In part one of our blog post with this headline, we discussed a variety of red flags to look for during the divorce process that may indicate a spouse is behaving badly. We also offered tips to better protect yourself against such behavior, as well as how to educate yourself about the divorce process and what to expect.
In this blog post, we will take our examination of bad behavior during divorce to a deeper level — a level not so apparent as some of the examples shared in the first piece. This blog post pertains most often to high-level executives at large companies who have complex benefits packages that a spouse may not know about, or fully understand. Bad behavior at this level can also occur if a spouse owns a business, and is trying to hide income, financial information or other details about the structure or success of this business.
Other examples include spouses who may try to deceive a spouse, attorney or others about bonuses, benefit packages, the value of a private business or special collection; or try to hide income, special compensation packages, assets, money or debts. These executives might also try to devalue retirement or pension accounts, arguing that they have no present day value until the earner retires. The good news is there are trained experts — Certified Divorce Financial Analysts (CDFAs), like myself, or Forensic Accountants — who can often find hidden financial information through tracing, and then use accepted methods to figure out current values in order to reach equitable divorce settlements.
Financial experts can find out if a spouse receives or will receive what is called Non-qualified Executive Compensation, such as bonuses, stock options, deferred income, restricted stock, or supplemental executive retirement packages. And what’s even more important, experienced and knowledgeable CDFAs can use formulas that calculate the present day value of such compensation, what percentage a spouse should receive in a divorce settlement and how best those funds should be distributed to the spouse in the divorce settlement per his or her unique situation.
Many times CDFAs can find evidence of special compensation plans by closely reviewing an earner’s paycheck stub and/or income tax documents or other financial statements. In some cases, records can be subpoenaed by your legal team directly from financial institutions as part of the discovery process during divorce. If the executive spouse’s company is publicly traded, and is a high-level executive, much of the company’s financial data is readily available in annual reports and other documents that are publicly filed with the Securities and Exchange Commission and other regulatory agencies.
So, in these cases, the best defense is a good offense. In other words, find and make copies of all known financial records, including paycheck stubs, refinancing forms, mortgage statements, loan documents, credit card statements, current credit reports for each spouse, income tax returns for at least three years, retirement account statements, investment accounts, appraisals for any collectibles, electronic copies of employer annual reports, if applicable, and any documents that include the sale of real estate or large ticket items, etc.
And don’t expect a divorce attorney to be able to help much at this level of financial complexity. They generally just don’t have this kind of training, especially in the area of federal income tax laws surrounding divorce finances, how to put a value on a small business or how to calculate the present day value of stock options, or a retirement or pension plan. When in doubt, schedule a consultation with a CDFA and bring lots of questions and any documents and knowledge of your marital finances you have. He or she can readily tell you if you would benefit from their knowledge and sleuthing skills.