When people in Indiana get a divorce, it is important for each of them to be fully informed about the other person’s financial situation. There may be cases in which one person tries to hide finances from the other. For example, a person might try to give money away to friends and family in order to reduce their net worth. However, gifts in excess of $15,000 are supposed to be reported on taxes.
A person could also claim that money given to them is a loan and should not be included in net worth. However, if there is no loan agreement specifying interest, it does not count as a loan. Funds placed in a 529 plan for a child’s college education should be tracked carefully. Even if neither person is trying to hide assets, there could be confusion in assessing the value of some investments if capital gains taxes incurred by a sale are not accounted for.
Assessing the value of equity compensation for non-business owners may be a complex process. Employer-provided life insurance policies may need to be reviewed. Businesses could also be used to hide assets. For example, a business owner might try to make the business look as though it earned less money than it did by using business deductions in IRS section 179. Business owners might also try to reduce profits with personal expenses.
Even if both people are sharing information in good faith, it can be easy to overlook some assets or to calculate their value incorrectly. Another common error is for one person to keep the home without accounting for the costs of taxes, insurance and upkeep. For some people, it may be helpful to have a team that includes both financial professionals and family law attorneys to ensure that the marital finances are thoroughly examined.