Episode 68 - 20 Crazy Ways People Try to Hide Assets in a Divorce
Todd Orston: Most divorces deal with assets division, meaning how will the marital estate be divided between the parties? And almost as common, are the creative efforts and ways people try to hide assets so that they are not subject to division.
Todd Orston: Under normal conditions, it may work. But when a knowledgeable attorney who knows what to look for, knows the questions to ask, gets involved, the hidden assets are usually found. And the person who hid them then has to explain the behavior to an irritated judge.
Todd Orston: During this show, we're going to dive in. We're going to talk about 20 ways that people have tried and continue to try to hide assets so that it somehow affects the divorce.
Leh Meriwether: Oh, it's going to be a good one.
Todd Orston: Absolutely.
Leh Meriwether: Welcome everyone. I'm Leh Meriwether, and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you're listening to Meriwether & Tharp Radio, on The New Talk 106.7. Here you will learn about divorce, family law, tips on how to save your marriage if it's in the middle of a crisis, and from time to time, even tips on how to take your marriage to the next level. If you want to learn more about us, you can always call or visit us online at atlantadivorceteam.com.
Leh Meriwether: And like Todd said, in today's show we're going to talk about the different ways that we have either seen or read about people trying to hide assets from their spouse. Really the purpose of today's show is to educate and entertain, with some of these examples.
Leh Meriwether: We're not trying to dive in deep into how we might go about finding these hidden assets. We'd rather explore that with an expert. We know what to do, but often we bring in experts to help us dig deep when we find that there may be some hidden treasure somewhere. But the plan is to just talk about some of the 20 ... there's been a lot, but I tried to summarize it down to 20.
Todd Orston: 20 examples.
Leh Meriwether: 20 examples. Ways people have tried to hide things. So, you ready?
Todd Orston: Well, hold on. Okay. Now I'm ready.
Leh Meriwether: Okay. Good.
Todd Orston: All right. So how about number one, excuse me. This is something that is one could say it's a sort of new phenomenon, but cryptocurrencies. I mean they've been around, especially Bitcoin. They've been around for some time, and because they don't have the regulation that stocks do, because they are dealt with differently, and the way that they are purchased and the exchanges that are used to purchase them are different than let's say stocks, sometimes people don't know to look for them. And we have seen and we have read about situations where people try to invest in these cryptocurrencies and conveniently fail to disclose the purchase of cryptocurrency in the context of a divorce.
Leh Meriwether: Yeah, and so just to give it a little background, the cryptocurrency like Bitcoin is a really good example, is they're stored in "virtual wallets", and I put that in air quotes. Or desktop, or smartphone. Some sort of cloud-based software. They generally use what's called blockchain technology to record the permanent decentralized and encrypted transactions to and from that virtual wallet. Most of those cryptocurrencies, they are purchased on an exchange like Coinbase, but these are all digital exchanges. It's hard to track down who you would serve a subpoena on to get this information. And with it being encrypted and all that stuff, it's very hard to track the purchases of cryptocurrencies.
Todd Orston: Yeah. So what ends up happening, is rather than looking around the house for a stock certificate, or any documentation evidencing the purchase of stocks or looking at a 401K account or some other kind of investment account documentation that might evidence and show that stocks were purchased, it becomes much more difficult with these cryptocurrencies and you end up having to sort of back door it. You have to look at expenditures. You have to end up looking, and that's where the expert like you were talking about, may come in. You have to look at big amounts of money disappearing and then try and figure out where that money went.
Leh Meriwether: Yeah, I know that this area of the law is changing rapidly, so by the time we finish this show, what we say may already change, but when you're dealing with stocks, if stocks are sold, and you sold it and made a gain, that's a taxable event. But it is recorded and a, I think it's a 1099, is issued to reflect that gain. You have to pay a capital gain taxes on it. Where cryptocurrencies, we all know that the Bitcoin went from like $100 to $20,000 at one point, and so you could have made a $20,000 profit on it, but store it in this virtual wallet, and nobody's out there issuing a 1099 to record that you just made $19,900 in profit.
Todd Orston: I wish I had that problem.
Leh Meriwether: No you don't, because the IRS might be coming after you.
Todd Orston: I'll gladly pay those taxes. Are you kidding me?
Leh Meriwether: That is a good exchange.
Todd Orston: Yeah.
