What to do if my ex-spouse is hiding money?

Matthew Katsionis, Calgary family lawyer and Vancouver family lawyer 

The question that comes up in many of my cases is what to do when one spouse is hiding money. Often this is just a hunch but sometimes there are facts that lead to urgent concerns including:

  • A spouse who operates a predominantly cash business and now cash flow is drying up. 

  • A spouse who has a business or company and now there are new significant expenses.

  • A spouse who now claims large loans from friends or family. 

  • A spouse who is diverting funds into a trust.

  • A spouse who now claims that they need to sell a business to partners quickly. 

It is important to remember in any of these circumstance that a family lawyer is not an accountant. A family lawyer who has dealt with many divorce cases can often spot red flags that point to a dissipation of family assets but will not be able to account for the missing funds.  Generally, family lawyers will go through bank records, credit cards, mortgage statements, investment accounts, corporate and business records to see if anything looks strange.  However, tracing missing money can be very complex so we will advise divorcing clients to seek advice from an accountant as well. When there are real concerns about money going missing after separation, especially where businesses are involved, it may be worth it to hire a forensic accountant.

What is a Forensic Accountant?

Think CSI except it has to do with accounting.  A forensic accountant is an expert in reviewing various types of accounting records, bank records and bank statements, etc. and their job is to trace nearly dollar for dollar what came in and what went out – and more importantly, how and where.  Most notably, a forensic accountant is able to review the expenses and overhead of a business and whether the bank records, bills, invoices, line up with the actual earnings.  This can result in identifying shortfalls in the profits of a business and tracing hidden money.    

Pros and Cons of Hiring a Forensic Accountant

Pros

  1. A forensic accountant is an expert who can testify at a family law trial.

  2. A forensic accountant may be able to find hidden money which can lead to increasing the amount paid in a divorce settlement.

  3. If a forensic accountant finds that someone is hiding assets or cash, this finding can be used to attack the credibility of the spouse hiding the assets.

  4. A report done by a forensic accountant can be used to impute income to the spouse who is hiding the money.  Imputing income in a family law case means assigning a spouse an income that is higher than what they declare to the Canada Revenue Agency. This can lead to an increase in child support and spousal support.

Cons

  1. A forensic accountant is expensive.  Depending on the complexity of the case, it can cost $30,000-$300,000.

  2. A forensic accounting may not result in a finding that money has been hidden or the money hidden may be less that the cost of the forensic accountant. 

  3. A forensic accounting requires time and can take many months to complete.

If you are interested in receiving a forensic accounting ask your family lawyer if they think it is worth the expense and time. You can also set up a consultation with a forensic accountant and the following firms provide this service:

https://www.mdd.com/locations/calgary/ 

https://www.bmmvaluations.com/forensic-accounting.html 

https://www.mnp.ca/en

https://www.bdo.ca/en-ca/services/advisory/investigative-forensic-accounting/overview/ 

Crossroads law has extensive experience working with clients in family law and divorce cases involving hidden assets and forensic accounting. We have a team of top rated Vancouver family lawyers and Calgary family lawyers to assist clients across British Columbia and Alberta. If you are concerned that your spouse is hiding money after separation and divorce, contact us now for your free consultation with a family lawyer.