In divorces it comes down to the question of who is going to get what. What may appear to be a simple exercise of “just splitting it down the middle” in reality is not so easy for many divorcing couples who have a wide range of assets.
Before courts start determining the asset division, the court needs to know an asset’s value and whether it is marital or not. Additionally, there is the question of whether maintenance (alimony) is appropriate, and if so, the amount.
If there are minor children, child support needs to be determined. For “support” calculations there must be a fair assessment of the income, cash flow and expenses of each party.
Finally, it is not unusual for one spouse to attempt hide assets from the other. Ferreting these out requires special skill.
Many divorce lawyers have an understanding of the basics, but what happens when the estate has more esoteric assets and sources of income?
A pedestrian understanding does not provide the necessary background and ability to understand the different nuances. The need for counsel with such skill and experience in dealing with these as well as one knowledgeable and conversant in financial matters is a necessity for a client to be properly represented.
Some assets involved in divorce matters require more than a passing understanding.
Examples are cryptocurrency like bitcoin, closely held businesses, professional practices, shopping centers, stock options, restricted stock, deferred compensation plans, pension plans, unique personal property and many others.
Business valuations can become complicated as well as subjective. Financially savvy divorce counsel have an appreciation for the subtleties in the valuation process as well as knowing professional valuators who can testify in a case, are adept and can explain the valuation process to the court in an understandable manner.
Such experts are affiliated with one or more of the following groups: National Association of Certified Valuators and Analysts, American Society of Appraisers, American Institute of Certified Public Accountants and the Institute of Business Appraisers — all of which require vigorous examinations and experience in order to become accredited.
Recognizing the existence of employee benefits is key to a full accounting of the value of assets available to an employee. Some of these include 401(k) plans, deferred compensation, supplemental retirement benefits for highly compensated workers, phantom stock awards and long-term disability insurance as well as health, dental, vision and life insurance, among others.
Benefits can carry many different titles so it is important to scour employee handbooks, financial statement footnotes, annual reports and Securities and Exchange Commission filings to gain an understanding of what is available.
Valuing these benefits and incorporating them in the parties’ statement of assets and liabilities provides a pathway to an accurate listing of what is in the estate and makes it easier for the court to consider who gets what.
The determination of what belongs to the marital estate and what is a party’s nonmarital asset can be complicated as well, involving careful tracing of accounts and transactions occurring over an extended time. In Illinois, all assets in a divorce case are assumed to be marital. The burden to show it otherwise is on the party making the nonmarital claim.
Premarital accounts over the years are frequently moved from one financial institution to another and possibly commingled into marital accounts. Obtaining documents showing the chain of movement from one account to another as well as identifying assets acquired with money from blended accounts is critical. These records need to be obtained as soon as possible because financial institutions’ retention policies only provide holding such information for a limited number of years.
Uncovering hidden assets is as much an art form as skill; only through years of experience can you become adept at understanding the clues that might help you locate the “hidden” account.
Typical ways that someone can bury an asset include collectibles of great value are recorded on the books of a closely held company at a value far less than their fair market value; life insurance is purchased at great cost with its cash surrender value deferred until some later date (after divorce); overpayment to the IRS beyond the actual tax liability; overpayment to other creditors; postponing raises, bonuses and stock awards and creating phantom debt that appears on a personal or business balance sheet but is really a contrivance designed to artificially deflate net worth.
These are just a few. The smart and the sneaky are creative and constantly conjuring new ways to suppress their real net worth. Trusts, both domestic and offshore, are some of the more current methods used to hide assets from spouses. Obtaining and carefully studying trust documents is a necessity to determine whether the trust assets can be clawed back into the marital estate.
A divorce attorney schooled and experienced in the world of valuation, accounting and financial detective work is worth more than his or her weight in gold.