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Divorce Strategies Group

Denise French

Dividing Property

What is a Certified Divorce Financial Analyst or CDFA?

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It seems incredibly unfair that at a time when you are dealing with the emotional stress of separating from your spouse, you also have to deal with worrisome and complicated financial issues too. As much as any other time in your financial life, it is vital to get professional help with your money questions when you are experiencing a divorce. One person in particular who take a lot of weight off your shoulders is a Certified Divorce Financial Analyst or CDFA®.    For many clients, divorce is the largest financial transaction of their lives. The role of a CDFA® professional is to address the special financial issues of divorce and help litigants achieve a settlement that will work both today and in the future.

IDFA Institute for Divorce Financial Analysts

Prerequisites

The Institute for Divorce Financial Analysts (IDFA™) is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena.  The IDFA sets the standards for all CDFA professionals.  The eligibility requirements for CDFA’s are established by the Board of Advisors and reflect the fact that a CDFA is not an entry-level designation but an advanced program.

Individuals with a minimum of three years of professional experience in finance or divorce and a Bachelors degree are eligible to enroll in the CDFA® Program. IDFA will accept ten years of professional experience from those candidates that do not have a Bachelor’s degree. This includes experience as a financial professional, accountant, or matrimonial lawyer. Candidates should also have working knowledge of financial calculators before purchasing the program.

Skillset of a Certified Divorce Financial Analyst

Divorce Financial Planning is the application of the discipline of financial planning to settlement strategies in divorce. The process requires the synthesis of tax, insurance, retirement and other areas of knowledge with their specific application to divorce. CDFA holders must possess experience with a and a strong knowledge base of a multitude of divorce related financial and legal issues, including:

• Personal vs. Marital Property
• Valuing and Dividing Property
• Retirement Assets and Pensions
• Spousal and Child Support
• Splitting the House
• Tax Problems and Solutions
• Expert Witness Testimony
• Tax Law and Financial Issues Affecting Divorce

 

divorce financial solutions

Maintaining the CDFA Designation

Once a candidate completes the CDFA® course, the designation is valid for one year, after which a fee must be paid annually.  To assure continuing competency in tax codes, legislative and other ongoing developments in the field of divorce financial planning, a candidate must report 15 hours of divorce-related continuing education every two years.

Code of Ethics

The Code of Ethics and Professional Responsibility is provided as an expression of the ethical standards that IDFA has adopted and every CDFA professional has agreed to abide by. The code applies to every CDFA designee and candidate in conducting divorce-planning work.

1. Integrity: Maintain the highest standard of honesty and integrity when dealing with colleagues, IDFA, clients or lawyers.

2. Competence: In addition to satisfying the continuing education requirement needed to maintain the use of the designation, every CDFA professional should serve their clients competently. Therefore, acquiring the knowledge and skill necessary to do so in the area of divorce planning is required.

3. Objectivity: Objectivity requires a CDFA professional to be intellectually honest and impartial. Regardless of who hired him or her, a CDFA professional will always be objective when dealing with clients and their lawyers.

4. Fairness: To alleviate the risk of potential conflict of interest as well as to not confuse the public, CDFA professionals should separate their financial practices and their divorce-planning practices to ensure divorce-planning recommendations are made independent of the potential financial planning relationship.

5. Confidentiality: CDFA professionals shall hold client information to the highest standard of confidentiality. Short of client consent or appropriate legal process, a CDFA professional shall not release any information about their client before, during or after the divorce.

6. Professionalism: A CDFA professional’s interactions shall project the highest level of professionalism. Whether dealing with clients, lawyers, IDFA or any of its partners or subsidiaries, a CDFA professional will behave in a professional manner.

7. Scope: A CDFA professional, by education and training, is a specialist dealing in the financial issues of divorce. Working alongside the lawyer who is licensed to practice law, a CDFA professional must never (unless licensed to do so) advise clients on their legal rights.

8. Compliance: A CDFA professional will comply with all the laws related to the business they conduct and report to IDFA any actions by other CDFA professionals that are illegal or in violation of this code. In addition, a Certified Divorce Financial Analyst professional will comply with any requests from IDFA for information regarding any complaints brought against him or her. If IDFA, after comprehensive investigation, decides that either suspension or revocation of the CDFA designation is the proper remedy, a CDFA professional will comply with the order.

