Beware of asset concealment when divorcing a small-business owner
In Michigan, the law provides that divorcing couples must divide their property according to the principle of equitable distribution. This means that their property must be divided equitably, or fairly, but not necessarily equally.
The rule of equitable distribution applies to a couple’s marital property, which typically includes all assets acquired by either spouse during the marriage, such as bank accounts, retirement savings, real estate and business assets. In contrast, property obtained by either spouse prior to the marriage is generally considered separate and is not usually subject to division under Michigan law unless certain conditions are met.
When one spouse is a small-business owner, the process of dividing assets during divorce can become more complicated – especially if he or she uses the business to conceal assets in an effort to influence the outcome of the settlement. Even if the business owner acquired the company prior to the marriage, the other spouse may still be entitled to a share of the business assets if a court determines that he or she contributed to the success of the business during the marriage.
Asset concealment warning signs
Unfortunately, spousal financial fraud is more common than many people realize. While it may take place at any time during a marriage, asset concealment often begins shortly after the issue of divorce first arises. When an individual uses a small business to disguise his or her financial circumstances, the fraud may go unnoticed by an unsuspecting spouse and result in an unfair divorce settlement. Therefore, people going through divorce should be wary of the possibility that a spouse may be hiding assets, and should be on the lookout for potential warning signs.
In some cases, the following behaviors could indicate that a spouse may be using his or her small business to conceal assets during divorce:
- Complaining that the business is suddenly struggling or failing
- Claiming that business investments have dramatically depreciated or failed to pay off
- Making unusual major purchases or taking on large amounts of business debt
- Reporting a substantial decrease in income, especially if not accompanied by a corresponding change in expenditures
- Opening multiple bank accounts without an obvious reason for doing so
- Being secretive about business and personal finances
In order to obtain a fair divorce settlement, it is critical to obtain a thorough disclosure of each spouse’s financial information. If you suspect that your spouse is attempting to conceal assets from you during divorce, it is important to seek help from an experienced divorce lawyer who will work hard to bring concealed assets to light and strive to ensure that you receive your fair share of the assets you are entitled to.