Discovering the Fraud She Perpetrated on Him By Vickie Adams

Recently, a bankruptcy lawyer sent me a client, who had been sent to him by a divorce attorney. Here’s how we uncovered the fraud my client’s wife had been perpetrating:

6 months prior, while my new client was at work, his wife had moved out. She had taken every stick of furniture. His bank accounts had been frozen by the IRS; he had just gotten a notice his wages were to be garnished. My mission was to figure out ‘what happened’ and ‘why.’

“I’m a trusting guy,” he said. “I just deposited my check in the joint account and my wife took care of everything. My wife had our taxes prepared by ‘a friend.’ I only signed it.”

After a few hours of quality phone time with the IRS, I learned that he had a $15,000 tax liability due to “a mistake” the friend made. He believed his wife had been paying the debt monthly with his salary. We also learned she had filed fraudulent returns for several years. He was so out of touch with the financial realities of his household, he didn’t know that his wife was collecting $22,000 worth of Social Security each year (which she failed to report on their tax return).

Since California is a community property state, my client now had “community liability” for several thousand more. Learn more about “community debt” in a prior blog article by clicking here.

His divorce settlement agreement was almost finalized, and now these new tax debts were surfacing. I called his divorce attorney and made him aware of these community debts: The settlement conference was postponed. If these had not come to light, the agreement would have been based on undisclosed information and could have been re-opened in years to come.

How could this fraud have been avoided or discovered earlier?

  1. If your marriage is in trouble, take an interest in your finances: Do not be in denial. Don’t count on someone who you barely speak with for years on end to be responsible for your financial well-being.
  2. Get an authentic transcript of your tax return directly from the IRS (by using Form 4506) before you settle. Or ask a tax professional registered with the IRS to get a complete history of your account for you (as I did for my client).
  3. Before you hire an attorney, take the time to consult with a Certified Divorce Financial Analyst™, who is also a CERTIFIED FINANCIAL PLANNER™ professional: Get a complete overview of every aspect of your financial life. Don’t let a surprise surface after your divorce is final.

A CERTIFIED FINANCIAL PLANNER™ professional is often the next stop for a client when an attorney realizes there are so many different financial problems in so many areas: There is no one good starting point to unravel the skein.

I think old school, experienced, comprehensive CFP® professionals are like the MacGyvers of the Financial World:

We are armed with diverse, multilayered skill sets such as specialization in tax, divorce, and estate planning. We are called upon to apply practical knowledge to solve complex problems, that can have life altering financial impact for clients. Our mission is to avert or avoid a crisis; or better yet, plan ahead so these mistakes do not happen.

Do you know someone who has a divorce financial ‘horror story’?

Vickie Adams Divorce Financial PlannerVickie Adams, CFP®, CDFA