9. Unauthorized Practice of Law: A CDFA professional understands that in order to practice law, one has to be licensed. Under no circumstances will a CDFA professional represent that the IDFA certification is a license to practice law.

10. Support: A CDFA professional will always support our profession and IDFA as the main driving force behind the progress of the profession.  Additionally, a CDFA professional will not collude, debase or discredit IDFA or the profession

 

charts and calculatorDo you need a CDFA?

Simply put, if you and your spouse have assets of significant value, the financial ramifications can be quite complicated. At this emotional time, it’s best to trust someone experienced with these kinds of issues rather than trying to learn on-the-fly. Money mistakes made at this time could have far-reaching consequences for your new life.

How do I find a Certified Divorce Financial Analyst?

The easiest way to enlist the services of a CDFA is to ask your divorce attorney for a recommendation. If you want to find one on your own, the Institute for Divorce Financial Analysts can help you locate an analyst in your area. Find them here.

You will likely find having one less thing to worry about—or several less things—during this difficult time is of tremendous value to you. A CDFA can lift some of the burden from your decision-making load.  Schedule an appointment today with Denise French, CDFA who not only has the professional experience to help you with the finances of your divorce, but she’s walked through her own divorce and can help you navigate yours.

Dividing Financial Assets During Divorce In a Volatile Market

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The U.S. stock market continues to be a daily surprise – sometimes shock – to investors and businesses across the country.  While there’s never a promise of financial gains in the stock market, there are times, such as now, during which anxiety about your financial security is heightened.  Divorce is also a time when financial anxieties grow.  When the stock market and economy go crazy, you might worry you’d be crazy to pursue a divorce in a volatile market.

Economic fears are understandable, but you can get divorced during a tumultuous market and still come out with your financial security intact.  You will just have to be extra careful and strategic during property division negotiations.  This is also a critical time to enlist a Certified Divorce Financial Analyst (CDFA) on your divorce team.

divorce and your 401k

Know Type of Accounts and Cost Basis

If you are like many working couples, you have money saved in retirement accounts like an IRA or 401(K) as well as other money invested in the stock market.

A retirement account is also called a qualified account.  When you take funds out of an IRA to cash in your bank the money is taxed fully as if you had worked for a company and earned that money.  If you are under 59.5 years old you may also be hit with a 10% penalty on IRA accounts taken out in cash.  Conversely, if you cash funds out of a 401(k) or other ERISA governed group retirement plan owned by your spouse, you will still be taxed on those funds, but you will not pay the 10% penalty if you take them out pursuant to a divorce and a Qualified Domestic Relations Order or QDRO.  This all applies to a cash distribution.  Any retirement funds you move into your own IRA will have no tax due.

During volatile markets when the values are low, it will be wise to work with a Certified Divorce Financial Analyst to determine if now is the best time to convert these funds to a Roth IRA. If you do so, you will pay tax now on the lower values but not pay any tax in the future on the growth of the account or distributions from the account years down the road at retirement age.  Further you can also use ROTH IRA funds within certain parameters, for a first time home purchase or for education.

The non-retirement accounts are non-qualified accounts.  The taxes related to these accounts are handled differently than taxes tied to qualified, retirement accounts.  When addressing non-qualified accounts and stocks, pay attention to cost basis.  The cost basis of an individual security (stock) is the cost you and/or your spouse paid for it at the beginning.  Let’s assume you both decide to split the value of the stocks.  You want to look at more than the current value of your investments.  You need to know which stocks have increased in value since you bought into them and which have decreased in value.  This might sound backwards, but the stocks that have decreased in value compared to their cost basis can be better for your finances in a divorce.  Why?  Simply because of taxation.  If the government sees there’s been a financial loss, you aren’t taxed for that.  If you only get the share of stocks that have increased in value, the taxes you pay in capital gains could result in a lower payout for you.

stock options

Stock Market Risk Tolerance

Another factor to consider is the experience and comfort of the spouse who originally managed the account versus the spouse who is receiving the account.  For example, just because the spouse who traditionally handled the accounts is very aggressive and has a comfort level with stock market risk, the other spouse taking over those funds may not.  The accounts may need to be moved into a different set of stocks or other assets for the comfort level of the spouse taking over the stock account, especially in a turbulent market.

