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Normally family law matters, including child custody and cheating spouses are proven through surveillance techniques involving video, still pictures, pulling trash, and other techniques relating to the subject. The surveillance is based on a discussion between the investigator, the client, and his/her attorney to determine what is necessary to prove the case. When the surveillance is completed and the reports written, a lawsuit is filed in the courts. At a hearing or a trial the attorney has the private investigator (PI) testify to the observations, pictures obtained during the surveillance, and pertinent trash collected. The court hearing both sides of the case then makes a decision.
There are a number of states based on community property laws including, Texas, Louisiana, New Mexico, Arizona, California, Nevada, Washington, Idaho, and Wisconsin. In those states, property, assets, and income are presumed jointly owned. In some cases, wealthy individuals marry and own property and assets as separate property acquired prior to the marriage. Proper recordkeeping must be maintained to avoid damage to the separate property estate improperly benefiting the community estate. The accounting techniques are specialized and should be performed by an experienced forensic accountant.
Case Scenario
A divorced woman received a large settlement from her previous marriage. She was smart, and prepared for her future by investing her money in property, brokerage accounts, Certificates of Deposits, gold, and cash. Her separate property estate totaled $20 million. Her divorce attorney coached her and she maintained the records necessary to prove her separate property interests. A few years later, she was tired of being lonely and found a nice man and they married. He was unemployed, but derived his income from his 401(k) investments. A few weeks after their marriage, she received in her bank account interest and dividends ($10,000) from her separate property investments, which unbeknownst to her was community income. She transferred $2,000,000 from the bank account and invested it with her stockbroker. Applying the Community First rule according to the Texas Family Code, her investment was 99% ($1,990,000) separate and 1% ($10,000) community property. Three years later, with no additional funds invested in the account, except reinvestment of interest and dividends and after she withdrew funds over the years, she decided to divorce her husband. Her lawyer employed a forensic accountant to help her with the tracing of the separate and community property investments. The examination revealed that her separate property had decreased to $1,750,000 and the community property increased to $200,000 from $10,000. The client was shocked to learn that she owed her husband $100,000. Other tracings of brokerage and bank accounts revealed similar growth of the community estate with a small amount of community property assets commingled with separate property assets.
The consequences of divorce go beyond surveillance, child custody, and divorce mediation. Individuals with separate property should be aware of the pitfalls and the rules for tracing funds, inception of title, claims for reimbursement, and business valuations. Maintaining the separate property portion of a marital estate involves a forensic accountant who can help the client keep her eye on the “bigger piece of the pie.”
Sage Investigations, LLC is a leader in forensic accounting and divorce tracing and has propriety technology that can be of benefit to clients with separate property issues. With over 50+ years of experience following money. Sage uses proprietary technology (DIO) to help develop the full picture of the financial aspects of your separate property. Sage will help structure your future or that of your client. Learn more about assisting you or your clients by contacting retired Internal Revenue Service Special Agent Edmond J. Martin, Chief Investigator at Sage Investigations, LLC. Email edmartin@sageinvestigations.com website: www.sageinvestigations.com or call 512-659-3179.
NOTE: Please be advised that Sage Investigations, LLC, Edmond J. Martin, CFE and Kenneth Huff, CPA are not attorneys and this article is not intended to provide legal advice.
