Social Media and Divorce

There is no doubt that modern technology is raising extra concerns for people facing a contested divorce. Thanks to the proliferation of social media, there is now more evidence than ever to show exactly what each partner did before and has done since the separation. This evidence can change the course of settlement negotiations and even hurt your chances of getting alimony or custody in a trial.

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How to Choose a Spokane Divorce Lawyer

A divorce is rarely stress-free. Not only do you have the emotional turmoil and financial uncertainty, but you may also need to navigate legal hurdles that often arise in a high asset or contested divorce. Knowing how to choose the right divorce lawyer is key in ensuring the process goes smoothly and your rights remain protected throughout your divorce. Here are a few questions you should ask when choosing a divorce or family law attorney:

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Does having another child lower child support?

This has very recently become a hotly contested issue in the Spokane County Superior Court.  The formal name for a requested reduction in support for another child is a “deviation for a child by another relationship”.    Typically, an individual who is being asked to pay child support has a child by a prior relationship.  In some cases, the individual completes a divorce or parenting plan action and then subsequently has another child by a subsequent relationship and wants to modify child support.   In past years, the Spokane County Judges typically granted the individual with the additional children  a lowered child support amount (deviation).  This was a fairly typical and common result. [Read more…]

How Long Does Spousal Maintenance (Alimony) Last?

Spousal maintenance, also known as alimony, is available to Washington courts in divorce and legal separation cases in order to make a fair and equitable distribution of the marital estate.  There are two primary factors that courts use in determining how much maintenance (if any) to award and for how long. These two primary factors are the length of the marriage and “need and ability to pay”.

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Can I Fix My Divorce Decree?

Sometimes errors are made in a divorce decree.   A common error is that some property has not been divided, for example a stock account was overlooked. Perhaps a business was valued incorrectly, and it turns out to be worth far more (or less) than the original estimate of value.  In some cases, assets or accounts have been hidden, and only discovered after entry of the divorce decree. Perhaps false or misleading values were provided in discovery.   When these things occur, can they be fixed after the divorce is entered? [Read more…]

Divorce in Washington Published

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In June 2014, Addicus Publishing released the book “Divorce in Washington”, which was authored exclusively by David Crouse.  Divorce in Washington is now available at the Amazon, Barnes and Noble, and Apple store websites. It is also available on Kindle, Nook, and I-Books, and at the Addicus Publishing website.  A courtesy book is always available to all firm clients.

Hidden Business Assets in Divorce Cases

In addition to the assets commonly hidden in the typical divorce case, business owners (particularly where closely held businesses are involved) may try to hide assets as follows. Closely held businesses most at risk are those businesses operated by just the spouse, or by the spouse and their family/friends. More often than not, one or more of the following is usually present in closely held businesses:

• Skimming cash from the business. This is especially prevalent in restaurant operations, espresso operations, construction/home maintenance fields, or wherever cash transactions are prevalent. Even where checks are involved, these checks are deposited into a separate account rather than into the business account.
• Salary payments to a nonexistent employee, with checks that will be voided after the divorce. A variation on this ruse is a salary payment to a actual person (known in legal circles as a “straw man”) to decrease profitability for purposes of child support, maintenance, or business valuation, with the payment recouped in some fashion after the divorce is final. Typically, this person gives the money back after the divorce has been long-completed or passes some other benefit (such as season Zag tickets in a recent case) to the business owner.
• Money paid from the business to a trusted third party such as the spouse’s father, mother, girlfriend, boyfriend or close associate. The money is either given back to the spouse after the divorce is final or diverted for the use of this relative (to the detriment of the marital community).
• A delay in signing long-term business contracts until after the divorce in order to lower the value of the business during the valuation process and also to present the business as being in financial straits for the purpose of reducing spousal maintenance or child support.
• Checks or other funds received near the end of the year which are then held until the following year to reduce business value or to avoid sharing with a spouse. The hiding spouse knows that the following year’s tax return will not likely be prepared until after the divorce is final. Similarly, where separation is anticipated, checks or other funds are held for deposit until after the separation to create the appearance of separate property.
• Purchase of non-essential capital assets in order to reduce income. This is a fairly common ruse in medical and dental practices. It is also prevalent in other businesses where substantial equipment exists.