We had a client who’s spouse was a financial advisor.  He was very comfortable with stock market risk and understood complex investment concepts.  His wife had never had to worry about their investments.  We took over her account after the divorce and found it was invested in an extremely aggressive S&P 500 2x portfolio which meant it moved like the S&P 500 did, only twice as far.  In up markets that is great, they captured double the return of the markets.  However, in down markets it would be catastrophic.  We moved her into a more conservative portfolio which proved to be very helpful when the markets fell.

The Wording Will Make All the Difference

When dividing divorce assets and debts, the estate will usually be divided as of a certain date.  In Texas, you will typically be mandated to attend at least one mediation.  When you choose to finalize the details of your estate in mediation, that tends to be the date of division.  After mediation, attorneys will draft your divorce decree from the mediated settlement agreement, review it with you and then schedule a date and time to attend court to finalize your divorce.  These steps take time.  The date of division could be months away from the actual date of divorce (when you can start dividing the assets) which is why the wording in your division is so important.

For those who finalized the division of their estate in mediation in December of 2019 but didn’t get divorced until March of 2020, the wording would be critical.  For example, if you had stated you wanted a set amount you would be thrilled because the market losses would not affect you (unless the account became smaller than what you were awarded). Conversely, if you agreed to take 50% of the estate including gains and losses in the account you will participate in the market swings whether up or down.

No matter which option your choose and agree to in mediation, a set dollar amount or a percent of the estate, you will want to understand what you are choosing and have some level of control over the assets in such a volatile market.  This should provide peace of mind in knowing roughly what you are getting in your estate settlement.  You can also request the funds be put in more conservative investments while the divorce finalization is pending.  You do not have to sit in fear throughout this process, you just need to have help from someone who understands how this works.

S&P Index History - 1960-2020

Divorce in a Volatile Market: Keep Calm and Invest On

It is very common within a marriage for one spouse to control the investment decisions and the other spouse to not.  If you were the spouse who did not make investing decisions, you aren’t alone in not fully understanding how the markets and investments work.  For many who get divorced, the marriage ends and, suddenly, they are left wondering how to manage a stock portfolio.  This new post-divorce reality can lead to anxiety.  Worry about affording life after divorce, along with the felt ignorance when faced with the stock market, can result in a knee-jerk financial decisions.  Many with less experience running the finances will choose to simply cash out all the stocks they received through the division of assets.  Making the decision to cash out from an emotional place may provide some immediate relief; but could really hurt you in the long run.  While cash is the best place for an emergency fund and for safety for part of a portfolio in a falling market, it is also the one asset class proven to lose money to inflation over the long term.

A focus on financial planning for the future, however, can be a growth opportunity after divorce, both in the metaphorical sense and in terms of your net worth.  The financial markets can be your friend.  That may be difficult to believe, particularly at times when stock market volatility is an everyday headline, but the facts are clear: the US stock market is one of the best investments you can make.  History of the stock market has shown investing long-term is a strategic way to financially survive, even with volatile markets.

You Don’t Have to be a Financial Expert

When you decide to divorce in a volatile market, you aren’t signing up to become a financial expert.  However, it is wise to hire one.  During difficult market times it can be very scary but enlisting a Certified Divorce Financial Analyst or CDFA who is well versed in both the details of a divorce financial division and stock markets can be very helpful.  Many CDFA’s are experienced financial planners and advisors who have been through their own divorce and understand what you are going through both professionally and personally.  These professionals understand the markets and investing.  They are also trained to work specifically with divorcing couples and individuals and understand how divorce finance works.  These professionals can help you as they only focus on the finances a divorce case, and will work alongside you and your divorce attorney.

If you have questions or concerns about the financials of your divorce, schedule a call or video conference with us today to get the answers you need.

Mediation versus Court in Divorce

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“I’ll get my day in Texas divorce court!” ……. “The judge won’t like what you did!” …….. “I’m going to spread your dirt all over the courtroom!”

We’ve all heard someone say these things. Guess what… You really don’t want your day in court! Here’s why:

Expensive Legal Fees

money and divorce

The longer you drag out the process, the more your estate will suffer. You could spend $50,000, $60,000 or more on the divorce process and that is less money for you to divide! Wouldn’t you rather use that money for… hmmm… ANYTHING ELSE?? Texas divorce court costs so much money because there is so much preparation. Court is war. You want your attorney (or lead warrior) to be fully prepared which requires time and information. We’ve seen multiple families spend $50,000, $60,000, $100,000 or more on their divorce. Fighting just to “get him” or “nail her” could likely just transfer your kids college funds into your lawyer’s kids’ college funds without much for you to show for it.

Time in “Limbo”

Divorce is beyond painful. I know!! I’ve been there. I’ve sat in front of the judge and even though I “won” that battle, the war was lost by everyone in our family. It was excruciating. I know there could have been a better way to achieve the same goal without the long, drawn out battle which cost us so much effort, time, energy and hurt our child. As long as you are in the process of divorce, it will be impossible for you to begin the process of healing and moving on with your life. Ask yourself how much time you really want to spend in this “limbo” state.

A Stranger Deciding the Future of your Family

The stranger in the black robe that has never met you, your spouse, or your children will be deciding your future and more importantly your children’s futures! To make it worse, they’re basing these decisions based on a fraction of information they’ve been given about your life… and then a fraction of THAT is what they’ll actually consider relevant. Frightening!

Mediation

from problem to mediation story

In most Texas counties, you will be required to attend mediation before the court will hear your case. For the reasons stated above, embrace the idea of creating solutions for your future that will work for both of you. This is your chance to keep control of what you really want while creating a cooperative environment of giving your spouse what’s important to them as well. There is a solution – it may take hours to get there, but there is a solution. You only need the right people to help you find creative settlement options. You need a strong attorney and if your estate is of any significant size and/or you are middle age or older, you’ll need a financial expert helping you as well.

Preparing for Mediation

Your attorney.

Your attorney is your strongest ally and support. They are there for legal counsel and guidance. You hired them, now trust them! They know the law, the court you are in, and have walked through thousands of divorces before you.

A Certified Divorce Financial Analyst or CDFA®

financial freedom

While attorneys know the law and the courts, a CDFA knows divorce finance and tax. We are financial advisors specifically trained to work with divorcing clients. I’ve been the client so not only do I understand the work professionally, I understand it personally. When you have property, investment accounts, savings accounts, retirement accounts, etc., it’s important to realize how you split things today will have a significant effect on your future. We have saved clients thousands of dollars in tax savings, helped create win-win solutions, and provided peace of mind by using the settlement options in mediation to create financial plans. We help you by working out those details in mediation before you sign an agreement. Leave mediation knowing you made informed financial decisions and with a clear vision of your future.

If you’re facing Texas divorce court, call Divorce Strategies Group!! You only have one chance to get the estate division right – having a financial expert on your team just makes sense!

Life Insurance & Divorce

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Many of our clients come to us before divorce mediation with some type of life insurance. The question we hear weekly is “Can I keep the life insurance policy in the divorce?” Well, it depends. You can keep many types of contracts, but you need to know what you own before you decide who is keeping what. There are many variables in a life insurance contract and other questions you also need answers to. Are you the owner? Is there cash value? Can you remain as the beneficiary when you are divorced? It’s important to understand the parties and their rights in a life insurance contract, how your state treats ex-spouses, and the basic types of contracts.

Texas divorce resources

The parties involved

The Owner – This is the person or entity who has control over the policy, can gather information on the policy from the carrier and has control to change beneficiaries. This person or entity has total control over the policy and unless blocked, can change the beneficiary at the insurance company level.

Annuitant – This is the person whom the policy is based on. If this person dies, a death benefit is paid. Often, the owner and annuitant are the same person, but not always.

Beneficiary – This is the person who receives the death benefit if the annuitant dies. A primary beneficiary receives the funds first. If this person dies before the annuitant or with the annuitant, the contingent beneficiaries receive the funds. In Texas, per Texas Family Code 9.301 in the situation of an ex-spouse who has not been re-designated as the beneficiary after the divorce, the ex-spouse will be skipped over and the other primary and/or contingent beneficiaries will be paid.

forensic accounting

Paying a death benefit to the ex-spouse

In Texas, if a spouse was designated as a beneficiary before the divorce and not re-designated after divorce, and not designated in the divorce decree as the beneficiary of the policy, he/she is written out and/or skipped over by the life insurance company per Texas Family Code 9.301. For example, Tom purchases a 20-year term policy for $2 Million and named his current wife Susan as the primary beneficiary and their three adult children equally as the contingent beneficiaries. Seven years later Tom and Susan divorce and the policy remains unchanged. It’s a term policy worth nothing so it was, honestly, just forgotten in the divorce negotiations. It was not addressed at all in the divorce decree. A year after the divorce, Tom dies suddenly of heart failure. In this case, Susan may not receive the death benefit, the children may instead.

