Category: Division of Assets

What Are The Panama Papers?

In short, early this month, a group of journalists dropped a bombshell of a document leak, hailed by whistleblower-in-hiding Edward Snowden as the “biggest leak in the history of data journalism.” The Panama Papers, as they’ve been designated, involve a Panama-based law firm called Mossack Fonseca that has allegedly helped many of the world’s super-wealthy hide assets behind shell corporations in order to shield them from taxation in their home countries. It has never been a secret that this sort of tax-evasion scheme happens, but with proof, many world leaders and otherwise wealthy private citizens have been implicated.

Though it will take some time to pore through the 11.5 million documents contained within the Panama Papers, the world impact has been pronounced. At least one world leader has resigned his post, Prime Minister Sigmundur Davíð Gunnlaugsson of Iceland, due to public outcry regarding his connection to the Panama Papers. Other implicated parties, such as President Vladimir Putin of Russia and Prime Minister David Cameron of Britain, have issued vehement denials, while the entire country of China instituted a moratorium on media coverage of the Papers. Sounds shady.

But there is another lesson to be learned from the leak that we thought would be relevant for a blog: how the Panama Papers implicate wealthy men and women who attempt to hide assets from their spouses during divorce.

Hidden Assets in the Panama Papers

When a couple files for divorce, they are supposed to disclose all assets and marital property to ensure equitable division of assets between the parties. However, divorce ”“ especially high profile divorce ”“ can be very contentious, and faced with the idea of losing a massive chunk of wealth, especially to someone that a person might not really like anymore (some of these divorces are downright vicious), it makes sense that the holder of the wealth might look into options for hiding that wealth. One option ”“ create a series of shell corporations and trusts overseas to funnel the money into, making it very expensive, difficult and time-consuming to track down. This is how the Panama Papers have revealed hidden divorce assets: by providing a blueprint of how money was hidden, where it was hidden and when it was hidden.

Take, for example, Dmitry Rybolovlev, a Russian oligarch whose divorce with his wife Elena was once described as the most expensive divorce in history. According to a report by the International Consortium of Investigative Journalists (ICIJ), Elena fought Dmitry for seven years at the cost of millions of dollars to receive her due share of his wealth in their divorce. She claimed he was worth much more than he said he was. Her initial winnings amounted to $4.5 billion, which was then slashed to $609 million by a higher court. She eventually settled for an undisclosed sum. Now, the ICIJ report shows that Rybolovlev hired Mossack Fonseca in 2002 to move assets beyond Elena’s reach.

What Happens If Hidden Assets Are Discovered After Divorce?

If you become aware of assets that were hidden and the divorce has already been finalized, you have options to take your ex-spouse back to court. You can file a motion to have your divorce case reopened for the purposes of amending the divorce agreement, or you can even file a civil lawsuit for monetary damages.

Spouses found to have hidden assets could receive court sanctions and be forced to pay more to their ex-spouse than they would have if they had been honest at the outset.

Our Denver divorce attorneys are prepared to walk you through the electronic discovery process to ensure that you receive your equitable share of your marital property.

Heads up when you get divorced: if you keep your name on joint accounts, whether by accident or intentionally, you will still be held liable for debts and charges that are made on those accounts.

When you are filing for divorce and getting together all of your financial records, check to see if you are a joint user or an authorized user on your spouse’s cards. If you are an authorized user, you will not be held liable for future debt, but if you are a joint user, your ex’s use of that credit card can affect you long after your marriage is over. Even if you have already gotten divorced and your spouse has been ordered to cancel the joint card, check your credit report using a free service like CreditKarma or by requesting a copy from the credit reporting bureaus to see if the card is still listed.

When you get divorced, your settlement agreement should mandate that all joint cards and accounts be canceled. It doesn’t always happen that way, though. Say your spouse failed to carry through with the transfer. This could open you up to snowballing credit card debt and even the financial ramifications of bankruptcy, which sometimes follows divorce. If you don’t act quickly, things could spiral out of control for you, even if you are the fiscally responsible one. If you do find that your ex failed to cancel joint accounts despite the settlement agreement, you can take your spouse to court on a contempt motion for violating the terms of the divorce agreement.

This rule goes for all kinds of joint accounts. A common one is car loans. Creditors are not interested in what the divorce court has to say about the car loan, so if you get divorced and the courts say your ex is liable for the loans, but your name is still on the account, the holder of the car loan can still go after you.

Our Denver divorce lawyers have a vested interest in helping you prepare for your financial future following divorce.

We don’t have to tell you how mortgage loan servicers make life more difficult ”“ that much you probably learned on your own ”“ but you might not realize that in divorce, they can be a lot harder to work with.