Leh Meriwether: So, that's one of the ways is cryptocurrencies. It's new, we're learning about it. There's rapidly changing laws. Some areas are trying to outlaw it, so it's-
Todd Orston: And I sort of hinted at this in the beginning, and as we continue, I just wanted to jump in and make one more comment. Understand that when we think about these things, some people think of it like a game, and clearly it's not when you're dealing with a divorce. And they think of it in terms of, "Well, I'm going to try and hide the assets, and if I get away with it, great, and if I don't, big deal. I'm no worse for wear, right? The asset is on the table, has to be divided, okay."
Todd Orston: But it's not that simple. If you engage in this kind of behavior, and get caught, it can be used against you by the court in some way. In other words, it can influence the court when it comes to the division of the estate. So when we oftentimes, all the time, tell people, "You need to be upfront, you need to be honest, you need to disclose," the followup to that is always, "and if you don't, understand that actions carry consequences." And they can be very severe. We've both seen cases where people have tried to hide assets, and end up with like a 30% of the marital estate kind of situation.
Leh Meriwether: The court punishes them for hiding it.
Todd Orston: So that's another of the main reasons why we're talking about this. A, obviously to show, "Hey people, before you have thought about hiding assets in these ways ... " but on top of that, it's a cautionary statement. It's a cautionary tale. Be careful if you try and engage in this behavior. It can come back and bit you.
Leh Meriwether: Yeah. Well don't be careful, don't do it.
Todd Orston: Don't do it.
Leh Meriwether: All right. Well the next one is PayPal accounts. Now as weird as that sounds, we have seen situations where PayPal was used. Somebody set up a PayPal account, and you can actually use it like a bank account and you can sell things and store money on there. People can give you money. You can also transfer money through PayPal.
Leh Meriwether: There have been situations where we were looking at a statement, and there was this PayPal, PayPal, PayPal. What is he buying on PayPal? Well he wasn't buying anything. He was transferring money out of the bank account and putting it into PayPal. So by the time you finally, "Hey, you need to turn over this PayPal account, there's $5,000 sitting there that he didn't previously disclose. So PayPal, which may look on paper like somebody's using it to buy something-
Todd Orston: Yeah, it's just a pass-through.
Leh Meriwether: Right. But you can-
Todd Orston: Sort of like I'm buying this good-
Leh Meriwether: ... store the money in there now.
Todd Orston: Right, right.
Leh Meriwether: It used to be you couldn't do that.
Todd Orston: Exactly. It used to be, in a very simple way of putting it, it was a pass-through, right? It was, "I'm gonna buy a good from you. I'm going to put money into this PayPal account. As soon as I get the product it releases to you." Everybody's happy.
Todd Orston: It's morphed into something much more where assets can be sort of placed in the PayPal account, and I understand what people are thinking. Again, it's wrong. But they're thinking, "No one's gonna ask." We're looking at bank accounts, well it's not a traditional bank account. It's not an investment account. It may not fall under any of those categories in terms of discovery when we're asking for financial documents, and therefore, over the last year, two years, three years, put 10, 20, $30,000 into this account, I'm going to make off like a bandit.
Leh Meriwether: Right. You know, as we sit here, I made these notes ahead of time. I realized right in conjunction with that, we won't count this as a separate one, but is Apple Pay. Because you could go to a restaurant, you could use money, I mean a credit card, to buy dinner for all your favorite friends, and then your friends could pay through Apple Pay, and it goes into your Apple account, but it doesn't actually go into your bank account. Unless you transfer it. But that's another way that we might need to update our discovery. The way our discovery is written, it does ask for all accounts. It's just some people think, "Well, PayPal and Apple is a little bit different."
Todd Orston: It doesn't fall cleanly into a category.
Leh Meriwether: Yeah. So just sitting here today, I just realized I'm going to update our standard of discovery just to-
Todd Orston: All right. I'll-
Leh Meriwether: ... stow it out.
Todd Orston: ... finish this the show. You go revise the documentation.
Leh Meriwether: Yeah. Because we don't want anybody to ... But you can usually track that down and I'm sure when we bring on an expert, at some point we're going to send this show out and say, "Hey. We want you to break down how you would track down all these hidden assets."
Leh Meriwether: Man, we've only hit two.
Todd Orston: I think we can do it.
Leh Meriwether: We can do it?
Todd Orston: It's-
Leh Meriwether: Well these two were total [crosstalk 00:10:22]-
Todd Orston: ... 20?
Leh Meriwether: ... they were a little more recent.
Todd Orston: Absolutely.
Leh Meriwether: But another interesting one that we are going to get into next, is about the IRS. People are actually using the IRS to hide money in their divorce. And they're using it in a really, really interesting way. So you want to tune in next to hear that. You want to hear how people are using things with ... they're colluding with their employers regarding delaying bonuses, all kinds of really interesting things. Clever, wrong, things that people are doing to get away from splitting their assets with their spouse.