If Susan had been written into their divorce decree as the beneficiary of the policy the insurance company would review the decree and likely pay Susan, however, the interim stress and strain could all be thwarted with a new beneficiary designation with the insurance company after the divorce.

Irrevocable and revocable beneficiary

Even if the ex-wife is re-designated as the beneficiary after the divorce, the owner still has control to change a regular, revocable beneficiary – no matter what your divorce decree states. We strongly suggest the ex-spouse make you an irrevocable beneficiary if you want to remain the policy beneficiary. As an irrevocable beneficiary you cannot be written out as beneficiary without your consent. For example, let’s assume instead of dying a year after the divorce, Tom remarries Daniele. Tom makes Daniele the primary beneficiary after they are married, even though the Texas divorce decree states that Susan should remain primary beneficiary of the same policy. Then a year after marrying Daniele, Tom dies. We are still within the original 20-year term period only now the insurance company has a designation from Tom to pay his current wife Daniele, so they will likely pay Daniele. The divorce decree states that Susan should remain the beneficiary – so at the very least there is a fight on Susan’s hands and she may not in the end receive the funds at all. Had Susan and her divorce attorney mandated that Susan be designated the IRREVOCABLE beneficiary, there would be no confusion. Tom could not have made Daniele the new beneficiary or he would have had to open a new policy for Daniele alone.

life insurance and divorce

Types of policies

Term Life – This is simply a term life insurance policy meaning you pay a certain premium for insurance for a certain term or period of time. If the insured dies within that term period, the beneficiary receives the death benefit. If the owner stops paying premiums, the policy lapses and is gone. There is no cash value with a term policy. The policy is worth nothing today and only worth something if the annuitant dies. This policy should be on your divorce estate spreadsheet, but the value is $0. It’s the death benefit that is worth something and conversely, costs something each month, and it should be discussed in the divorce negotiations especially if you still have minor children. While child support is typically an obligation of the estate, that obligation would be far less than a million or multi-million term life policy.

Whole Life Policy – This is permanent policy that pays either a dividend or a set interest rate. As with term life, regular premiums are due with whole life policies for a predetermined period. Whole life can grow over time, but it is costly in the early years. You pay a premium for the cost of insurance in the earlier years only to have that cost not rise in later years. These policies have cash value and should be listed with that value on your divorce estate spreadsheet. The policies should be discussed and negotiated for in the divorce. There is a monthly premium for these policies as well and that should also be discussed and negotiated.

Universal Life Policy – This is a permanent policy that, like whole life, has cash value. Universal Life policies are more flexible as there is no set premiums due. There were illustrations ran when the policy was purchased with what the parties agreed to pay, but no mandated premium payments. If you don’t pay the premiums, the policy will use the cash value to pay the premiums. If no premiums are paid, it will lapse only if there is insufficient cash value to pay premiums. Universal policies utilize some type of underlying investment – the investment can be a fixed rate, a mutual fund type of account in the markets or an indexed policy tied to the markets but unable to technically go below 0% if the markets have a down year. Most of the policies we use with our investment clients through our sister firm, French Financial Group, are universal life policies are they are more flexible, have better options for growth and can be morphed to use for either tax free cash later in life for the owner or death benefit for their heirs. This is certainly an asset to go on the estate spreadsheet to be discussed and negotiated.

An in-force illustration can be run on the universal policies and the whole life policies. These illustrations will show how long you have, based on performance and your specific contract parameters, to keep the policy and use the cash value for premiums. These illustrations take several days to run, so order them well before your mediation date.

If you have life insurance or other financial questions call us. We offer strategy sessions to help you understand what you own and develop a plan for your future.

Divorce Settlements Gone Wrong

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John and Susan are very typical clients we see in our office regularly. They are educated. John makes a good living as an MBA who works downtown at a financial firm. Susan was a stay at home mom for a while but has a degree in marketing and has recently re-entered the work world. She currently makes a fraction of what John makes, but that is expected to grow over time. They are knowledgeable about what they own and what they owe. They, logically, assume dividing their estate will be simple. How many times have we heard; my divorce case is simple? While logically it may seem simple, it’s usually not in reality. In addition, tax issues may slant a 50/50 division into more of a 60/40 division – which can cause very hurt feelings a few months after the divorce. Their mediation in Texas could have gone very different ways.

Here is an example of a ‘simple’ divorce that proves to not be so simple and how this 50/50 division went very wrong.

hide assets in divorce

The Estate

John and Susan own the following:

Primary Home: $750,000 Value, Mortgage Balance $350,000 = Net Equity $400,000
Secondary, Vacation Home: $400,000 Value, No Mortgage
John’s 401k: $450,000
Checking & Savings: $50,000
Total Net Assets: = $1,300,000

financial audit of divorce settlement

Their Solution

Their kids are grown, and Susan determines that she cannot really afford the primary home on her own. So, John takes the primary home and Susan takes the secondary home. Susan is 53 and wants to stay close to their kids in Texas so she decides to sell the vacation home to purchase her own home. John initially decides to stay in the primary home for a few more years and then sell it down the road to downsize. This is the logical division of assets the couple decides to do:

John: Primary Home: $400,000 Net Equity
John: Half the 401k $225,000
John: Half the checking $25,000
John Total: $650,000

Susan: Secondary Home: $400,000 Net Equity
Susan: Half the 401k $ 225,000
Susan: Half the checking $25,000
Susan Total: $650,000

A perfect, 50/50 split right! No problem. This is simple. Well, it is on paper, but this 50/50 is really a 62/38 division after taxes.

The Reality

John decides he doesn’t want such a big house to upkeep, so he sells it right after the divorce is final. John sells the primary house for $760,000. He pays off the now $345,000 mortgage and pays 8.5% ($64,600) in closing costs and realtor fees for a net equity of $350,400. They purchased the house 10 years prior and put $300,000 down the home and added a pool for $50,000. His net cost basis in the home is $350,000. He has zero tax liability as he has $250,000 exemption as a single person.

Susan sells the vacation home and purchases a new residence for herself. She is only 53 so she is going to take advantage of the opportunity to withdraw funds from her spouses 401k in divorce without the extra 10% penalty, but she still owes tax on the withdrawal. She does this for a financial safety net while she re-establishes her career. Susan sells the secondary home for $405,000. She also has 8.5% in closing costs or $34,425. The property had been purchased for $170,000 and $30,000 was put into a new back patio so her basis in the home is $200,000. Susan assumes her gain of $170,575 is well under her personal exemption amount of $250,000. When tax time comes around the next year, her accountant looks at her with big eyes and breaks the bad news. The personal exemption is only applicable to a primary residence and you must live there for 2 years in order to use it. Since she didn’t, the entire $170,575 is taxable at 15% netting her $144,989. Let’s not forget, Susan doesn’t have the income that John has so she takes $100,000 of the 401k and moves it into cash and the other $125,000 she moves into an IRA for herself. The $100,000 is treated like ordinary income and taxable to her. She owes $28,000 in taxes off the 401k funds she took in cash.

This is what each party really kept in the divorce:

John: Primary Home: $350,400 Net Equity
John: Half the 401k $225,000
John: Half the checking $25,000
John Total: $600,400

Susan: Secondary Home: $144,989 Net Equity
Susan: Half the 401k $125,000 into an IRA plus $72,000 cash from the 401k, the remaining $28,000 goes to the IRS this year for taxes
Susan: Half the checking $25,000
Susan Total: $366,989

Total Tax Effected Estate: $967,389

The net effect is not a 50/50 – within one year of the divorce, given the withdrawals that were taken, they had a net tax effected estate of $967,389. John receives $600,400 or 62% while Susan receives $366,989 or 38%.

