What Is Asset Tracing and How Is It Useful During High-Net-Worth Divorce?

 Posted on December 28, 2022 in Divorce

Classifying, valuing, and dividing assets is often one of the most complex components of a divorce. When spouses marry, their property is mixed. Determining who is entitled to what in a divorce can become a lengthy and complicated process - especially in a high-net-worth divorce.

Asset tracing is the process of tracing the origin of each asset. This is especially important in a high-net-worth divorce case, as the spouses may have complicated financial portfolios with multiple investments, complex tax returns, and global assets. Asset tracing can be used to determine what assets were acquired during the marriage versus those that existed prior to it. Asset tracing may also be used to reveal hidden assets, undervalued assets, or undisclosed sources of income.

What Does Asset Tracing Entail?

Asset tracing is a process of tracking the origin, movement, and ownership of each asset. The process may include:

• Researching the origin and pre-marriage value of an asset
• Investigating each spouse's finances to determine whether there are any hidden or undisclosed assets
• Examining financial documents such as bank statements and tax returns
• Reviewing any transfers or sales of assets within the marriage
• Locating offshore accounts
• Analyzing marital debts and liabilities

Marital and Non-Marital Property in a Divorce

Marital assets are jointly owned by both spouses, while non-marital assets belong to only one spouse. Classifying property as marital or non-marital can be complex. Asset tracing is often used to investigate or "trace" assets to determine ownership. For example, property and money acquired through inheritance is typically classified as non-marital property. An heir is not required to share his or her inheritance with his or her spouse during divorce. However, an inheritance can become commingled with other assets, muddying the waters and making it difficult to determine what is marital versus non-marital. Asset tracing can help identify ownership and establish the pre-marriage value of an asset.

Finding Hidden Sources of Income and Undervalued Assets

When spouses file for divorce, each spouse is required to disclose assets and sources of income. This could include bank accounts, investments, real estate investments, stocks and bonds, businesses owned or operated by either spouse, leased vehicles or property, retirement plans, premarital assets that were used for marital purposes (such as purchasing a home) and much more. Spouses may fail to disclose full and accurate financial information during a divorce. Asset tracing can help uncover these hidden assets or sources of income.

Forensic accountants, investigators, and divorce attorneys may also use asset tracing to locate offshore accounts, undisclosed asset transfers, and other types of financial dishonesty during divorce.

Contact our Joliet Asset Division Lawyer 

Determining how to divide property during divorce can be complicated on both a legal and a personal level. The Joliet divorce attorneys at Law Offices of Tedone and Morton, P.C. can help. Call our office today at 815-666-1285 and set up a free consultation to get started. 

Source:

https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm