During a couple's divorce, all aspects of their finances should be considered to ensure that their marital property can be divided fairly and equitably. When a spouse is a business owner, this process can become very complex. In some cases, a person may attempt to use a business to hide assets in hopes that they can keep money or property for themself and avoid dividing these assets with their spouse. When one spouse owns and operates a business, the other spouse can work with an attorney to identify any assets that have been concealed and ensure that all of their marital property is considered during the divorce process.

Methods of Hiding Assets Through a Business

A business owner may come up with a variety of ways to conceal money from their spouse as a way to gain a financial advantage during and after their divorce. These include:

• Nonexistent employees - If a business owner pays a salary to a person who does not exist, company records will show that these payments were made, but the amount may actually be transferred into a separate account and held by the business owner until after completing their divorce.

Whenever a couple chooses to end their marriage, they will need to address multiple legal and financial issues. High net worth divorce cases can be very complex, especially when it comes to the division of marital property. These couples will likely own multiple types of high-value assets, and as they determine how to divide these assets fairly, they will also need to understand the financial implications of the decisions they make.

Dividing High-Value Assets

During a high net worth divorce, couples will need to gain a full understanding of all of the assets they own, including marital assets acquired during their marriage and separate property each spouse owned before getting married. Assets that these couples need to address may include:

• Jewelry, artwork, and collectibles - Certain items owned by a couple may have both financial and sentimental value. In many cases, appraisals may need to be performed to determine the value of these items and ensure that they can be divided fairly.

Sometimes, things just do not work out the way that you planned, and the only thing you can do is to find a way to remedy the situation. When a marriage does not work out, divorce is usually the result. Divorce can happen to anyone, no matter your age, educational attainment, or socioeconomic status. However, couples who have a high net worth often experience different issues and difficulties that other couples may not face. Getting a divorce when you have a high net worth can be demanding and stressful. Having a clear understanding of the divorce process as a high-net-worth individual can help decrease some of the unknowns that any divorce can bring.

Important Issues in a High-Asset Divorce

While the general elements of a divorce resolution are the same for couples with a high net worth, the presence of substantial assets can complicate them. Here are some issues you are likely to encounter.

• Property Division: Property in Illinois is only subject to division if it is marital property. Marital property is considered to be anything the couple acquired after they were married, with certain exceptions. For example, an individual with a high net worth may have extensive family wealth or heirlooms that would be excluded from division, in most cases.

In Illinois, parties to a divorce are often required to complete a financial affidavit. A financial affidavit is a legal document used to declare the income, expenses, assets and property, and outstanding debts of each spouse. Parties to a divorce have a basic duty to make full and transparent financial disclosures.

Unfortunately, not everyone plays by the rules. If you believe your former partner is hiding assets, your rights are being violated. Fortunately, there are tools you can use to help uncover property and assets that are being improperly concealed by your spouse.

How Do I Know if My Spouse is Hiding Assets?

Divorce cases involving hidden assets are notoriously complex. The spouse who is playing by the rules faces a significant challenge: How do you find the assets that your spouse is hiding? After all, if your spouse is trying to hide money or property to keep it out of the divorce, they are not going to make it easy to locate.

It is vital to conduct an accurate valuation of your business during your divorce. The value that you and your spouse agree on will determine how much it will cost you in other marital assets to have sole possession of your business following a divorce. If you overvalue your business, you may give up too many assets to keep your business intact. While undervaluing your business could be advantageous, you risk the divorce court rejecting your agreement if it objects to your valuation methods. There are several ways that someone can make a mistake in the business valuation process that will skew the value of the business:

1. Using the Wrong Valuation Method: There are generally three methods of valuing a business: income-based, asset-based, and market value. The accuracy of each method may depend on the type of business you are valuing. For instance, the market value approach is not considered to be an accurate way to value a privately held company if you are comparing it to publicly traded companies.
2. Overlooking Assets and Liabilities: The asset-based valuation approach should include all of your business’ assets and liabilities. Some assets and liabilities can be easy to overlook because they are not tangible properties or part of your regular balance sheet. For instance, your business may have long-term debts that are not listed in your budget or goodwill value that only exists because of your reputation.
3. Not Considering Risk in Growth Projections: Another part of the value of your business is how much it is expected to grow in size and profits. Your business plan may project a certain amount of growth in the coming years but also considers risks that may hamper growth. A business valuation that does not consider risk may overvalue your business by projecting unrealistic growth.
4. Giving Too Much Weight to Outlier Events: Situations arise that may change your business’s value in ways that you do not expect to continue. We are currently going through a big outlier event because of the coronavirus outbreak. Many businesses have been forced to close, while others are seeing an increased demand for their products. Once the economy fully reopens and consumers return to their normal spending habits, your business’s value may also revert back to normal.

Contact a St. Charles, Illinois, Divorce Lawyer

Valuing your business is not something you should attempt to do on your own because of the many ways that you can make mistakes. A Kane County divorce lawyer at Goostree Law Group works with professionals who regularly assess the value of businesses for the purpose of divorce. To schedule a free consultation, call 630-584-4800.

Source: