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Recent Blog Posts
Utilizing a QDRO to Collect Back Support in High-Asset Divorces
It is a frustrating reality of divorce, but many ex-spouses do not honor the terms of their high-asset divorce settlement, especially when it comes to child support and/or spousal support. After what can be months, or even years, of drawn-out, complex litigation, the support checks the obligor spouse is supposed to pay stop coming, sometimes before the ink is even dry on the divorce decree.
Trying to collect back alimony or child support funds from an ex who refuses to pay often involves even more litigation and more legal expenses. However, one tool that many high-asset divorce attorneys are beginning to utilize in order to assure their clients receive the assets they are entitled to is the Qualified Domestic Relations Order (QDRO).
How to Protect Your Assets before You File for a Complex Divorce
One of the most important steps you can take before filing for a complex divorce is to protect your assets. This is especially critical if you expect the divorce to be contentious, and involve complex property litigation and other high asset issues.
To begin, make copies of all important financial documentation and paperwork from the past five years. Keep the documents in a safe place where your spouse will not be able to access them. Be sure to collect records of any bank accounts, investment portfolios, mortgage payments, retirement accounts, credit card statements, insurance policies, and income tax returns. Also, make copies of deeds to all properties owned by you and your spouse, as well as copies of titles to any vehicles and boats. These documents will help your attorney prepare your financial affidavits, as well as provide an accurate record of all the assets that make up the marital estate.
High-Asset Divorce May Trigger IRS Audit
For many people, going through a high-asset divorce can be a very emotional and frustrating time. They often cannot imagine dealing with anything that could be similar, or even worse, than the divorce process. However, there is an all too common occurrence many high-asset divorce litigants find themselves in—an audit by the Internal Revenue Service (IRS).
The IRS maintains one of the largest databanks in this country. The databank is not connected to any Internet server due to the classified information. But the agency is very much aware when someone gets married (tax returns must be filed either under married filing separately or married filing jointly) and when someone gets divorced (tax returns are filed either single or head of household).
Property Appraisals Critical in Complex Divorce Cases
If you are involved in a high asset divorce that involves complex property litigation, it is essential to have an accurate value of the property since it is all part of the marital estate. The estate will be divided between you and your soon-to-be ex-spouse. Therefore, you will want to ensure that all property, to which you are legally and financially entitled, is received.
To begin, you will first want to obtain a property appraisal for all properties owned by you and your spouse. Property values fluctuate; hence, make sure you have the most up-to-date dollar value. If not, you could be hurt financially if the market dropped since the last appraisal was completed.
As an example, let us say you want the vacation home you and your spouse co-own. The home was originally appraised in 2010 for $1 million. However, the most recent property appraisal shows the property is now worth $900,000. Had you gone with the old figure, you would have paid your spouse an extra $50,000 in equity. Additionally, you could also lose out if your spouse wants the property and you are paid the equity but are not using up-to-date property appraisal amounts and property prices have risen. Thus, this could mean less equity for you.
Another way to determine what a property is worth is to have a Comparative Market Analysis (CMA) done. A CMA looks at similar properties that have active listings, pending listings, and have recently sold. All properties reviewed are located in the same area as the property being evaluated. Most CMAs are performed by realtors.
Is Your Spouse Hiding Assets?
In many high asset divorces, one spouse will attempt to hide assets from the other spouse with the intention of denying that spouse his or her rightful share of the marital estate. However, an aggressive complex divorce attorney representing you decreases the odds of your spouse getting away with not disclosing his or her true financial worth.
There are steps that an attorney will take to uncover those hidden assets. Requesting your spouse's pay stubs, tax returns, cancelled checks, bank statements, brokerage account statements, and any other deposit accounts, as well as credit card statements, are all part of the discovery process. Those documents will be closely studied to see if there are discrepancies between what your spouse is claiming he or she has and what the documents say they have.
Protecting Your Assets in a Complex Divorce
It is a common scenario for couples who are facing a divorce: after years of being married and working together to pool resources and plan for retirement, a divorce leaves you suddenly looking at those golden years with half of those resources—possibly more—gone. Protecting your assets in a complex divorce case can be crucial for you financial future.
In a survey that was done by the National Foundation for Credit Counseling (NFCC), 25 percent of the married participants said they would keep financial secrets from their spouse. How would your spouse answer that question?
Study Shows Wives Take Hardest Financial Hit in High-Asset Divorces
According to a study conducted by the Institute for Social and Economic Research (ISER), husbands, especially fathers, benefit much more financially from divorces than wives. The study, Marital Splits and Income Changes over the Longer Term, revealed that when high-asset couples divorce, a husband's income increases by one-third of what it had been while married. However, a wife in a high-asset divorce can actually lose a significant amount of income, and this loss can last for years.
In addition, the loss of income for a woman who has gone through a complex divorce is even more profound if the couple has children. Typically, a wife has given up—or significantly slowed down—her high-earning career in order to take on the primary responsibility of raising the couple's children. Hence, this can cause quite a hardship when, years later in an attempt to re-enter the workforce after the divorce, a wife is unable to find a job at the same level as the one she gave up years ago.
Could Your Spouse be Hiding Money in Bitcoin Purchases?
Often in complex divorces, one spouse attempts to hide income and assets from the other spouse in order to avoid a fair and equitable marital estate settlement. There are several ways this can be done, including transferring assets to separate accounts or put them in a friend's name, delaying payments of commissions or bonuses, not billing clients or creating phony expenses (in a business) and overpaying the IRS.
However, there is a new way for spouses to hide money, and it can be almost impossible to trace. Bitcoin is a new, digital currency that was invented in 2009. The currency does not use banks and there is no government involvement or oversight. There are no fees and users can remain anonymous. In fact, even the person who invented Bitcoin is anonymous. He is only known by his alias of Satoshi Nakamoto.
Federal Agency Finds Huge Tax Gap in Alimony Deductions and Payments
Alimony payments are part of the final settlement in many complex divorces. A recent study by the IRS has uncovered major discrepancies between alimony deductions and alimony payments on 2010 federal tax returns.
According to IRS rules, alimony that is paid to someone under a high asset legal separation or divorce agreement can be used as a deduction from a person's income for purposes of paying federal taxes. Conversely, a person receiving alimony payments under a legal separation or divorce agreement is required to report that money as income on their federal tax return.
Complex Divorce Negotiations: Know the Real Value of Financial Assets
When a couple is involved in a complex divorce, there are usually a number of financial assets that need to be divided up between the two. However, financial advisors recommend that people who are involved in high asset divorces really examine the actual worth of the asset they are fighting for or willing to concede to the other party during negotiations.
The value of an asset may change when it comes to liquidating that asset, depending on tax liabilities and/or depreciation values. For example, if a couple owns a home that has $1 million in equity and they also have a 401(k) account that is worth $1 million, the actual long-term value of those two assets is different.
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