For many couples, a divorce is financially straightforward. Incomes come from a standard paycheck, the main asset is the family home, and savings are kept in joint accounts. But when a marriage involves a private business, complex investment, or valuable property, the risk of hidden or undervalued assets increases significantly.
If you think your spouse is hiding money or if you are worried about how a business will be valued, you need experienced legal representation.
At Brodsky Renehan Pearlstein & Bouquet, our experienced Maryland divorce lawyers focus solely on family law. We conduct formal discovery and work with expert witnesses to ensure our clients receive a fair and accurate financial outcome.
The Reality of Asset Concealment in Maryland
Under Maryland law, both parties must provide a complete financial disclosure of their income, assets, and liabilities by filing a financial statement and a joint marital and non-marital property statement. However, “disclosure” is only as reliable as the person providing it. In high-end cases, a spouse might attempt to conceal or deplete assets or income:
- Deferred Compensation: Intentional delays in bonuses, commissions, or stock option exercises until after the divorce is finalized.
- The “Friendly Debt”: Creating fictitious loans to friends or family members that are intended to be repaid once the decree is signed.
- Asset Dissipation: Spending marital funds on non-marital pursuits (such as a paramour or gambling) to lower the total value of the marital estate.
- Undisclosed Accounts: Utilizing offshore accounts, digital currency (cryptocurrency), or “shell” companies to move liquid capital out of reach.
A professional divorce attorney in Maryland does not just trust what is written on a financial statement. We look for red flags, such as discrepancies between reported income and lifestyle, or unusual patterns in business ledgers that suggest personal expenses are being buried in company overhead.
The “Lifestyle Analysis” in High-Net-Worth Cases
Beyond digital records, we will analyze a party’s lifestyle to uncover unreported income. This process involves comparing the spouses’ known income against their actual expenditures, such as mortgage payments, luxury travel, private school tuition, and memberships.
When a spouse claims to make $150,000 annually but maintains a $400,000 per-year lifestyle, there are unreported sources of income. We utilize this data to ensure that alimony and child support obligations are based on the spouse’s true earnings rather than a manipulated tax return.
This level of scrutiny is essential in divorce cases, especially when parties may be tempted to conceal assets or underreport their income.
Formal Discovery: The Legal Toolbox for Uncovering the Truth
Formal Discovery is a useful tool in divorce matters to obtain information and ensure transparency:
1. Interrogatories and Requests for Production of Documents
Interrogatories are written questionnaires that require written responses under oath. Requests for Production of Documents allow you to request your spouse to provide documents to you, such as tax returns, general ledgers, bank statements, credit card statements, and loan applications, where individuals often claim a higher income than they report to the IRS or their spouse.
2. Subpoenas
If a spouse fails to provide records, we can go directly to the source. A subpoena can be issued to banks, brokerage firms, employers, and even business partners. This guarantees that the evidence comes from a neutral third party, leaving no room for an “edited” financial history.
3. Depositions
A deposition is an oral examination under oath. It is a critical opportunity to uncover more information or lock a spouse in a story. If their testimony later contradicts the paper trail uncovered in discovery, their credibility to the Court can be significantly impacted.
Protecting Separate Property through Tracing
In cases involving high-value assets, disputes often center on whether an asset has “marital” or “non-marital” status. Under Maryland’s equitable distribution law, only marital property is subject to division. However, non-marital assets like inheritance or assets owned
Prior to the marriage, it can be commingled over time.
If you used an inheritance to pay a marital mortgage, the nonmarital status of those funds is blurred. To protect those interests, we will trace the source of funds to prove an asset’s non-marital origin and status. Without complete tracing, you risk having separate property determined to be commingled and added to the marital pot. Our firm has experience in complex tracing to ensure that your pre-marital wealth is properly shielded from distribution.
Business Valuation: “Fair Market Value” vs. Personal Goodwill
One of the most controversial areas of high-asset divorce in Maryland is the valuation of a professional practice or private company. Maryland courts usually use the “Fair Market Value” standard: What a willing buyer would pay a willing seller.
However, a business valuation divorce in Maryland is not an exact science. It often becomes a “battle of the experts.” There are three primary methods used by experts:
- The Income Approach: Valuing the business based on projected future earnings.
- The Market Approach: Comparing the business to similar companies that have recently sold.
- The Asset Approach: Calculating the net value of all tangible and intangible assets.
Maryland law distinguishes between two types of goodwill:
- Enterprise Goodwill (the value of the business name and reputation, which is a marital asset)
- Personal Goodwill (the value tied specifically to the individual owner’s skills or reputation, which may be excluded from the marital estate).
Navigating this distinction requires an attorney who knows how to challenge or defend an expert’s appraisal.
Strategic Challenges to Avoid Double Dipping
A common pitfall when valuing a business in a divorce matter is the “Double Dipping” error. This occurs when the same stream of income from a business is used once to value the business (as a marital asset) and again to determine the owner’s ability to pay alimony.
The Power of the Monetary Award
Unlike some states that have a mandatory 50/50 split of all property, Maryland is an equitable distribution state. This means the court is looking at what’s “fair” based on eleven factors, which include monetary and non-monetary contributions of each spouse to the well-being of the family. In Maryland, the courts can issue a monetary award to balance the equities between the parties following the distribution of property.
If a spouse is caught hiding assets or undervaluing a business, the court may award the other spouse a monetary amount. If the court finds “dissipation” (the intentional wasting of marital assets), they can “add back” those dissipated funds to the marital estate and grant a monetary award to the other spouse.
Experience Matters in High-Stakes Financial Disputes
Legal advice from experienced divorce attorneys is necessary when your financial situation and valuable possessions need protection. When faced with a divorce, you need a team that specializes in Maryland divorce law and asset tracing.
Brodsky Renehan Pearlstein & Bouquet has dedicated more than 70 years to understanding the complicated procedures involved in high-asset divorce cases.
Take the first step toward securing your financial future. Contact us for a confidential case evaluation.