Leh Meriwether: Welcome back. I'm Leh Meriwether, and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you're listening to Meriwether & Tharp Radio on The New Talk 106.7. If you want to learn more about us, you can always call or visit us online at atlantadivorceteam.com.
Leh Meriwether: Well today, we're talking all about 20 crazy ways we've seen people try to hide assets in their divorce. We're really sharing this to educate people. We're not breaking down how we try to figure this stuff out, but if you're listening to this, and you think about something like, "Oh, I just noticed that." Or, "You know, we have been ... we seem to be spending more money than we have coming in. Maybe I'm missing something." Bring it up with your lawyer if you're in the middle of a divorce.
Todd Orston: On the flip side, if you're thinking, "Hey, I have a brilliant idea that might allow me to save some money and avoid dividing some assets." Yeah, they normally don't work.
Leh Meriwether: Yeah. Rarely have I ever seen someone get away with it. And if they do get away with it, what often happens is it comes out later, and then you go back and you vacate the order, because not everything was disclosed.
Todd Orston: Yeah, because even if you're dealing with a situation where literally over time, you collected cash, meaning you just put cash into a safety deposit box or a shoebox, okay? Once that money is gone, if there's evidence that it existed, and now it's gone, the court can basically make legal assumptions that that money exists or that you possessed that money.
Todd Orston: So in other words, there's a picture of $5,000 sitting in a shoebox under the bed. Your spouse says, "Where's that $5,000?" And you say, "Don't know." The court can make an assumption that you do know, and your spouse may get $5,000 extra from the marital estate. So even if you think you got away with it, there's no way to track or trace it, because the court has so much ability and discretion-
Leh Meriwether: Equitable power.
Todd Orston: ... to make decisions, a lot of times it's recaptured.
Leh Meriwether: Yep. And that's actually one of the ways people try to do it. They try to take cash, put it in a safe deposit box or using a safe, or I've literally seen people try to bury it in the backyard.
Leh Meriwether: But like in one case we had, the gentleman had set aside about $900,000 in cash, and so the wife pulled it out of the safe, and took pictures of it. And it had been neatly stacked, so she was able to take a picture, and from the photo, you could see how much money it was.
Leh Meriwether: Which, and by the way, during the course of the case, "Oh, there was no cash in the safe deposit box." And so we waited til the deposition to show him the picture we had. That was quite entertaining.
Leh Meriwether: You know what? Let's keep going, because when we left off, [crosstalk 00:14:18] we were going to talk about how people would actually use the IRS to hide money. Now this is a really tricky thing, but what we have seen is someone make an estimated payment, or I should say an over-estimated payment to the IRS for their taxes.
Leh Meriwether: So maybe they think they're going to owe 10. Instead of paying 10 to the IRS, they'll make an estimated payment of $20,000 and then they'll get a letter back from the IRS saying, "You've overpaid by 10." And then the person turns around to the IRS and says, "No, hang onto that. I'd like to apply it to next year's taxes."
Todd Orston: And that's where what was not necessarily a bad deed becomes a bad deed. Right? Because it goes from okay, you made a bigger payment than you should have. Okay. I'm sure the Federal government loves you for it, and your taxes are paid. Fantastic.
Todd Orston: But at that point, you know that's the case, and by not disclosing the overpayment, by not disclosing the fact that there's now a credit, that you are then saying, "No, no, no. We'll just push that to the next tax return," which you already know is going to be an individual return for you, then that's where the bad deed has occurred.
Leh Meriwether: Right. But some people have done it, they kind of know the divorce is coming, and so they'll do that for a few years. And over the course of a few years, they may have 20 or $30,000 or more built up with the IRS. They get the divorce, they file individually, and then boom. "Hey, yeah. I want all that money back now."
Leh Meriwether: Not only will that get you into trouble with the court though, my understanding the IRS, if they get wind of what you're doing, they can actually fine you for that. Even though they've been holding onto your money, they can fine you for filing a fraudulent tax return. Even though they got extra money, every time you do it, it can be over a $5,000 fine. So again, don't do it.
Todd Orston: Don't do it.
Leh Meriwether: All right. Well the next area where we see sometimes people hide it there, and I don't want to say this is always intentional, sometimes it's unintentional, so I want to cut some people some slack here. But areas when you're dealing with antiques, artwork, maybe hobby equipment, coin collections, stamp collections. I mean you and I have both seen situations where someone had a legitimate coin collection or a baseball card collection or something, or a train collection. Did you have a train collection?
