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Divorce: Hidden Income and Assets

By: Attorney Kristen J. Vidas
Most divorcing spouses will tell you that they want “half of everything.” But if you do not know what “everything” is, how do you know whether you are really getting half when all is said and done?

The trick is to get as specific as possible in your asset investigation and not to rely upon the other party to be forthcoming with the details.

For example, we represent a woman whose husband works as an executive for a Wall Street company. When asked to disclose his income, the husband represented that his income was as it appeared on his W-2 and the parties’ joint income tax returns, copies of which he produced. With respect to his retirement assets, the husband represented that he had a rollover IRA and a 401(k) account through his company and produced statements for his account.

The husband’s disclosures, however, did not paint a complete picture as our subsequent investigation into his employer’s compensation and benefits structure proved.

With respect to his income, the husband failed to mention that he routinely received stock options as well as phantom shares of stock as additional compensation from his employer during the marriage. He also failed to mention that he had participated in an Incentive Compensation Plan and had deferred a portion of his bonus to purchase additional shares in his employer’s company. All of these additional forms of compensation will be subject to equitable distribution in our client’s pending divorce proceeding.

With respect to retirement assets, the husband did not volunteer that in addition to his rollover IRA and 401(k) accounts, he had various deferred compensation and savings plans through his employment. More and more, companies are offering their executives alternative forms of tax-deferred compensation, including participation in profit sharing plans, Rabbi Trusts, etc. As with the husband’s additional compensation, any compensation that the husband deferred during the marriage will be subject to equitable distribution in our client’s divorce action.

The above example highlights the importance of doing a thorough and detailed investigation into and an accounting of the income earned and assets accumulated during the marriage. While income tax returns and W-2s are a good starting place, it is imperative that your divorce attorney delves deeper into the compensation and retirement structure of your spouse’s employer to determine whether there is hidden income or whether there are hidden assets at issue in your particular case. Once you have a handle on the specifics, then you will know whether you are getting your equitable share of the marital estate.

It is also important to identify your spouse’s income level as well as each and every eligible account and/or asset as part of any final divorce agreement prepared on your behalf. That way, in the event you discover in the future that your spouse failed to disclose certain income or assets during the divorce proceeding, you will be in the best possible position to secure post-divorce relief.

 

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