Are You Suspicious That Your Ex-Spouse Hid Money From You? Here’s How to Know For Sure
Most couples spend their entire marriages planning for, worrying about, and working toward their retirement years. But what happens when you don’t get there, or decide to split during your retirement? Unfortunately it’s not uncommon for one spouse to move or hide assets to avoid sharing them in the divorce. If you’re suspicious that your ex isn’t sharing their full financial story, former social worker turned financial planner Robert Laura has some important information for you to consider.
Over the years, I have had the opportunity to serve as a financial expert witness in a variety of divorce cases. I’m usually hired for a couple of reasons. To either investigate a claim that a former spouse may have moved or hidden assets before or during the divorce, or they misrepresented the value of their retirement account to avoid splitting the assets.
Divorce can be a very trying and emotional time, and nothing is more damaging to a person’s future than not getting what they deserve. Most people near retirement age have no idea how emotionally and financially damaging a divorce can be. The harsh reality is that it’s hard to keep everything together during this time…to manage your work life, home life, family, friends, your own emotional state, and of course your money. As a result, it’s not uncommon for a few things to slip by unnoticed.
Sometimes it can take a year or more for people to come out of the fog and start to think about and wonder how they ended up with only a small portion of what they thought they had saved as a couple. Fortunately, there’s usually a paper trail for retirement accounts that is very difficult to hide or eliminate.
Most people don’t think of the IRS as their friend or ally, but in the case of divorce, they can be your new BFF. IRA and other retirement account distributions are generally reported on a 1099-R. For example, let’s say your spouse had a rollover IRA at Scottrade or a 401(k) at Fidelity. In either case, if they withdrew funds to shrink or eliminate the account balance, the custodians for the account (Scottrade or Fidelity) would not only send a 1099-R to the individual but also to the IRS.
Therefore, even if your spouse shredded their copy, the IRS still knew about it and they would have to report it on the Federal tax return for that year. On a standard 1040 tax return, any income received from an IRA, pension or annuity is reported on lines 15a and/or 16a.
Depending on your role in the relationship, you may have never looked at or done anything with the taxes. You may have unknowingly just signed the form every year and didn’t give it much thought. Also, depending on your attorney’s background and experience, they may not have looked back over the last couple years or secured a copy of the tax form for the year the divorce was started or ended.