Todd Orston: No, no.
Leh Meriwether: Oh. David Canale had a train collection that was worth ... They were worth like $90,000. The trains. But some people will just say, "Oh, it's worth $20,000." And they may know it's worth more, but that's what, "Oh, $20,000." Because maybe he could sell it at a garage sale for 20, but if he took it to a train auction, you'd get $90,000 for it.
Todd Orston: Yeah, and what we've seen, what I've seen, actually I had a case where we were dealing with a train collection. And there was a ramp up in the, let's say about 12 months leading up to the filing of a divorce, where the party with the collection started purchasing more and more trains, more and more equipment, more and more and more and more.
Todd Orston: Look, is there anything wrong with that? No. If your spouse doesn't have a problem during your marriage with you having a train collection, coin collection, stamp collection, so be it. Again, it comes down to disclosure. And in that situation, there was no disclosure as to the value. It was more trying to pass it off as, "Oh no, it's just sort of a hobby. Not a big deal."
Todd Orston: Well, it was probably 70 plus thousand dollars worth of train, whatever, equipment. And so that was that problem. That's where if there's a cautionary statement here, it is more along the lines of ask the right questions. Do not make assumptions. And this goes with anything. It goes with those types of collections, or even tools.
Leh Meriwether: Woodworking tools.
Todd Orston: Woodworking. I'm trying to get into it. I am a baby when it comes to woodworking. You are far more advanced. My equipment, it really could almost be something that you just look past, if I had to go through this. It's not worth that much. You, on the other hand, I have to assume, have a lot more value in terms of your tools.
Leh Meriwether: Yeah, some of my hand tools are actually collector's items. And so they arguably are going up in value. So in those situations, probably best to have an independent person come in and appraise them. But it's really easy to overlook the woodworking tools.
Leh Meriwether: So someone can sort of sneak by with we do marital balance sheets to make sure it's a fair division. And so maybe you don't want the money for it. But if you put it on a marital balance sheet, and you only put 5,000 when you should have put 35,000, well you're kind of giving up over $15,000 somewhere else.
Todd Orston: Absolutely.
Leh Meriwether: Or 15. Yeah, $15,000.
Todd Orston: You need to at least be thinking, "Should I be getting something in return? If my spouse is walking away with X, should I get something in return?" Sometimes it's easy just to say, "You know what? Done. Keep it. I'll go this way and take this stuff with me, and you can keep that." But just be very mindful of the fact that some of these collections, some of these tool sets, some of these whatever, their value can be far greater than you expected.
Leh Meriwether: Yep. So another way that we have seen this is when you've got these small businesses, and the employee goes to the employer, an employee going through a divorce, and says, "Hey look, I know I've got a bonus. I closed some deals. But can you pay me that next year?" And so sometimes maybe the employee will say, "Yeah, I'd like to do it for tax reasons, because I did really well this year, and if you give me that, I'm going to bump to a new tax bracket and I'd rather just pay me at the beginning of next year."
Leh Meriwether: And so the employer will go, "Okay." Because they can adjust the payment point. And that's not going to get the employer in any sort of trouble when it comes to the IRS or anything like that. But then that cash never hits the bank account. And can impact child support, it can impact equitable division, and alimony. It can impact all of those things. So that's another way we've seen people try to hide assets in a marriage. It's-
Todd Orston: Deferred compensation.
Leh Meriwether: ... deferred compensation. Well, sort of dishonest deferred compensation.
Todd Orston: Oh, absolutely. Absolutely.
Leh Meriwether: There are deferred comps, or compensation-
Todd Orston: Correct.
Leh Meriwether: ... mechanisms for executives.
Todd Orston: Not all deferred compensation is nefarious.
Leh Meriwether: Not exactly.
Todd Orston: It doesn't have-
Leh Meriwether: Nefarious?
Todd Orston: Yeah. Hey, I pulled out a big word for the show. And I think I got it right.
Leh Meriwether: Yes you did.
Todd Orston: But no. Obviously there are proper times or appropriate times when there's going to be deferred compensation. Everything we're talking about though, is things that are being done to trick, or to avoid the right thing happening. Okay?
Todd Orston: In this case with deferred compensation, and it usually happens the bigger the company the less likely. It's usually smaller companies, and a lot of times it's when it's a small company and your spouse works for somebody that they know, it's a friend, it's whatever. You have to be incredibly careful that there's not some game playing going on in terms of compensation.