There are, typically, no do overs in the final estate division. If Susan had known what was going to happen with the primary home and the secondary home net of taxation – she may have not been so eager to agree to this in a mediation in Texas. Further, if she knew the tax ramifications of taking funds out of the 401k, she may have discussed taxation a little further before determining the 50/50 division or have asked for support of some kind to offset this taxation hit in today’s dollars. A Certified Divorce Financial Analyst could have really helped uncover these issues before a Mediated Settlement Agreement was signed in mediation in Texas or before the divorce negotiations were finalized.

employer contributions

Your Reality

If you and your spouse are entering a do it yourself divorce, we commend you on trying to hash this out cooperatively rather than in a long, drawn out battle. However, it’s important to consult with professionals before signing anything. It is wise to review your estate division with a Certified Divorce Financial Analyst who can walk through financial pitfalls, such as taxation, in your divorce settlement. At Divorce Strategies Group we understand divorce financials, we understand divorce mediation in Texas, and we can help. Call us at 281-210-0057 or schedule a strategy session today to get started!

Common Ways to Hide Assets in Divorce

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Have you ever wondered if the opposing party in a divorce case has actually disclosed all the assets of an estate?  Do you feel like your spouse might hide assets in divorce?  

Common Ways to Hide Assets in Divorce

This article covers creative ways people have hidden assets in divorce and conversely, ways we have found those assets.  We feel like the best way to talk through a divorce is with integrity and dignity without lying about assets.  Often, doing so could backfire on you.  However, if you feel your spouse is lying about money, here are a few places to look.

Excess ATM Cash Withdrawals

Excess cash withdrawals from ATM’s are fairly common.  One spouse will start taking small withdrawals on a regular basis from ATM machines.  Instead of using the cash for legitimate purposes, they stockpile it and forget to mention this as an asset when walking through the estate valuation.  They claim they have spent all the money and have no cash on hand when in reality they have a lot of cash on hand.   We often are able to track exactly how much cash was spent, on average, in normal conditions and then compare that to the months leading up to the divorce and in the divorce months.

Stealing Hard Assets

Some people will literally “hide” assets.   For example, imagine if a couple has a lot of jewelry that’s been accumulated over the years from various sources. Prior to inventorying, one party takes a few select items from the jewelry box and hopes the other party doesn’t notice anything is missing.

This can also be in the form of hiding items in safety deposit boxes whether they be straight issue bonds in coupon form, stocks in issue form.

hide assets in divorce

Another form of stealing cash is having cosmetic surgery or taking an expensive lavish trip soon before requesting the divorce.

Overpaying Debt Instruments & the IRS

One way to having a cushy safety net is by overpaying the IRS.  An unethical spouse can change their W2 withholdings if you are employed by a firm.  Doing this creates an account you know will be refunded when you do your taxes the next year and it lowers your spendable income today for purposes of child support and negotiation.   If you are self-employed your ability to overpay the IRS can be in the form of quarterly payments from company distributions or again, increasing your W2 withholdings if you pay yourself.

If a credit card is overpaid and the credit balance sits for a while, the credit card company will refund the overpayment, usually in the form of a check. The party that overpaid the credit card can then take that check and cash it. To the other party, particularly those who aren’t close to the household finances, it just looks like credit card debt was paid.

hide asset in divorce

Self-Employed Financial Games

Self-employed parties have many ways to attempt to hide income and assets in their business. Income can be hidden by increasing expenses or by paying a large expense that must be done but wasn’t budgeting for a few more years. For example, buying a huge piece of equipment you had originally planned to buy in a few years will lower your income which could lower the value of your business.

Self-employed people can overpay taxes with increases to their W2’s or increase their quarterly payments to the IRS.  Self-employed people can also delay being paid and sit on a large amount of account receivable until after the divorce.

In Texas and many other states, personal goodwill is not a community asset. Games can be played here to try to increase personal interest and personal involvement in business as to decrease the value of the business in the community estate.

If you are considering divorce, it’s important that you have the right professionals involved. A Master Analyst in Financial Forensics ® (MAFF®) and a Certified Divorce Financial Analyst® (CDFA®) has the training to help uncover shady acts like the ones listed above. And here at Divorce Strategies Group, we have both the hearts and minds to help make sure your financial outcomes in divorce leave you feeling confident. It’s all about having the right people on your team. If you are concerned your partner will hide assets in divorce or need some professional divorce help contact us today.