You should listen to your instincts in a divorce if your spouse’s reported business assets and income seem to not add up. You may not know all of the details about his or her business, but you know in general whether your family is doing well financially. Your spouse may be misreporting his or her business income or hiding assets. Business fraud is both illegal and detrimental to your financial interests in the divorce. Only a thorough investigation of your spouse’s business can determine whether your suspicions are true.
Examples of Fraud
Your spouse may use employee benefits to hide his or her income, such as deferred compensation and stock options. He or she may not tell you about a company expense account that will reimburse his or her expenditures. However, a spouse has more opportunities to commit fraud if he or she owns a business. Your spouse may mislead you about the value of the business by:
- Not reporting or undervaluing business assets;
- Taking on additional debts that will be repaid after the divorce;
- Overpaying creditors with the intention of being reimbursed;
- Understating the business’s total value or growth potential; or
- Creating secret accounts or shell corporations for the purpose of hiding assets.
The value of your spouse’s business interests helps determine the division of marital property, child support, and spousal maintenance. The business may be a marital property, giving you a right to partial ownership or equitable compensation for its value. The business is also a major component of your spouse’s income, which determines whether your spouse is responsible for support payments. Your spouse can gain a financial advantage in the divorce by misreporting the business’s value. However, he or she may be lying to you in order to hide other illicit activities:...