Why you need to know about your spouse’s business

Income is a key consideration in any divorce. Under Wisconsin law, both spouses’ incomes are factored into determining how much spousal maintenance or child support one spouse may be required to pay as it is a community property state wherein assets are divided equally. Substantial changes in income may warrant a post-divorce modification in alimony or child support. Given the key role income plays in family law considerations, it is important that anyone going through divorce has a good handle on what his or her spouse earns.

In most cases, a spouse’s income may be ascertained and easily determined by looking at W-2s and pay stubs. Determining income becomes trickier if the spouse is self-employed. When a spouse runs a home cleaning or maintenance business, a lawn service company, or even a bar or restaurant, much of the income will come in the form of cash, which is easily hidden and can be used to purchase a new luxury vehicle, a golf-course condo and other high-end items that significantly increase one’s net worth without ever making its way onto an income statement.

When a spouse runs a cash-based business, questions are likely to arise during divorce about how accurately the income has been reported. If one spouse knows the other spouse had underreported income in the past, there may be a presumption that current income also is being understated. If the other spouse does not have an adequate understanding of how the business operates and where to find the cash flows, the missing income may be hard to track. Options to locate income discrepancies during divorce include a lifestyle analysis tool and a forensic accountant.

An experienced family law attorney can help ensure that all income be accounted for during a divorce, and he or she may also assist in assembling a team of financial experts to track down hidden cash.

Source: Forbes, “What A Divorcing Woman Needs To Know About Her Husband’s Cash-Based Business,” Jeff Landers, Jan. 30, 2013