Breaking Up is Hard To Do
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Breaking Up is Hard To Do
If you are planning upon getting divorced, or in the process of getting divorced, you are facing some major financial challenges. I am a C.P.A. and not an attorney, but I do have considerable experience in the area of forensic accounting related to divorce. At the risk of coming across as being sexist, this article is oriented towards male business owners since the majority of significant closely held businesses are still owned by men. And if you are a woman who is a business owner, all of the information is relevant to you too as well.
Most divorces are initiated by women, in many instances because they feel “unfulfilled” or “lonely”. Now, if your spouse tells you that she wants out of the marriage, this is because she has made a conscious decision that her life is going to be better without you in it. She may or may not be correct, but that is the thought process whether she realizes it or not. So the first thing you need to do is to stop feeling protective towards your soon to be ex, and to start thinking about yourself. Remember, there is such a thing as a “friendly” divorce, but it’s rare; your soon to be ex’s goal is probably to have you walking around broke, sleeping in a truck, and never getting laid again. After all, you are the sole cause of the marriage failing because you are a “dick”.
Your soon to be ex’s attorney will probably hire a forensic accountant to “investigate” your business and to place a value on it In New Jersey, closely held businesses are subject to equitable distribution, with the standard of value being fair value, and not fair market value. If your business is just you and a couple of employees, the forensic accountant and your wife’s attorney will attempt to inflate its value to make it appear that it has worth above and beyond your day to day participation. This is what is known as goodwill. In that way, you will be forced to “buy out” your wife. As ridiculous as this may be, your attorney and your accountant will have to counteract this.
If you have not been reporting all of your income, you have a potential IRS problem. In New Jersey, judges are required to report cases of tax fraud to the IRS that they come across during their adjudication of matrimonial cases. Some do report it, and some do not, but the risk is there. I was a forensic accountant in a case where the judge did in fact report tax fraud to the IRS. Discuss this with your attorney during the first meeting and provide him or her with a complete picture of your tax shenanigans. The worst thing that can happen is that s/he learns about this in open Court in front of the judge courtesy of your wife’s testimony or accusations made by your wife’s attorney or forensic accountant. DO NOT DISCUSS THIS WITH YOUR ACCOUNTANT. There is no such thing as accountant-client privilege. Your ex might also report you to the IRS. Even if you have filed a joint return, she can claim innocent spouse. This works when there is a big difference in educational attainment between spouses, and the spouse claiming innocence has not been involved in the marriage’s financial affairs.
Settle but settle aggressively. Many men agree to anything just to get it over with. DON’T. It will come back to haunt you for many years.
• If there are firearms in the house, get rid of them as soon as the topic of divorce comes up.
• When you move out of the house, don’t tell your soon to be ex where you are living; it will avoid “scenes” in your driveway or parking lot.
• Don’t discuss your divorce with employees or anyone for that matter with the exception of professionals that you pay.
• Hopefully, you have a “cash stash” that your soon to be ex-does not know about. It’s much easier to get a new life when you have money. Hide it in an out of state bank or out of the country. Any place where she or her attorney and forensic accountant won’t think of looking.
• Do not have an out in the open new relationship until you have been divorced for at least six months. Getting a girlfriend that your soon to be ex-knows about as soon as you separate will only inflame the situation.
• AND GOOD LUCK!
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