Leh Meriwether: Yep. And up next, we're going to continue to dive into more games that people play to avoid splitting their assets with their spouse.
Leh Meriwether: Welcome back everyone. I'm Leh Meriwether, and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you're listening to Meriwether & Tharp Radio on The New Talk 106.7. If you want to learn more about us, you can always call or visit us online at atlantadivorceteam.com.
Leh Meriwether: Today we have been digging into the 20 crazy ways we've seen people try to hide assets in a divorce action. Some of them are very devious, nefarious, and some are ... well, I mean just kind of people overlook it. It's not sort of an intentional, "I'm going to ... "
Todd Orston: I'm not going to go so far as to say ... I mean everything that we're talking about is intentional. Some of them are just blatantly wrong. Hiding the ball, taking the asset, moving it from point A to point B to hide it.
Leh Meriwether: Getting your boss to pay you later.
Todd Orston: Absolutely. Then there are some, like some of the ones we're going to go into, where it's more of an omission.
Leh Meriwether: It's a gray area.
Todd Orston: It's just not disclosing something that is out there that has value, and so people need to be aware that an attorney is going to ask those questions, and if you are the one who may not be in control of that account, you need to ask the right questions.
Leh Meriwether: Yes. So one area is sort of those, I'm going to group this into one big group, so frequent flyer miles, Marriott points, credit card points, any type of things where you get a point system, sort of rewards for using your credit card. Because I know that I have seen businesses where they ran through most of their expenses through their American Express card, and that could be $100,000 a month.
Leh Meriwether: Well that's an enormous accumulation of points. So I've seen people with Amex points, when you look at the points and applied them to say Amazon, there was $20,000 right there. So you could buy $20,000 worth of stuff on Amazon using those points. Well that has a obviously a huge value. And if it was associated with the business that the man or woman owned, then you could see someone sort of just it not registering. Or maybe like, "Eh, that's just points. That's not really cash." But it is a way that someone can sort of get the short end of the stick.
Todd Orston: It has value.
Leh Meriwether: Yeah.
Todd Orston: End of story.
Leh Meriwether: And the frequent flyer miles, you can't transfer them, since 9/11 you can't transfer frequent flyer miles, but if someone has a couple million miles, that could be worth 10 ... I'm not familiar with how the miles work, but I did have one case where someone had two million miles, and we did put a value of it, like five or $10,000. You couldn't transfer it, but I think Delta actually had a way to calculate its value. And we just used that.
Todd Orston: They do. And I've had cases where, and I'm not going to state my recollection, but you can go on to see what the actual value of every mile is if you were to cash it out or use it in some way.
Todd Orston: But the bottom line is, be cognizant of the fact that they are assets, they have value, and what some of these smaller ones, to some degree like the PayPal example, there may not be a lot of money there. Frequent flyers, there may not be a ton of money there, but these are all examples of assets that are floating around out there. And if you put it together, it can be a lot of money.
Leh Meriwether: It can add up.
Todd Orston: Yeah. So you have to be thinking about these things, asking the right questions, so that you get what you're entitled to.
Leh Meriwether: So the next one, we touched on it earlier, but I'm going to revisit it just real quick, and we'll keep going. But just cash. Sometimes you report the cash, someone pays you in cash, you put it in the bank account, you bury it in the backyard, wherever you may put it, but then somebody maybe forgets about it.
Leh Meriwether: Or, "Where's the money that was in the safe?" Well, we spent that last year." But you didn't. You reported it to the IRS, you were upfront and honest about it. But then there's situations where you get paid in cash and it's not reported. And so that's set aside. And that can be more difficult to trace. So that's another way that someone will try to hide assets. They get paid in cash along the way doing work or side jobs, and they put it in a shoebox.
Todd Orston: Yeah. But whether or not it's reported to the IRS, I've seen situations where there was money that was reported that was sitting in let's say a safe. The other party, until the divorce came, never went into the safe. And so they went for months and months and months, and then entered into a divorce action thinking, "Oh, well my assets? Right. We have a 401K, we have this, we have that. Oh, and there's the cash in the safe." And when they went into the safe, the money was gone.
Todd Orston: And unfortunately, that is one of those situations where it becomes very difficult to prove, because when it's gone, it's gone. And you are taking a chance that the court is going to do one of two things. Either the court's going to be like, "It's gone." I've seen and heard judges say, "What do you want me to do? The money is not there." I've also seen-
Leh Meriwether: "I can't tell if it was spent, or-"
Todd Orston: Exactly.
Leh Meriwether: "... the person's hiding it."
