Untangling family finances during divorce can take some digging. Your spouse may have assets that aren’t top of mind (restricted stock or Bitcoin, anyone?).
For those going through divorce, these usual suspects when it comes to the division of assets are the house, the bank accounts, the retirement accounts, and the credit cards. However, there may be other, less obvious assets.
Here are so-called hidden assets to be considered as you walk through the divorce process which we see on a fairly frequent basis.
Pension Plans and Supplement Pension Plans
If you or your spouse is a state or federal employee, you most certainly have a pension to consider. Private companies in industries such as oil and gas often offer pensions as well. Assets earned during the marriage in Texas are typically valued in divorce and divided, even if not in pay status at the time of divorce. These pension plans will need to be added to the marital inventory and a QDRO or DRO will need to be created and submitted to the courts to receive this future income.
High level executives at corporations may also have additional pension plans such as a Supplemental Pension Plan or Additional Payments plan. These are plans offered to key employees at some firms who are highly valued. They are a marital asset in Texas if earned during the marriage even though not in pay status yet. They are not as easy to find as pension plans so having a financial expert involved if your spouse is a highly valued employee at an oil and gas firm may be a wise decision. These plans cannot be divided via QDRO but are typically assets of the estate and have a value today even though these are not available until the employee retires. Some government plans also offer these if retirement is mandatory before age 62.
Bitcoin and Other Cryptocurrency
If your spouse has invested in Bitcoin and other cryptocurrencies, know there are a lot of different ways to hold these assets. They can be held at major investment companies like Schwab or individually as you would with stock certificates, and it can be difficult to trace. It’s also a still-emerging kind of investment and can be volatile. You might need to bring in a professional who has expertise in valuating cryptocurrency.
Has your spouse ‘loaned’ money to a relative? Has you spouse ‘loaned’ money to a close friend? Reviewing the bank or brokerage accounts may be necessary to find funds which have been removed from the estate if that is a concern in your case. If that has happened, those ‘loans’ can be placed on the marital inventory as an asset to be received in the future and given to the spouse who created the ‘loan’. In Texas waste claims or reconstitution claims can be added to the marital inventory. These are more complex and something you will need to discuss with your attorney.
Undervaluing Personal Resources
Estate division is not only about property and bank accounts. Jewelry, gun collections, coin collections, that rare record collection or model airplane collection could have significant value. Airline miles are standard protocol in divorces – they can be divided or valued and given to one spouse. Discuss any collections, antiques, or other valuable items in your home with your attorney.
With that in mind, we do not regularly value the day-to-day items in the house. Your couch and TV in the living room do not typically have a value on the marital inventory – those items are divided amongst the parties. If you need help doing so, discuss this with your attorney. We do recommend you take photos of or keep a log of items in the home so when it comes to division time, you have an accurate inventory of the items and can divide accordingly. No need to value those items, but they will need to be divided at some point.
Prepayment of Tax
If you have 1099 income or own a business, you likely make payments to the IRS on a quarterly basis. If so, overpayment of these taxes is a common way clever spouses can temporarily divert community funds in divorce. Anyone can send money to the IRS at any time online through IRS.gov. Fortunately, IRS tax payments are easily traceable with a printout from IRS.gov. The spouse with the social security number will need to log in and provide the data, but it is very easy to track. Also, if checks were sent to avoid looking at IRS.gov – that is easily traced by walking through bank accounts as well.
Another way we usually avoid this issue is splitting the year of divorce tax refunds 50/50 – so if there is an overpayment of taxes each spouse participates in the refund the next year at tax time.
If you suspect that your spouse may have hidden property you need to be particularly cautious when going over financial records and discussing these items with your attorney. Financial experts may need to be hired to review tax returns to find assets you suspect are hidden or value pension plans.
At Divorce Strategies Group we regularly review the tax returns to look for assets which may have been inadvertently left out (whether on purpose or not). We also have had experience with hundreds of cases involving various corporate and governmental plans; so, we know what to look for in most cases. If you think you may need a financial expert, discuss this with your attorney. If you feel like you are aware of items in the estate and are interested in a more collaborative divorce, schedule your complementary consultation to discuss Cooperative Divorce alternatives today.