Worried your spouse is hiding money? If you’re going through divorce, it’s worth doing a little investigating to find out.
If your suspicions are right, you’ll discover hidden assets to share. If not, you can set your mind at ease. Either way is a win.
Some women going through divorce decide to hire a forensic accountant. If you’re not sure what that is (and have images of the Law and Order “dun dun” sound when you think about it…) it’s an expert who specializes in examining the finances of an individual or business in a way that’s suitable for court. They can be a huge help in your divorce. But what if you can’t afford to hire someone, or don’t want to spend the money without knowing if it’s worth it?
We’ve got 3 (relatively) quick things you can do to be your own financial detective. This is certainly not an exhaustive list, but it’s a great place to start.
Don’t worry, you don’t need a degree in accounting to do this. We’ll walk you through easy steps to take to review each of the documents below.
*Before you start, you’ll need copies of your spouse’s bank statements, year-end paystubs, and tax returns. We suggest reviewing 3 years’ worth of each. That will give you a broader picture than just the last year. If you don’t have these docs, you have a right to request them as part of your divorce case.
1. Review bank statement transfers in and out.
What you’ll need:
Copies of your spouse’s (both individual and joint) bank statements.
What you’ll do:
Look for money being transferred out of the account (listed as a debit) to another account you don’t recognize. If it’s a transfer to another account at the same bank, the transaction might say “online transfer to ########.” If it’s a transfer to a different bank, you’ll see something like “electronic debit Schwab ######.” If you don’t recognize what you see, you know you’ll want to look further.
Don’t just look at money leaving the account. It’s important to know where money is coming into the account from also. The entry will be similar, but it will be a credit instead of a debit. Sometimes deposits show up as from an “unknown” source.
Banks have more information than what shows up on your statement. So if you can’t figure out where a deposit or transfer is coming from, the next step is to ask the bank.
2. Check out his total compensation - what he received and what he might have held back.
What you’ll need:
A copy of his year-end paystubs.
What you’ll do:
You’re looking for a) current income that you didn’t know about (like a bonus) and b) compensation and benefits that were earned but haven’t been paid out yet (deferred comp).
Not every paystub received during the year will list bonuses; that’s why the year-end paystub is so important. It should show the total of all bonuses that were paid out that year.
A year-end paystub should also let you know if your spouse is participating in a deferred compensation plan - meaning some of his income wasn’t paid but is being deferred to a later date. It won’t show up on a tax return until it's received, so you might not even know about it. Even if it’s not counted as income now for purposes of alimony and child support, deferred comp is still an asset that can have a ton of value.
3. Look at his tax return 1040, Schedules B and D.
What you’ll need:
A copy of the full income tax returns, including any attached schedules.
What you’ll do:
You’re looking for 2 things: 1) interest and dividend income and 2) capital gains and losses. Both will let you know if your spouse has stock and bonds or other investments you aren’t yet aware of.
Here’s a simplified way to check:
Each will appear on the 1040 (the first 2 pages of the tax return), so start there. Interest income is reported on line 8a or 8b. Dividends go on line 9a or 9b. If the total is $1,500 or less, that’s probably all you’ll find on the return. But if your spouse had more than $1,500 in interest and dividend income for the year, it has to be listed on Schedule B. There you’ll see a list of all the stocks and bonds that paid dividends and interest, and the amount received from each investment that year. So if you don’t even know if your spouse owns stocks and bonds, this is where you’ll find out!
Next, check line 13 of the 1040 for capital gains or losses. If there are any, you’ll also find a Schedule D attached to the return. That’s the place to report gains or losses from the sale of investments. Again, each investment has to be listed by name and amount received or lost.
If you’ve done this exercise and don’t understand what you’re seeing, or your review leads to more questions (like you find bank account transfers that you can’t trace), it’s a good time to bring in your lawyer or accountant to take it a step further.
Friend, you have a right to understand your financial picture, and to receive a fair settlement in your divorce.
So don’t let this information scare you. Or at least use that fear to do the work you need to protect yourself! It just might mean a bigger settlement for you. Or at the very least, a better night’s sleep.