Todd Orston: Exactly. If the court believes that hiding is going on, and there's no evidence to support how it may have been used for marital expenses, then the court can then impute some amount and can basically assume, "Oh, you know what? The money disappeared on your watch. I'm going to then credit you with that money, which means that the spouse gets the balance." The same amount from something else. But you're taking a chance, so you need to be thinking about what assets exist.
Leh Meriwether: Yep. So the next one is the debt repayment of a phony debt to a friend or family member. So you're getting ready to get a divorce or divorced and all of a sudden this promissory note appears, and says, "Oh. Yeah, I paid this promissory note back." "Well where'd 20 grand go out of the bank account?" Or, "Yeah, and I had to pay back Jimmy." "Jimmy? What [crosstalk 00:28:35]?
Todd Orston: I never trusted Jimmy. I'll be honest with you.
Leh Meriwether: "I have a promissory note." And then at the end of the divorce, Jimmy gives the 20 grand back. So that's one thing that we have seen happen before, and most of the time I've seen the court not believe it.
Todd Orston: Yeah, usually the way that we fight it is, "Show me a promissory note. Show me something that will establish this as a true, real debt that needs to be repaid." And then we'll obviously dive into why did you take out that debt? And we'll determine whether it's a marital debt or it should be deemed as separate debt. But show me something.
Todd Orston: And usually that's the way the court's going to be. Don't just say, "I owe Jimmy money, and 5,000 went to go pay Jimmy." Okay? Because oftentimes a court's going to look at that and say, "Yeah, that 5,000 is either coming back, you need to call Jimmy, or I'm gonna take 5,000 out of some other account and give it to the spouse."
Leh Meriwether: Yep. And so similar to that, this is another one, a phony debt is created. So a phony promissory note is created. The spouse says, "Well I'll pay that, and it should be put in my column, so to offset this $30,000 that we owe, I need to get $15,000 out of this retirement or bank account." And you can go, "Well hang on a minute, that's not ... " And in those cases, the spouse in the one I had, the wife said, "That's not a real debt. Yeah, it's a real promissory note, but the person never intends on collecting on it."
Todd Orston: It usually happens with parents and other relatives where they said, "We're gonna do this for tax reasons in the form of a-"
Leh Meriwether: To avoid the tax. Gosh I'm having a brain fart.
Todd Orston: But for tax reasons.
Leh Meriwether: The gift taxes.
Todd Orston: Right.
Leh Meriwether: Sorry.
Todd Orston: Basically, they can then get credit as a gift tax.
Leh Meriwether: They can avoid that.
Todd Orston: They can avoid that, rather. And so that usually happens with family members and things that we see.
Leh Meriwether: Or friends.
Todd Orston: "My parents loaned us 10,000, 15,000, whatever it might be. And it's not truly a loan. And there are times that the court will say, "It was a loan." There are times when the court will say, "Come on."
Leh Meriwether: Well, and we had one where that exact thing happened, and I subpoenaed the person that supposedly held the promissory note. They did not show up to trial, and then when I cross-examined him, the husband claimed that he had obtained that note because he was really short of funds. He wasn't making ends meet. And so then we, on the stand, dissected his domestic relations financial affidavit, and by the time we finished, he had a surplus of $5,000 a month. So there was no reason for him-
Todd Orston: He was struggling.
Leh Meriwether: ... to borrow the money. Yeah. So needless to say, that promissory note got thrown out and was not thrown into the equitable division calculation. All right let's see. What do we got next? Security deposits. That's a crazy way, that we don't see that often because not everybody has rental income.
Todd Orston: Yeah, yeah. We don't see it that often, but we do see it. And again it's less of an overt act to hide the asset as it is an omission. Usually you see it when people are renting, and there could be security deposits with utilities, with the apartment or the home that they're renting.
Todd Orston: And oftentimes, if you are not careful, and we have seen this where somebody has not been careful, the parties go their separate ways, they get the divorce, and guess what? Somebody got the house or the rental property and the utilities associated with that property, and then they're walking away with sometimes thousands of dollars of security deposits that were paid.
Leh Meriwether: Yeah. I've even heard of someone who, they got a storage unit and paid this huge security. Like, "Why'd you have to spend so much money on the storage unit?" "Well, they wanted a big security deposit. So that's why I gave 'em $5,000." "Well I had to store my stuff, you want me to move out." I think they said it just like that, too.
Todd Orston: With that gravelly voice.
Leh Meriwether: With that gravelly voice.
Todd Orston: Got it.
