Some spouses try to reduce alimony or child support by hiding income through deferred pay, perks, or side deals with an employer. Here's how to recognize the signs.
When a marriage is ending, some spouses try to make themselves look poorer than they really are so they can pay less in alimony and child support. For example, a spouse might arrange with an employer to defer part of a paycheck, take advantage of unreported perks, or hold off on a bonus until after the divorce is final to hide income and assets from the other spouse. Because these arrangements vary from one employer and industry to the next, they can be hard to spot unless you know what to look for.
Below are 10 of the most common ways a spouse hides money through their employment, from stock options to special profit-sharing deals with an employer.
Why Would a Spouse Hide Income Before a Divorce?
Alimony and child support are typically calculated based on each spouse's income. The less income a spouse appears to have, the less they may have to pay. This gives some spouses an incentive to hide income or make their finances look worse than they actually are in the months leading up to a divorce.
Does Hidden Income Always Affect Alimony and Child Support?
Some states count nearly all forms of compensation, including employer-paid perks and unused benefits when calculating alimony or child support. Other states only count only wages and salary, with narrower exceptions for specific perks.
A divorce lawyer in your state can tell you how these types of compensation are treated in your case and how they would affect the division of property in your divorce.
10 Signs Your Spouse May Be Hiding Income
1. Deferred Salary Until After the Divorce
Your spouse may defer a portion of salary until after the divorce. Look for letters or notes asking for an income deferment. The history of your spouse's earnings could also be very telling. If your spouse is accustomed to receiving $75,000 per year in commissions and is suddenly not receiving any, this is a suspicious fact that your attorney can use.
2. Misusing Expense Accounts for Personal Spending
Perquisites (“perks”) refer to benefits over and above direct compensation that a company may offer its employees. Some companies offer very little to no perks, while the perks of other companies are so valuable that they almost equal the salary being paid. Some common perks are:
- a company car for personal use
- paid parking space
- expense accounts
- meal allowances, and
- clothing and uniform allowance.
Even though expense accounts are intended to be used for business expenses, some spouses might use them in a way to hide money they're using for personal expenses. For instance, they might keep a portion of a weekly expense account for themselves, or they might charge meals to the employer but also list them as a personal expense in their financial declarations for the divorce.
3. Deferred or Split Bonus Payments
Some employees receive bonuses in addition to their net pay. Look for deals where partial bonuses are paid and the other portion is put into a separate account accruing to the benefit of the employee. Bonuses can be deferred for future distribution. Look for a pattern of bonus payments in the past.
4. Employer-Paid Trips and Extended Business Travel
Does your spouse’s employer pay for days at hotels when the business part of the trip has been completed? Some employees are allowed to take their spouses on business trips. Check to see whether your spouse took someone else as a guest.
5. Unused Vacation, Sick, or Personal Days
If your spouse gets four weeks of vacation and only takes two weeks off, they may be entitled to pay for that unused time depending on state law and the employer's own vacation policy.
Similarly, if your spouse doesn't use personal or sick days, they may get paid for the unused days depending on employer policy and state law.
6. Unexercised or Recently Exercised Stock Options
A stock option is the right to buy shares at a fixed price, usually equal to the stock's market value on the grant date. If your spouse exercised employee option(s), they may be sitting on valuable assets you might not be aware of.
7. Country Club or Health Club Memberships Paid by an Employer
Your spouse's employer may be paying for these expenses.
8. Fake or Informal Loans from Friends, Family, or Employers
A common way divorcing spouses increase debts and look “poor” is to create a loan with a friend, employer, or family member. The loan may be a sham, which never has to be paid back, but it will be listed as a debt in the divorce.
9. Profit-Sharing or Hidden Ownership Stakes
Look for possible signs that your spouse may have a special arrangement with their employer. For example, your spouse's employer may pay your spouse a percentage of the company's profits. Also, try to confirm whether your spouse actually owns a percentage of the company and is, therefore, not an employee but an owner or partner who is entitled to additional profits or returns.
10. Cryptocurrency, Digital Wallets, or Employer-Paid Tokens
Some employers pay bonuses or incentive compensation in cryptocurrency or company tokens instead of cash. Your spouse could also be moving money into a personal crypto wallet or exchange account that doesn't show up on a pay stub or bank statement. Ask for exchange account statements and wallet information as part of discovery.
