While openness about finances is vital in California divorces, sometimes it’s a challenge to uncover every asset obtained during the marriage. Deferred compensation, carried interest, offshore accounts, and other sophisticated assets often require closer examination to determine whether they should be included in the marital estate. Understanding where high-earning spouses hide assets in a Century City divorce can help you recognize financial issues that may affect property division.
Deferred Compensation May Not Be Immediately Visible
Deferred compensation is compensation that is earned now but paid at a later date. This can include deferred bonuses, incentive compensation, supplemental executive retirement plans (SERPs), and other types of employer-sponsored benefits.
Deferred compensation can be a significant issue in a divorce and may raise questions about whether the benefits are separate or community property, depending on when the benefits were earned and the intent of the compensation. As deferred compensation benefits may be subject to employment contracts and vesting requirements, plan documents and other compensation agreements may be reviewed to help determine if deferred compensation is included in the marital estate.
Carried Interest Can Complicate Property Division
Carried interest is a type of compensation that is paid to private equity, venture capital, and investment fund managers. A fund manager may receive compensation in the form of a share of a fund’s profits, subject to the governing partnership or fund agreements. Due to the fact that the value of the carried interest can depend on future investment performance, timing of distribution, and contractual terms, it may be difficult to ascertain the value of carried interest in a divorce.
In addition, it may be necessary to determine whether the carried interest was earned before, during, or after marriage. Reviewing partnership agreements and supporting financial records is a crucial step in valuing these interests.
Offshore Accounts Are Not Automatically Hidden
Many people have perfectly legal offshore accounts as part of their business or investment operations. The fact that a bank account is located outside of the United States, however, does not make it automatically off-limits to California financial disclosure. California Family Code §§ 2100-2107 provide that spouses have a continuing duty to fully disclose assets, debts, income, and expenses during a divorce.
If an offshore bank account is part of the marital estate, it should be identified through the discovery process in most cases. According to the IRS, U.S. citizens are required to file a Report of Foreign Bank and Financial Accounts (FBAR) if the aggregate value of their foreign financial accounts is more than $10,000 at any time during the calendar year.
An FBAR filing requirement is separate and apart from a divorce proceeding. Offshore accounts, however, could become part of the marital estate. Diligent review of financial records may help identify all marital assets that should be considered.
Why Sophisticated Financial Records Matter
Individuals with substantial income often have financial portfolios that include more than just checking and savings accounts. Business interests, investment partnerships, trusts, executive compensation plans, and other financial arrangements can all be factors in a divorce.
The U.S. Census Bureau reported 3,502,950 nonemployer businesses in California for 2022, highlighting the significant presence of entrepreneurs and business owners there. Complex divorces can involve financial holdings like these, which can take more documentation and financial analysis to determine the nature, ownership, and potential value of those assets before financial issues can be resolved.
Hire a Hidden Assets Lawyer
Every high-net-worth divorce presents unique financial and legal challenges. At Kramer & Zitser, LLP, our boutique family law firm was formed by combining two respected family law practices, creating a team with over 50 years of combined experience. Supported by Certified Family Law Specialists, we help clients protect their interests in complex divorce and property division matters involving significant wealth and sophisticated assets.
FAQs
Can Cryptocurrency Be Used to Hide Assets During a Divorce?
Cryptocurrency makes a divorce more complex because crypto can be stored in many different wallets or traded to a variety of different platforms. As with all other assets, cryptocurrency must be identified, valued, and disclosed if it is part of the marital estate. Establishing whether or not the couple has digital assets is a matter of tracing financial records, transaction histories, and any other available information.
Can Trust Assets Be Involved in a Divorce?
Trust assets can be a concern in a divorce based on the type of trust, when it was created, and how a spouse has an interest in the trust. Some trusts may hold separate property, and others may have assets that are worth further analysis. Analyzing the trust documents and financial picture surrounding the trust may clarify how it could impact the divorce.
Can a Spouse Request Financial Records During a California Divorce?
California’s discovery process allows a spouse to request financial information that may be relevant to the divorce. In some cases, this can include documents, written questions, or other evidence about the marital estate. In cases with major financial issues, getting complete and accurate records can help the parties assess the issues and prepare for settlement negotiations or trial.
How Common Is Divorce in the United States?
As of 2023, the Centers for Disease Control and Prevention reported 672,502 divorces and annulments across the 45 reporting states and the District of Columbia. Divorces involving high-income spouses and high-asset financial complexities can often lead to a number of unique legal and financial considerations not encountered in a traditional divorce proceeding.
Contact a Century City Hidden Assets Attorney
Divorce and property division for high-income couples may present financial concerns that can be more complex than standard accounts or real property. Forms of deferred compensation, carried interest, offshore accounts, and other financial entities may be factors in a divorce settlement and may have to be analyzed under California divorce law.
Understanding how these assets are identified, valued, and treated under California law is an important part of protecting your financial interests during divorce. Kramer & Zitser, LLP has handled high-income divorce cases in California where considerable wealth and complex financial and business issues are present.
For questions regarding hidden assets or other property division concerns in Century City, an experienced attorney can advise you regarding the next steps to protect your financial rights. Schedule a consultation today to hire a hidden assets lawyer.
