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Tracing assets in a California high-asset divorce

In many families, one person may handle the finances throughout a marriage. In other situations, each spouse may work on paying the bills and deciding where to invest marital funds. But in either of these arrangements (any the many variations upon the theme) one spouse or the other may have hidden assets somewhere. This may not be an issue for some people, but if the marriage breaks down and divorce becomes necessary, the ideas of hidden assets or how money has been invested may become an issue.

Recently, the Fresno Bee business section discussed some potential ways to trace hidden assets through tax records. The discussion surrounded allegations that a husband had managed the family finances and had managed his wife’s inheritance during the marriage. The former wife, after a breakdown in the marriage, claims that her estranged husband would not divulge where the inheritance went. It appears from the story that the couple had not yet gone through divorce.

Generally, California is a community property state when it comes to divorce and family law. That means that each spouse is generally entitled to an equitable distribution of the marital assets. Determining if an asset is a marital asset may require a forensic analysis of many types of financial records. Typically, an inheritance may not be a marital asset, but if the inheritance is commingled with other marital assets—things can change.

Tracing hidden assets may not be necessary in every divorce. But, from time-to-time hidden assets can be a real issue for one of the spouses seeking a divorce. In a similar vein, how finances have been handled—even when no hidden assets are involved—can change the nature of the asset, depending upon the circumstances. When it comes to a high-asset divorce in California, forensic accounting analysis may be necessary to gain a better picture of not only what the value of the marital estate may be, but in determining what belongs in (or out) of the marital property settlement.

Source: The Fresno Bee, “Personal finance Q&A: IRS records get tangled in messy divorce,” Claudia Buck-The Sacramento Bee, Aug. 26, 2013