your family’s tax returns. Financial advisors recommend looking back five years, and to check for itemized deductions, real estate and capital gains. Expense reports and uncollected bonuses may also hint at hidden assets. A dramatic increase in expenses is a red flag, and many spouses use this as way to hide assets.
While it’s best to hire a tax advisor for complicated tax issues, there are some key areas of the return you want to look at when searching for hidden assets:
- Form 1040:
- Income from Wages: The Income from Wages section will list all sources of income, including salaries, wages, interest income, tips, business income, dividends, IRA distributions, capital gains, annuities and pensions, social security, and unemployment compensation.
- Interest and Dividend Income: The Interest and Dividend Income will show investments that generate income, like bonds, savings accounts, loans and money market accounts. If dividend or interest income exceeds $400, a Schedule B will be attached, and will list the source of the income.
- Retirement Plan Distributions: This includes distributions from an IRA account or deferred-compensation plan.
- Schedule A:
- Itemized Deductions: All itemized deductions are listed here, including real estate, taxes paid on income, and personal property. Keep in mind that payments may be related to assets, like real estate, in another state. In this case, you will need to find out whose name is on the title, the source of the payments and the date of purchase.
- Miscellaneous Deductions: This section may include expenses for estate planning and taxes.
- Schedule C: Profit or Loss from Business. If your spouse is a sole proprietor (business owned by a single owner), Schedule C will list reported expenses, sales, the cost of goods, and net income, which will give you an idea of how well business is going.
- Schedule E: In Schedule E, you’ll find Supplemental Income and Loss. This is where you’ll find income-generating assets, like royalties, rental income, business investments, trusts and estates.
To protect the children before a divorce, check to see whose name is on any savings account for the kids.
A divorce attorney who has experience with high asset divorces will likely know where to look for hidden assets, and can help ensure that you get your fair share when the divorce is finalized.
The Micklin Law Group, LLC is a New Jersey law firm specializing in family law and estates. Attorney Brad Micklin was recently named to The National Advocates list of Top 100 attorneys from each state. Brad has a special expertise in working with high asset divorces. You can read more on this topic by visiting our Divorce blog. To set up a consultation, call 973-562-0100.