According to a report by the National Consumer Law Center (NCLC), thousands of homeowners across the United States find trouble saving their homes from foreclosure after inheriting the home or being awarded the home in divorce. The chief reason for the difficulty is having to live on less money, potentially leading them to fall behind in repaying their mortgage loans. Unfortunately, the protections against foreclosure for divorcees who are awarded a home in divorce are not very robust.

For many, the secret to keeping their homes is loan modification, but depending on who holds your loan and what state you live in, it can be nigh impossible to get the servicer to help, which may result in losing your home.

Recommendations for Successors to Protect Their Homes

Given the lack of protections, the NCLC has released a list of recommendations for the Consumer Financial Protection Bureau (CFPB) to consider when coming up with new rules to help protect successors from home foreclosure.

1. Successors should be more able to access information about their mortgage without having to produce unnecessary or nonexistent documents
2. Successors should have access to loss mitigation to protect themselves after a major upheaval in income, like that which often accompanies divorce
3. Homeowners dealing with hardship should be able to have the foreclosure process paused to allow them a review period to help prove their status

In short, the CFPB should revise their proposed rules to help successor families suffering the difficulties and sudden life changes of divorce to protect them from the further devastation of losing their home, and finalize them as soon as possible.

Speak to a Denver divorce lawyer to determine how your marital property will be divided in divorce to help you plan for your financial future.

When your partner in life is your partner in business, divorce tends to throw a wrench in your operations. And given that more than 80 percent of businesses in the United States are family owned, divorce’s effects on family businesses can be fairly substantial.

The Biggest Mistake Divorcing Business Partners Make

Unsurprisingly, the biggest mistake you can make when divorcing your business partner is doing it yourself. The forms necessary for divorce are available online, so in some circumstances, amicable divorcing couples who share a business will try to divorce by themselves.

This is a huge mistake. First of all, it can lead to a hit on your taxes thanks to retirement account changes. If you and your spouse attempt to split your 401ks or IRAs by yourself, you may inadvertently trigger a tax penalty.

Besides the monetary aspect, why should divorcing business owners speak with an attorney? It’s simple. Divorce is complicated, and when a business is involved, the complications get more complex. Business valuation in divorce is different than other types of valuations, because there may be applicable discounts for lack of transferability, lack of marketability and more. The last thing you want is to overvalue the business and then be responsible for a cash payment to your spouse based on an artificially-inflated number.

Not only that, but by having dedicated attorneys, you can keep emotion out of the mix. DIY divorce does not offer that kind of emotional distance that can help you maintain a more businesslike approach to the division of your company. With all of the effort that you have put into growing your business, you do not want to leave anything up to chance. You can do-it-yourself ”“ but don’t be surprised if it does not end well.

Our Denver divorce lawyers can help you navigate the complicated legalities regarding business division and valuation in divorce.

Divorce comes along with a mountain of paperwork, which certainly does not help relieve any stress. But despite feeling like you might be buried in deeds, decrees and debts, it is very important not to miss any details.

No matter how many assets you have, you are going to have to do a lot of revisiting old documents to ensure that your ex-spouse has no legal entitlement to any of your future assets. Take, for example, a will. If your ex-spouse is listed as a beneficiary on your will, your family may not have legal recourse to prevent him or her from taking those assets upon your death. Your assets, instead of being passed to your children or even a new spouse, could end up with your ex.

Wills are just one example. You will need to look at everything ”“ life insurance policies, your bank accounts, any annuities and retirement plans. All changes should be submitted in writing, and you should ask for written confirmation from each organization that you submit changes to.

When you have drafted new versions of these documents, be sure to include a provision stating that the new version fully replaces the old. This is implied by the creation of the new document, but you might as well make it very clear.

The most important tip is not to wait. Some divorcees will wait months or even years to get these essential documents in order, but the longer you wait, the more likely it is that you forget these important details.

A Denver divorce attorney can help you ensure that your property is protected during the divorce process.

When it comes to divorce, timing is everything ”“ divorces are rarely stress-free and usually it is best to handle a divorce when you don’t have other matters on your plate. But as the old adage goes, the best-laid plans of mice and men often go awry ”“ when your divorce comes up during tax season, it’s going to be a little more complicated.
It is incredibly important to be aware of how divorce is going to affect your taxes. If you make mistakes, you might have to deal with an IRS audit, and no one going through divorce should have to suffer at the hands of more bureaucracy.

Here Are Some Steps To Take To Help Make Sure Your Taxes Are Done Correctly.

1. Know your filing status! Are you married, filing jointly? Married filing separate? Head of household? Unmarried or single? To answer, you need to know when your divorce is finalized. If it was finalized before December 31, you can safely consider yourself single or the head of household for tax purposes. If your divorce wasn’t finalized until the new year, you’ll still be married for your tax filings.

2. Know your dependents. Only one of you gets to claim each dependent, so you will have to work with your spouse to determine whom. If both parties claim the same dependent, you may be audited.

3. Know your deductibles. Child support is not deductible. Alimony (maintenance, as we call it in Colorado), on the other hand, is, and the recipient must claim it as income. Know how the transfer of property will affect your taxes. Have an attorney help you draft a QDRO to prevent tax penalties relating to retirement accounts.

A Denver divorce lawyer can help you plan for the potential financial ramifications of divorce.

Running your own business is exceedingly rewarding, but stressful. But when divorce arrives, that stress can become much worse. Preparation is the key to maintaining your business and keeping yourself grounded while dealing with the stress of divorce.

Tips to Keep Your Head in the Game

1. Keep your finances organized. Consolidate your credit card statements, loan documents for your vehicle and your home, checking and savings account records as well as your investment accounts. Using software like Mint can help you ensure the accuracy of your financial status and help alleviate one of the major burdens of divorce for small business owners.
2. You will now want to start dividing up joint accounts shared by you and your spouse. This is especially necessary for business accounts with both of your names. While you may trust your spouse enough to keep their name on the accounts, you do not want to be beholden to their whims, especially if the divorce is contentious. Don’t open yourself up to having your accounts emptied by a vindictive ex, lest you face serious problems with credit and new business debts. No matter who ends up keeping the marital home, you will want to get your name or your spouse’s off of the mortgage. There are only two ways to do this ”“ sell the home, or refinance in your name only. Divorce won’t get your name off of the mortgage and lenders do not care who lives in the home, only that they get paid.
3. Once asset division has begun, you will want to take steps to protect yourself in the future. Leave your bank accounts in the past and make new ones in your name only. You will also want to request copies of your credit reports from the three major reporting agencies to look for errors, and dispute those.
4. Get everything in writing. Running a business makes this step especially important. Verbal agreements are rarely useful in court, so ensure that you have a paper trail for all interactions between you and your spouse.

Divorce is stressful. Alleviate that stress by letting a Denver divorce attorney help you with the hard work.

Because Colorado is an equitable distribution state when it comes to divorce, marital property is divided equitably ”“ not necessarily equally, but equitably ”“ in divorce. However, marital property does not cover all assets owned by a couple during divorce. Property that is separate is generally awarded to the party that owns it. However, in order to prove that property ”“ whether it’s a vehicle, a business or just personal money ”“ is separate, you will need documentation. This is where asset tracing comes into play.

Under Colorado’s Uniform Dissolution of Marriage Act, all property acquired by either spouse during a marriage is divisible. Asset tracing is a way that you can prove that property obtained after marriage is not actually marital property, but your own separate property.

How Asset Tracing Works

The first step of asset tracing is for the party claiming that certain property is separate property to demonstrate evidence of the claim. Let’s use gifts or inheritance as an example. By gathering together documents like gift tax returns, inheritance or estate tax returns or other documents that show ownership prior to a marriage, the party can usually easily prove that the property is separate.

Once it has been demonstrated that the property was obtained prior to marriage, it is then necessary for the party to prove that the assets were not transmuted during the marriage. Transmutation is a word describing assets that have changed from separate to marital. Assets that are commingled, such as an inheritance used to fund the marital home, can be considered transmuted.

Contact an Experienced Colorado Divorce Attorney

Asset tracing is a complicated and convoluted process that is made more difficult the longer a marriage lasts and the higher the total assets held by the couple. For more information on asset tracing contact our team and we can help today.

Our Denver divorce attorneys can connect you to the resources you need to ensure that your property is divided equitably.

If you and your spouse are business partners but find that your marriage is no longer working out, you may wonder whether it is possible to continue your professional relationship while ending your personal relationship. Well, every relationship is different ”“ if you and your spouse have remained amicable, then it could be possible to continue running the business together. However, divorce has a way of throwing a wrench into every aspect of your relationship and you may find that the hassle of continued professional ties can be more trouble than it is worth.

Tips to Keep Your Personal and Professional Lives Separate

• Set ground rules. A common one is to keep emotion out of the workplace. No arguing at work, and if something does come up that needs to be addressed, set aside a time outside of work to speak to your ex-spouse about it, or schedule time with a therapist.
• Most businesses start with formal agreements between managing partners that deal with what will happen if the partnership breaks up. If you and your spouse started a business together, odds are you were not thinking about an eventual dissolution of your marriage, so you probably do not have a formal agreement. Now is the time to make one. You can do it yourself or discuss it with an attorney. We recommend the attorney option; there are many aspects of separation agreements that you might not think about without a professional helping you along.
• Define your roles. Divvying up your responsibilities based on your individual strengths can help keep the business machine oiled and running. Perhaps one of you is better at handling finances and the other is better at managing employees. As long as you can trust one another to fulfill your roles, this separation helps keep everything flowing smoothly.

Our Denver divorce attorneys will zealously advocate for your best interests and seek the optimal resolution to your divorce.