Divorce Dilemma: My Spouse Is Hiding Income
If your spouse does not provide full income disclosure during your divorce, it can set you up to receive an unfair settlement, including lowered amounts of alimony and child support. Are you suspicious that your spouse is withholding critical financial information? Here are some tips for making sure your divorce settlement adds up.
The divorce process is based on full financial disclosure between spouse. After papers are filed, there is a period of time called the “discovery period” where both spouses are to share with each other all relevant financial information, including income information. Spouses exchange paystubs, income tax returns and information regarding salary bonuses.
But, what if your spouse has a second job that they are denying? Or, what if your spouse has another source of income that is paid in cash? You know your spouse probably better than anyone and have more than likely witnessed this income coming into your household. The problems arise when proof of this income is required. You can certainly testify regarding this income but without proper and authenticated documentation, it will be your word against your spouse’s.
So, what can you do? Your divorce attorney may advise you to hire a private investigator to track your spouse’s activities to possibly catch them going to their other job. You can also enlist the services of a forensic accountant who can go through your joint financial records as well as your spouse’s personal accounts in an attempt to discover and trace undisclosed cash or other forms of income through a process called a “lifestyle analysis.”
Once the income is documented, you would more than likely be entitled equitable distribution of undisclosed assets or income once the income was proven to exist. New Jersey is an equitable distribution state, meaning that marital property, including assets such as bank accounts, as well as debts are divided fairly between the divorcing spouses. It is important to note that a fair division does not necessarily mean a 50/50 split. If you and your spouse cannot agree on how to divide assets or debts, the court will go through an analysis to determine the fairest way for the property to be divided between the two of you. If your spouse has been placing undocumented income in their own bank account, you would most likely be entitled to a percentage of that bank account. Similarly, if your spouse has been putting undisclosed income into a pension or other retirement plan, you would, in most cases, be entitled to a portion of that retirement asset as well.
But, what if your spouse is simply spending the undisclosed income? Well, that income would be included in their gross income as reported to the court and could affect any alimony that they are obligated to pay. If you are entitled to alimony, and the court looks at several factors to determine if alimony is appropriate in each case, than you could possible receive more alimony when your spouse’s undisclosed income is eventually added into his disclosed gross income. Again, there are many factors that the court looks at to determine when alimony should be awarded, and both spouses’ income is just one of those factors. But, if there is indeed an increase in income, the courts must consider that increase when making alimony calculations.
If you have not already, gather together and make copies of all relevant financial information, such as your income tax returns, W-2 statements, paystubs, bank account information and retirement plan information. If your spouse’s undisclosed income is in cash, attempt to photograph the cash in your home, if you are still living together. At the very least, be prepared to show inflow and outflow of cash into any bank accounts. Be sure to disclose to your family law attorney all relevant financial information and give copies of all of your documents to them, even if you feel like what you are giving them is not important. It is certainly better to provide too much information to your attorney than not enough.
Lastly, do not be bullied into not mentioning your spouse’s undisclosed income or assets. In the end, you are only cheating yourself out of what may be a fair division of these assets down the line.
If you are in need of further advice or information regarding divorce and equitable distribution, contact us today to schedule your confidential consultation with one of our qualified attorneys familiar with divorce and all areas of family law.
What Happens During the Discovery Phase of Your Divorce?