The likelihood of discovering these various ruses increases dramatically where the attorney has extensive experience in business valuation cases. Use of a CPA with substantial experience in business valuation and accounting is also imperative.

Hidden Assets in Divorce Cases

Hiding marital assets during the process of a divorce is contrary to the fiduciary duty that each spouse owes to the other. Some spouses view the potential financial gain from hiding assets as being far more important than fair dealing. Hidden assets are often not easily found, especially those placed in the hands of third parties or behind trust or corporate documents.

Looking for hidden assets or unreported/under-reported income often involved the careful review of hundreds of pages of financial documents and the discovery process can test the resolve of even the most dedicated litigators. Proving the existence of an asset and proving it is part of the divisible marital estate is indeed a challenge. The individual hiding assets has a distinct advantage over the attorney who tries to discover them. This attorney seeking to find hidden assets must use a variety of discovery methods to increase the odds of locating the missing asset or income.

The following list reflects areas that have the potential for the hiding of assets or income:

• Bank or investment accounts. The existence of hidden bank or investment accounts is probably the most prevalent form of hidden assets.
• Hidden income unreported on tax returns and financial statements.
• Collusion with an employer to delay bonuses, stock options, or raises until a time when the asset or income would be considered separate property. While always possible, this is even more prevalent where the employer is a closely held business.
• Debt repayment to a friend for a phony debt.
• Expenses paid for a girlfriend or boyfriend, such as gifts, travel, rent, or tuition for college or classes.
• Stocks, mutual funds or other securities
• Stock Options – Stock options, not yet exercised but given as part of a compensation package to an employee, are often undisclosed unless the right questions are asked.
• Farming assets – “Watch the hay disappear.” Farm assets are a good candidate for aerial scouting.
• Commissions not yet paid/contingency fees not yet paid. This often occurs hand in hand with collusion between the spouse and their employer.
• Tax credits, carryovers and refunds – The parties may be entitled to credit previous tax losses against income and to carry this credit forward annually in increments. Similarly, tax refunds require a determination of whose name is the check coming to or what account it will be directly deposited into.
• A custodial account set up in the name of a child, using the child’s Social Security number. Deposits and withdrawals can easily be made without an unsuspecting spouse knowing.
• Hobby collections (particularly baseball cards, coins and stamps) as well as gold and silver – These should be itemized before dissolution if possible and appraised as soon as possible. This is one of the quickest assets to disappear and unless immediately accounted for, will never be fully discovered.
• Antiques and artwork – Antiques, paintings, sculptures, and carpets are often located at the spouse’s place of business.
• Frequent Flyer miles- A potentially valuable asset which is frequently overlooked but readily discoverable.
• Vehicles, boats, ATV’s, tools, firearms and other household goods. Like hobby collections, these assets can quickly disappear after separation and should be quickly documented and/or appraised.

By no means is this list of potential problem areas exhaustive. A properly motivated spouse can hide a myriad of assets. Instead, this list represents hidden assets commonly seen in dissolution actions where a spouse is inclined to deception. Having identified common areas of abuse, the inquiry then turns to how these hidden assets can be discovered. This is a multi-faceted approach involving the analysis of tax returns, use of interrogatories (written questions under oath) or other discovery methods, and the analysis of other documents and records.

In almost every case, my first point of inquiry involves the inspection and analysis of income tax returns, both personal and corporate. These returns provide clues to the discovery of income, income earning assets, or asset sales. Typically, the attached schedules are far more important than the summary entries on the first two pages of the 1040 return. It is my practice to get copies of tax returns for at least the prior three to five years, and in some cases I have gone back much farther. Spouses inclined to deception may provide altered or incomplete tax returns when requested through discovery. Where deception is suspected, it is wise to order a copy of the returns directly from the IRS or the state.

I am not a CPA and few practicing family law attorneys are so qualified. Accordingly, first and foremost, I view my job as a family law attorney to identify the potential for abuse. When red flags arise, it is my practice to bring in an accountant to analyze the respective financial documents. While my discovery may reveal hidden assets, trained financial professionals are far more likely to recognize areas of deception and assist in the process of asset recovery and valuation for the divorce court.

David J. Crouse & Associates