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Follow the money: divorce and forensic accounting, part 1

"Follow the money" is a common rule of thumb for investigators. Regardless of what the issue at hand is, knowing where the money went can be crucial to determining what is really going on in a given situation.

In high-asset divorce cases, a good way to do this is through forensic accounting. Marriage partners sometimes put marital assets in places where it's hard for the other spouse to get at them. But in order to have a fair division of marital property in a divorce, in Illinois or anywhere else, it's important to ferret out those assets and bring them to light.

To be sure, hiding assets occur in all types of divorces. But naturally there is often more money stake in a high-asset divorce. After all, for wealthy couples property division can involve tens of thousands or hundreds of thousands of dollars. If one party has squirreled away a very substantial sum, it can be very costly for the other party.

Of course, state law typically calls upon the parties to a divorce to disclose all relevant information regarding their marital assets. This is supposed to enable the parties to negotiate in good faith and agree upon a division of marital property.

But how can you be sure that full disclosure has taken place? As President Reagan once said in the context of arms control talks, "trust but verify." Forensic accounting is a means by which to verify that your spouse is playing fair with you and not hiding assets.

In part 2 of this post, we will discuss this process further and delve a bit into tax considerations that can be involved in divorce.

Source: "Tax considerations when dividing property in divorce," Journal of Accountancy, Ray A. Knight," April 2013

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