This article was originally printed in the ABA Section of Family Law eNewsletter, May 2013.

The issue of “income available for support” in divorces can be huge, particularly if only one spouse works. The issue gets complex if the earnings of one or both spouses are non-traditional. Regular wages are usually easy to evaluate in a divorce case, while income from businesses, real estate, and other investments become more complicated.

As a general rule, there is latitude in state courts when it comes to income and what is included or excluded for support calculation. There are general rules about the most common forms of income, but they don’t cover every issue and they all have a bit of “gray area” within them.

It is important to know the tricky kinds of income and cash flow that come up in divorces, as well as the varying views of how and why they should be included or excluded. Some of the types of income or expenses that may be treated differently from divorce to divorce and jurisdiction to jurisdiction include:

Earlier this year, I recorded a Sound Advice podcast for the American Bar Association’s Section of Litigation.  When dividing shared business assets in a divorce, it is important to fully evaluate the finances of the businesses. It is impossible to fairly divide these assets if you do not dig into the financial details.

This podcast goes through the financial documents needed, including the tax returns (and which forms you should ask for, based on whether the business is a corporation, partnership, LLC, or sole proprietorship), the financial statements, and the detailed accounting records.

This article was originally printed in the ABA Section of Family Law eNewsletter, March 2013.

Experienced family lawyers are familiar with the common ways spouses attempt to commit financial fraud in divorce: hiding or undervaluing assets, overstating debts, concealing income, and inflating or fabricating expenses. All of these are done in an attempt to get more than the spouse’s fair share in the property division, and to influence the amount of support that will be paid or received.

Successfully advocating for your client involves more than just knowing that these things occur during the divorce process. You must also be able to identify the red flags that indicate the financial issue(s) must be investigated further. Some are easier to spot than others, but once you have identified two or three red flags, it is time to get a forensic accountant involved. The financial analyst’s experience with fraud and deception will be invaluable in evaluating the red flags and determining if there is something of substance to investigate further.

This article was originally printed in the Family Law Review, a publication of the Family Law Section of the New York State Bar Association, Fall 2012.

Family law cases often focus heavily on financial issues. Whether the parties to a case are of modest means or great wealth, both sides want their own version of what is fair. Unfortunately, this can lead one or both parties to hide income and assets. With the help of a financial expert, counsel can identify income and assets that might otherwise go undiscovered, and hopefully reach an equitable end to a divorce or child support case.

Sources of income and assets owned can be identified with the right documentation. Attorneys need to be familiar with some of the most common financial documents so they know what to request. Attorneys with financial knowledge can also help identify issues that may need further analysis in a family law case.

This article was originally printed in the ABA Section of Family Law eNewsletter, February 2013.

Forensic accountants and Certified Divorce Financial Analysts often use Quicken personal financial software to complete the lifestyle analysis in divorce cases. Unfortunately, Quicken is not the best option for accurately and thoroughly analyzing a couple’s finances before and during divorce.

Why is it used so often? For years, Quicken was one of the better options available for compiling and analyzing personal finances. Also, since a fair number of consumers use Quicken to manage their finances, divorcing spouses sometimes provide a Quicken file to the attorney, which may be used as a starting point for the lifestyle analysis.

This article was originally printed in the ABA Section of Family Law eNewsletter, January 2013.

We’ve all seen it before: A spouse owns and operates one or more businesses. Divorce is filed, and the “out” spouse is told that the businesses have little or no value. Further, there is no income available to pay support, thanks to the poor financial condition of the businesses.

How can this be when the married couple has lived a good life for years, always having more than enough money to pay for homes, living expenses, and vacations? It’s the case of the disappearing income and asset values, brought on by the divorce.

Child support, spousal support, and property division are often evaluated in light of the income of the each of the parties to a divorce.The parties fill out financial disclosure forms and purport to tell the court and the spouse the truth about their income. If one spouse is not truthful about his or her income, this can provide a great opportunity for the other side.

The spouse immediately appears to not be credible, and this can affect the entire case. If he or she is lying about income, he or she may be lying about other important things in the divorce.

The first step in evaluating claimed income is comparing it to documents that can confirm or refute the claims. This may include:

If you’re a family law attorney practicing in Wisconsin, you might want to consider attending a State Bar of Wisconsin CLE seminar being presented by Gregg Herman and Al Dassow on January 11, 2013. They’re talking about Tax and Tax Fraud Issues in Family Law.

Gregg Herman has been practicing family law since I was a little kid (he’s going to hate me for saying that), and I’m fortunate to run into him in my office building from time to time. He has blogs on family law issues, and I urge you to take a peek at his blog and put it into your RSS reader so you can keep up with it. He has been blogging faithfully for the better part of a year (no small feat!) and I am looking forward to reading more.

When one or both spouses have an ownership interest in a business, it is critical to get both income tax returns and financial statements for the entity. It is impossible to fairly evaluate the business and the income from it without both of these.

Many times we meet resistance from the spouse during discovery. It is common to hear “we already gave you the financial statements, why do you need the tax returns too,” or vice versa. Both are important because they provide different information. Occasionally the two will have identical information, but the vast majority of the time there will be different numbers and different levels of detail. We want as much information as possible on the business, so both are critical.

This article was originally printed in the ABA Section of Family Law eNewsletter, September 2012.

While it is common for one spouse to have control over the money in a marriage—be the major breadwinner, manage spending, and maintain control of financial documentation—family lawyers and their clients can increase the chances of finding hidden assets during a divorce by being aware of some of the schemes used to hide money.

Understanding the common schemes that may be used to hide assets and income can help the spouse in the lesser financial position protect himself or herself in the divorce; and, by knowing about these schemes, you can look for signs and hopefully limit the success your client’s soon-to-be-ex-spouse will have with them. Some of the more common schemes used to hide money in divorces include: