Do You Know About This Devious Way That Your Ex-Spouse Might Be Trying to Hide Money, Assets and Investments in Your Separation or Divorce in Ontario?

Do You Know About This Devious Way That Your Ex-Spouse Might Be Trying to Hide Money, Assets and Investments in Your Separation or Divorce in Ontario?

I’m about to reveal to you another way that your ex-spouse might be hiding money, assets and investments in your separation or divorce!

Hi, my name is Thomas O’Malley.  I’m an experienced family lawyer in Durham Region and the GTA.

Let’s see what Steve tried to do in his family law case.  Steve was in a business that operated as a corporation.  He was part owner and both owners received a salary from the corporation. 

Steve wanted to prove that his income had dramatically decreased so that he could get a family court order to lower his spousal support that he was paying to his ex-wife.

He hired a business valuator to show that his income and profits had gone down big time!  The business valuator, in fact, found that Steve’s income had gone up.   Steve questioned how that could be when there wasn’t enough money to cover the owners’ payroll checks.

After reviewing the general ledger of the business and selected paid bills, the business valuator collected a list of personal expenses paid by the business and deducted as business expenses. 

It turned out that the company had profits of $1.1 million which was $100,000 more than the one million dollars that the business owners had projected.  However, between the two of them, the owners spent approximately $700,000 on boats, horse riding lessons for their children, their pension contributions, multiple cars, skiing vacations, and meals at expensive restaurants. 

The business valuator explained to the owners that they had spend so much money on their personal expenses that they ran out of money to pay their base salaries.  If they combined their salaries and personal expenses, they would see that they had a more profitable year than the year before. 

They had just spent less in the previous year on personal expenses, giving them enough to cover their payroll and to pay for bonus checks.

The owners had forgotten about their personal expenses completely and considered only their salaries as income.  Since it is illegal to deduct a personal expense as a business expense, business owners often rationalize or justify their business expense as legitimate business expenses. 

After he realized that he had an even more successful business year, Steve dropped the planned court filing and continued paying spousal support as before.

In short, these business owners really believed that their personal expenses had become business expenses, resulting in what they thought was a poor year financially.

Here’s the lesson from this case:  Carefully see whether a business owner is deducting personal expenses as business expenses to lower their business profits and income.

Personal expenses deducted as business expenses are often buried deep in within the accounting system.  A business owner can try to charge their personal expenses on a busines credit card.

A less common but far more sophisticated approach is for the business to pay for merchandise or supplies from a vendor or another business that does really exist.  Instead, the vendor is a fictitious or fake company operated by the business owner who prints out invoice for merchandise.  The business issues cheques to the fake company and deducts the expenses as business expenses.  The business owner then cashes the cheques and uses the funds for personal expenses.

Other approaches exist and vary in sophistication but they all involve the business paying for personal expenses and deducting those payments as business expenses.

If you have any questions about your separation, divorce or family law case and you would like our help, there’s a few ways to contact our office.  You can leave a message on my Facebook law office page, visit my website at www.canadiandivorcelegaladvice.com, or call me directly at 905-434-8837.  We would be happy to speak to you.

Oh, by the way, did you know you can protect your family law rights and get essential information on settling your family law issues with your former spouse with the daily indispensable family law advice and tips at my FREE Facebook group?  

Click here to find out more: Durham Region Separation and Divorce Legal Support Group  

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