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How do divorcing high earners hide their money

(21 Posts)
DontMissHisJowls Wed 12-Dec-18 17:25:56

I am divorcing a particularly nasty high earner and I strongly suspect that he will do everything he can to hide or temporarily reduce his income to avoid spousal and child maintenance. I already have some evidence that he is moving from self employed status to a limited company and is reducing his hours.
Can anyone give me some tips on what to look out for as I go into the financial negotiations with him? What do these charming individuals tend to do with their money? Thanks in advance.

OP’s posts: |
littlebillie Wed 12-Dec-18 20:41:15

Change from salary to company reduced salary and dividends. A £145k salary can vanish into £8,400 salary with generous unlimited dividends ( which aren't classed as income)

TranmereRover Wed 12-Dec-18 20:46:38

Increase outgoings - by eg starting a junior isa for each child (for which the high earner is signatory) which the max allowance is paid in on a monthly basis / paying monthly allowance to parent who reimbursed it in cash - essentially any ways to increase monthly obligations to reduce what’s available to pay. Buying eg expensive watch or easily portable loose diamonds - depends what level of avoidance you’re talking. Offshore accounts and establishing trusts.

MarieG10 Wed 12-Dec-18 21:39:42

With a limited company he can also leave the money within the she,term of the company....it isn't his money until the company directors agree to pay him either a salary or pay dividends. Despite hi. Being a director the company assets are separate.

By the way, once dividends are laid they will still be seen as income.

I knew of someone contracting who went limited, took a minimal salary and built up over £400k in the accounts. Totally legit with generous tax reliefs when the company is liquidated if he is "retiring"

Fighting it will cost a fortune and get you no where

DontMissHisJowls Wed 12-Dec-18 22:00:24

Thanks all. Scary stuff. Incredible the lengths they will go to to shaft someone they once loved. I just want to get out of this marriage intact and with enough to live on but it does make me mad..

OP’s posts: |
namechangedtoday15 Wed 12-Dec-18 22:04:53

Go to a law firm with experience of high net worth individuals- my husband's firm for instance have in house forensic accountants who are used to tracking through all these shenanigans.

Japanesejazz Wed 12-Dec-18 22:08:23

Bitcoin

NotSuchASmugMarriedNow1 Wed 12-Dec-18 22:10:00

You need to get him to for him to exchange financial details and his FormE as soon as possible.

When you get that Form E, get yourself a cup of coffee and sit there and go through that form with a microscope. Every single transaction, make sure you know what it is. You are especially looking for money being moved between accounts. If there is any evidence of this then you can demand 12 statements for those accounts. You have to provide 12 months statements for ALL accounts (including paypal). If you think he is using his company for his living expenses then you need to tell the judge that.

Don't bother trying to negotiate with someone like this. Go straight to court. Make sure he knows that he alone doesn't get to dictate what the split will be - either you agree it between you or a judge decides.

Good luck and keep posting here for support.

Truckingonandon Wed 12-Dec-18 22:12:49

Get a SHL and do it quick.

Japanesejazz Wed 12-Dec-18 22:18:14

I got lucky that I had kept a copy of a statement for his business account, he denied having that account on his form e. His barrister was not impressed when it was presented to the judge in court. Case was immediately adjourned. Stay strong OP, are you joint proprietor on your home?

MyNameIsNotSteven Wed 12-Dec-18 22:24:24

'Sell' assets for token sums.
Pay 'maintenance' to OW for new children - apparently it won't matter to CMS if his dick reaches far enough to impregnate her again while they're 'not living together'.
Simply ignore court orders re buying out.
Do shady things with dividends that I make no claim to understand.

MyNameIsNotSteven Wed 12-Dec-18 22:25:46

If they are nasty enough none of the above will matter. They will get away with as much as they can because you need money to fight it.

MissedTheBoatAgain Thu 13-Dec-18 01:51:18

To OP

Form E requires 12 months of Bank Statements unless that has changed since my Divorce in 2016. However, Courts can at their discretion order at the FDA for documents that go further back than 12 months.

If your Ex has planned the Divorce in advance he may already have disposed of assets without your knowledge. I am not a family solicitor or Barrister, but remember during my own Divorce that assets disposed (by setting up Trusts for example) of within 3 years before the Divorce Application could be re-visited and taken into account if the Courts considered that such disposal was for the purpose of frustrating the other partner's entitlement. If necessary Trusts can be set aside by the Courts. Same with any unusual large sums of money that can't be accounted for.

The switch from Self Employed to Limited Company would have to be explained by your Ex. However, it is possible that his clients prefer that he operates as a Limited Company?

For a newly formed Ltd Company it may be a while before Accounts are produced, but courts can make reasonable assumptions as to what the; total revenue will be, what are legitimate costs, taxes due and what is left over that can be distributed in Dividends.

As for not paying out the full amount of Dividends possible and leaving money in the Company for a rainy day that will depend on the nature of the business your Ex is involved. Legal opinion is required on that point.

If you know the name of the Ltd Company you can check online with Companies House to see who is named as Director. Possible he may list a new partner or even a relative as a Director so that they can receive Dividends, but in reality they are passed on to your Ex.

Both you and your Ex will be required to complete a Form E accurately an truthfully. However, if you think you Ex's Form E is missing information it will be up to you to provide some evidence. This is where a solicitor (or a Barrister if you are talking big sums) will be needed as they should be familiar with all the tricks people have tried in the past.

As for being able to afford representation you may be eligible for help from your Ex if he is earning more than you and has greater assets. Legal Service Order I think it is called. Any help you receive from Ex will be taken into account when settlement is made.

Might sound odd that one partner pays the other's legal costs, but logic is that if both partners have good representation the proceedings and settlement take less time to resolve and total legal costs are less.

Good luck

FredaNerkk Sun 23-Dec-18 00:54:22

Here's another tactic high earning DHs use: Employee Benefit Trusts (EBTs) to disguise 'remuneration'.
This tactic is favoured by high earning professionals (in finance and legal sectors) etc, who are typically high earning employees rather than business owners.

Basically, high-earning ex H asks their real employer/client to pay their salary/fee to a management company (not to ex H directly). Management company takes a cut, and puts the remainder into a trust fund.

The management company 'employs' exH. The management company pays exH an amount of income equal to the low tax free threshold (so ex H doesn't have to pay income tax). And exH tells Child Maintenance Service that he has a very tiny income, so CMS declares he has negligible child maintenance obligation.

So how then does exH get his hands on the rest of the money? Well the management company - which declares itself to be his 'employer' - gives exDH an "interest-free employee loan" linked to the Trust that it set up (the pretence is that it is an Employee Benefit Trust). The loan can run to tends of thousands of pounds each month. It is declared to HRMC (form P11D), but because it is a 'interest free loan' and not income, no income tax is paid. HOWEVER it's not really a 'loan'. If one scratches the surface, it turns out that the Loan Agreement has a clause that repayment is only required if called in by the management company. The understanding between the management company and exDH is that it won't call in the loan (there may be a separate written agreement to that effect). So exH draws down on the loan and gets hands on the money to the value that the real employer/client paid.
Although exH has to pay the management company's fee, exH is happy because he pays practically zero income tax and zero child maintenance.

HMRC is getting tougher on these arrangements. So not sure if they are common now.

To investigate -- ask during disclosure for copies of P11D as well as P40, P60 etc. This will detail benefits in kind, including interest free employee loans. Then ask for proof of repayments. If no proof of repayment or if repayment is negligible, that's a pretty good indicator that it is disguised income (not a loan). Another giveaway is where exDH says he is employed by an 'agency' or a Management company, when you know he goes to work in/for a bank or other high paying organisation.

AmyDowdensLeftLeftShoe Sun 23-Dec-18 02:38:00

@FredaNerkk HMRC are chasing people for years of unpaid tax and NI if they have used EBTs. Many are going bankrupt as a result and this includes ex-professional sportsmen.

FredaNerkk Sun 23-Dec-18 10:38:25

@AmyDowdensLeftLeftShoe I'm glad to hear that. It's a shame nothing happens about the years of unpaid child maintenance.

LesLavandes Sun 23-Dec-18 11:56:14

I haven't had time to read all this thread. But I didn't want to read and run. Was married to a v high earner for 26 years before divorce proceedings started. Suddenly he was made redundant but was in an LLO. No redundancy money. He had also opened companies in odd jurisdictions of the world. Paid himself minimum he could - almost nothing. Used our capital to fund everything. I employed forensic accounts. They could find v little about his earnings except a load of companies which weren't trading at this time.
In the last 3.5 years I have been to court 8 times and both of us spent a shit load of money. This kind of divorce is awful.
Things were v much going my way but at final hearing I lost. Depends on the judge on day. She hated me. Loved him. Thought I was a money grabbing Princess.
It is now 4 months on. I could have appealed but couldn't afford to.
I have moved house last week 40 miles away. I am not divorced yet but v soon. This is the start of a new adventure for me.
OP. Get yourself a top lawyer. It's a rough road. Take care and I hope it goes well for you.

larrygrylls Sun 23-Dec-18 13:52:33

It is hard and high risk to hide money, also an extraordinarily bad idea.

If you lie on your Form E, it is a criminal offence. In addition, if found out on your lies, a court will look v harshly upon you.

Of course, things like pension and illiquid assets cannot be valued to the nearest penny and are negotiable.

Self employed people may have more latitude but arguing the a business is worth £2.50 pre divorce and millions a year later can easily be seen through. And, the final settlement can be revisited in the case of lying on your form E.

DontMissHisJowls Sun 23-Dec-18 15:34:04

Thank you everyone, lots of things to consider there.

My ex does seem to be reducing his salaried income (public sector) by reducing hours. If it was obvious that this all happened in the run up to his Form E, would this be seen as a way to reduce maintenance payments and could anything be done? I'm concerned he is trying to make himself as poor on paper as possible.

OP’s posts: |
ShalomJackie Sun 23-Dec-18 15:49:31

A friend's DH stuck pretty much all of his salary into a pension one year using up historic allowances to reduce his net income!

slappinthebass Sun 23-Dec-18 16:18:55

Mine gave everything away, properties, business... to his girlfriend of a year. They've currently lasted over 20 years so unfortunately it paid off for him.

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