Know this point about divorcing with a family-run business

Know this point about divorcing with a family-run business

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A stay-at-home spouse often has complete dependence upon their partner for financial support. When the source of income is a family business, both spouses may play roles in the company, but only one might have a working knowledge of what’s going on with the finances. This can work well as long as the marriage is on a good foundation, but it can pose a problem if things shift and the marriage becomes rocky.

In some cases, the downfall of the marriage might suddenly have the spouse who knows about the company’s finances claiming that the business suddenly isn’t doing as well as it was before. This might be the truth, but there’s also the possibility that sudden income deficit syndrome has occurred.

What is sudden income deficit syndrome?

Sudden income deficit syndrome, which is commonly referred to as SIDS, occurs when the person who handles the family-run company’s finances diverts funds to make it appear as though the business isn’t as profitable as the other spouse thought. Typically, this happens once the in-the-know spouse realizes that the marriage is over.

There are many ways to do this. It’s possible that they have a hidden cash receipt book, or that they establish fraudulent payroll or vendor accounts to funnel money into an account they control. They may inflate the price on some purchases or manipulate other financial records.

How do you find out if SIDS is part of the story?

One of the most efficient and thorough ways to find out if SIDS is occurring is to include a forensic accountant on your divorce team. This professional can review public records and take a look at the books for the business to determine if there is anything questionable going on.

You can also keep a close eye on your ex’s lifestyle. If it doesn’t appear that they have downsized their lifestyle, there might be something amiss. Sometimes, reviewing social media provides clues about what’s going on.

Unearthing SIDS in divorces is imperative because it can tilt the property division more toward one spouse than the other. Complete honesty about financial matters is imperative when you’re going through a divorce. Being able to work out an equitable settlement is important so that you have the best financial foundation possible as you start out your life as a single person.