Leh Meriwether: Just, people do crazy things.
Todd Orston: The games people play.
Leh Meriwether: Yeah. Well, let's see. Patents, copyrights, royalties. That's another way that people ... And that's I think more of an omission than someone trying to intentionally hide something. They think their copyright may not be worth too much. But they leave it off and they don't think about it. Or it doesn't get included when there could be a patent that may not be worth something this instant, but could be worth something down the line. And down the line, up next, we're going to continue to dive into other ways that people try to hide money.
Leh Meriwether: Welcome back, everyone. I'm Leh Meriwether, and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you're listening to Meriwether & Tharp Radio on The New Talk 106.7. If you want to learn more about us, you can always call or visit us online at atlantadivorceteam.com.
Leh Meriwether: Well, we've been talking all show about the crazy things that people do to hide assets in a divorce to avoid splitting things. Some are really crazy, some are very devious, some are, "Eh, kind of forgot about it."
Leh Meriwether: Like where we left off talking about patents, copyrights, royalties on books and that sort of thing. Sometimes people don't mention it or it doesn't get brought up, or someone doesn't think about it and there's a book out there with a copyright to it. And that book could be bringing in some level of revenue, so it's important to make sure that that is investigated in your divorce so someone doesn't get that. And we've got what? We have 10 left?
Todd Orston: About. Yep.
Leh Meriwether: Or no, eight, nine, ten? All right. So we're going to go rapid fire. We're going to get this done, because we promised 20.
Todd Orston: All right. All right. So how about custodial accounts set up in the name of a child? Oftentimes it's going to be, when we're talking about an account like that, it's set up in the child's name, child's social security number, and it's not like it's a trust. That money can be taken out.
Leh Meriwether: Yep. There may be a penalty, but yeah.
Todd Orston: There might be a penalty. But the penalty's going to be far less, at least in the mind of someone who set it up, if they put 10,000, 15, 20, $25,000 into that account, they may pay a penalty, but if they're walking away with the balance, then they got away with something big.
Leh Meriwether: Yeah because they're going to say, "Oh, it's for the child."
Todd Orston: Yeah. When really all it was was trying to create a haven for that money so that it wouldn't be captured in the discussion related to division of property.
Leh Meriwether: Yep. Another one is, and this deals when someone has a small business, there's salary paid to an employee that doesn't really exist. And so it shows on the books that this person has a $60,000 salary, and so on the books it shows that cash isn't there, but in the end, they get the divorce, the checks are voided, boom. He has $60,000, or she has $60,000 in their pocket that they were able to not be included in the division of assets.
Todd Orston: Yeah. And that falls into the more devious, okay?
Leh Meriwether: Yeah. That's definitely more devious.
Todd Orston: And we've seen that. We've seen it where the person who's running the business has a girlfriend sometimes, so it gets even deeper in terms of that devious intent.
Todd Orston: Okay. How about delays in signing longterm business contracts until after the divorce? I've seen this before. We both have. Where there's a business, and the business has struggled, struggled, struggled, struggled, and if we ask the right questions, we quickly find out ... maybe not quickly, but we find out that millions of dollars ... I had one where there was literally millions of dollars in contracts that were coming, and the person in question was sort of holding off until the divorce could be finalized. So what was a company that was almost going out of business, was going to become one where he immediately had to hire 15 to 20 people to start working for it because it was going to be off the charts in terms of profitable.
Leh Meriwether: So another one is money paid from the business to someone else. So this one's not a fake person, this is a real person. But it's like a father, a boyfriend, or a girlfriend, for services that were never really rendered. So they get this phony receipt, for $10,000, and so those checks are made out to this person, and when the divorce is final, that person returns the money. So basically phony contracts that were for nothing really.
Todd Orston: All right. How about investment in municipal bonds or Series EE savings bonds for which no interest is reported on tax returns? Again, this dips into a little bit more of a devious intent, okay?
Todd Orston: But it all comes down to, oftentimes it does, asking the right questions. Understanding what your estate looks like, and if you don't know what to ask for, if you don't know what to look for, it's not as simple as picking up a tax return and saying, "Oh, okay. This exists. It's here on the tax return." It may not show. And so therefore, if you don't ask the right questions, you're not going to get the right answers and information.
Leh Meriwether: Yep. The next one is expenses paid for a boyfriend or girlfriend through gifts, travel, jewelry, rent, college tuition. I even saw a situation where, and this doesn't necessarily ... Well, it impacts equitable division if someone doesn't behave during the course of the marriage because in Georgia, and I know some other states, you can deviate from what's typically a 50/50 split if someone's misbehaved.
