Advisers playing divorce detectives

NEW YORK (Reuters) - The difficult task of dividing assets in a divorce is usually left to attorneys, but financial advisers can play an important role to ensure that clients get their fair share.

Increasingly divorce lawyers are looking to advisers to analyze financial information and uncover assets a spouse may try to conceal.

“We don’t have the power to demand something from the other party,” said Lili Vasileff, president of the Association of Divorce Financial Planners and a Greenwich, Connecticut-based adviser. “But we can tell the lawyer what to ask for and give them the ammunition for their depositions.”

In a typical divorce, both parties must list all of their assets in a net worth statement. Advisers can match this information against other records.

“It’s like playing detective,” said Vasileff. “You get to know the short cuts and where to look” for discrepancies.

The first place to look is the spouse’s tax returns, said Vasileff. In particular, examine the attached schedules which list all of the taxpayer’s interest income, which may come from accounts not listed on the net worth statement.

Also compare reported mortgage interest and real estate taxes against the real estate listed on a net worth statement.

Next, check credit card and loan applications, which usually list the applicant’s assets. Also look at bank and brokerage account records to trace any large transfers or withdrawals, and track where the money went.

Many spouses may “loan” money to a family member and then have it paid back once the divorce is finalized, say advisers.


The spouse’s pay stubs can also be revealing. Advisers need to ask for the W-2 form summarizing the year’s earnings, as well as records from around the time the spouse is usually paid a bonus, said Vasileff.

The spouse may have asked his boss to hold off on paying his bonus until after the divorce is finalized so it is not included in the asset calculation.

Things become far more complicated if the spouse owns his own business. It is easy to inflate business expenses, especially items such as “travel” or “entertainment,” to reduce the income available to split, said Leonard Florescue, a New York-based partner at law firm Blank Rome.

When examining the company books, look for any notable increases in spending, such as a jump in the advertising budget, said Ginita Wall, a San Diego-based financial adviser.

Sometimes, it helps to snoop around the office. Wall recalls visiting the office of one client’s spouse and being struck by the amount of artwork on the walls as well as paintings stacked behind doors.

“It turns out he was investing in artwork and hoping it wouldn’t be included in the business valuation,” said Wall.

He was also writing off the cost of the art as a business expense, so it reduced the company’s income.

Still, even if an adviser does uncover some fiddling with the books, it may not be in his client’s best interests to drag it into court. Vasileff observed a spouse could end up in jail and the money with the IRS.

Advisers also should be wary if they easily uncover some “hidden” assets, Florescue said. “The best way to hide $1 million well is to hide a quarter of a million dollars badly.”

Reporting by Helen Kearney; Editing by Richard Chang