Using a Forensic Accountant to Discover Hidden Assets / Income in a Divorce

By Heather Deskins, CPA/ABV/CFF, CFE, CVA

Have you ever worked with a spouse that was addiment about their spouse hiding assets and/or income, but they didn’t know how or where? One of the steps in discovering hidden assets/income is to look for ways assets or income can be undervalued, disguised or undisclosed. This could include:

  • Withdrawing unsuspicious amounts of cash, over a period of time, and stashing it away
  • Opening custodial accounts in the name of a child or moving funds to a paramour
  • Transferring investments accounts to a family member, friend or business interest
  • Purchasing items that may be overlooked or undervalued (e.g., antiques, coins, guns, tools)
  • Not disclosing deferred compensation plans, stock options, retirement accounts from prior employers
  • Deferring business contracts, pay increases, bonuses, or commissions
  • Concealing owner compensation from a business interest through personal expenses paid by the business
  • Overpaying federal, state or local taxes or other creditors
  • Overvaluing or creating fictitious debt

These are just a few ways people have tried and even gotten away with hiding assets and income. This list can go on even further, but I think you have the idea.

Once there is a claim of hidden assets/income, how do you go about proving it and determining the amount? One of the first steps in determining the amount of hidden income/assets, is to figure out how long the deception may have taken place. Has the spouse recently become secretive about the finances or has it been happening the past few years? Once a time period is identified, a benchmark can be established to decipher “the truth” versus “deception” based on the pattern of behavior. For example, three years ago, the spouse would withdrawal $300 a week for food and incidentals. Then all of a sudden, the spouse starts withdrawing $1,000 a week, with no explanation. Why the need for an extra $700?

One of the first places to look for hidden assets/income is the income tax returns. The tax returns can identify any income producing assets. For example, interest and dividend income on bank and investment accounts. By looking at the past three years’ tax returns, have the amounts been decreasing every year? If so, why? Among other things, the tax return identifies income from wages, business interests, rental property, and shows tax refunds applied to future returns.

Other key documents in identifying hidden income/assets include reviewing checking, savings, investment and retirement account statements for deposits (make sure all sources of income are being deposited, look at all deposits to determine its source) and withdrawals (to whom are large checks being written and account for large withdrawals).

Another tool to find hidden assets/income is to conduct a lifestyle analysis which establishes the standard of living during the marriage. If the amount of living expenses exceeds the amount of income, assets and loans being received, this may be a case of hidden assets/income.

When your client accuses their spouse of hiding assets/income, a forensic accountant can help by providing a detailed analysis of their findings. If you have questions regarding locating hidden assets/income, please contact P.D. Eye Forensics, LLC at 614.722.7914.

Heather Deskins, CPA/ABV/CFF, CFE, CVA

Heather Deskins,
CPA/ABV/CFF, CFE, CVA

Managing Member
P.D. Eye Forensics, LLC