Leh Meriwether: But in one situation, the husband set up a condo, and they called it a executive condo, but that's where he had his girlfriend living. And so when that was discovered, all the money that was spent on that condo was considered to be part of the marital pot, and basically he had to reimburse the marital pot, the marital assets, reimburse it for spending $30,000 on a condo for something that was not business related or marriage related.
Todd Orston: All right. How about gold and silver bars? And this also goes into gold jewelry, because we've had cases where jewelry is very important, and sometimes it's even part of a dowry. It's even part of something given by extended family members as part of marital gifts and things like that. But I've seen cases where there were literally safes filled with gold and silver and coins and you name it, and those are the types of things that can disappear. And it's very hard, unless you have done a full accounting of what is there.
Todd Orston: With bars, unless you have an accounting of the weight of each precious metal that you have in your collection, it's very easy for those types of things to disappear. So you have to be very careful. And I'm not saying people should go through life distrusting, but if you have those types of things, look for insurance purposes, it is good to do it. Go ahead, do an accounting. Take pictures, have that information. And if you're entering into a divorce, do that at the very beginning of the divorce before the gold and silver has the time to walk away.
Leh Meriwether: There was literally a case that David in our office handled. He affectionately calls it the Gold Bar Case. But that exact thing happened, where basically there was hundreds of thousands of dollars in gold bars that suddenly disappeared.
Leh Meriwether: And he took depositions, he got a tremendous amount of information showing where they were purchased along the course of the marriage. Because they do track those things. It is required to track gold and silver purchases, and that sort of thing. So he was able to basically figure out how much it was, but the other side claimed that they had spent it on stuff. And so they cashed it in to make an upgrade to their house, and those sort of things.
Leh Meriwether: It was really messy, really ugly, and to trace those type of things cost a fortune in depositions and that sort of thing. So if you've got gold and silver bars in your house, make sure you're accounting for them, like you said, for insurance purposes. Gosh, if they're stolen you need to know where they are. So it doesn't have to be because you distrust your spouse, but just distrust someone that might break into your house.
Leh Meriwether: And that's actually a good way to look at the value of things. If someone put a rider on their insurance for jewelry. I actually have a rider on my homeowner's insurance for my power tools and my hand tools in my shop, because they are more expensive and there is a value there. So that's one place that someone can look at.
Leh Meriwether: The last thing is getting paid through credit cards. Now this does not necessarily have directly to do with assets per se as maybe trying to avoid a higher child support obligation, but we've seen people that what they'll do is they'll use their credit card and they'll buy all kinds of things, and then their employer, rather than sending them a paycheck, pays down their credit card directly.
Leh Meriwether: The times I have seen it, the employer was an offshore employer that was not in the United States, and the person was working remotely, so they weren't subject to tax laws where they had to report. Needless to say, we discovered it, through a lot of discovery, but he was running almost $100,000 a year. That's he was making an extra $100,000 a year through use of his credit cards. It was crazy.
Todd Orston: Look, the point or the takeaway should be that people are constantly going to try and beat the system. Okay? They're going to try and hide assets, or they're going to fail to disclose interest in some asset or ownership of some asset, and it takes the right people, meaning the right attorneys, asking the right questions. And even then, sometimes everything that we do, and everything we can do, is not enough to find those assets. And so-
Leh Meriwether: There's only so much a forensic account can do, too.
Todd Orston: That's right. And also it goes into something that we preach all the time, the difference between proactive and reactive behavior. We are reacting. We are dealing with the divorce. We are then reacting trying to find something that might be missing.
Todd Orston: It's all about, and one of the purposes in my mind of this show, is to teach proactive behavior. Be knowledgeable about what you have. Be knowledgeable about what the estate looks like. Ask the right questions. Secure the right information. And by doing so, hopefully you can avoid problems and avoid assets just sort of standing up and walking away.
Leh Meriwether: Which you don't want to have happen.
Leh Meriwether: Well that about wraps up this show. And you know what? If you want to read more about us or find out more about what we've talked about, you can always go to atlantadivorceteam.com. Very soon, this radio show and the notes from the show are going to be on that website. It's not quite there yet, I'm waiting for the web developers to finish it.
Leh Meriwether: But if there is a topic you'd like for us to explore, please email us at [email protected], or post your question on our Facebook page at Facebook.com/atlanta.lawyers.divorce.lawyers. Thanks so much for listening.
Speaker 3: This audio program does not establish an attorney client relationship with Meriwether and Tharp.