Maalox & Sleeping Pills: Required When Divorcing a Small Business Owner
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By Nancy Kay, Featured DM Blogger - January 11, 2015

 Fotolia_48703099_XS.jpg"Breathe deep and stock up on Maalox and sleeping meds. THEN call this phone number and make an appointment."

That’s what I really wish my divorce attorney had told me when she gave me a referral to a forensic accountant she often consults with on her cases soon after I had filed for divorce.

Circumstances in my divorce were going to make things very messy.

I had the unfortunate and extremely upsetting experience of finding out from a stranger’s phone call that his wife had just moved into a luxury condo rental that my husband had leased for the two of them just a few miles from our marital home where we were living with our 3 kids and our loyal golden retriever.

The stranger on the phone also shared with me that his wife (who was my husband’s assistant at work) had taken many extended business trips with my husband and that he had paid for her air fare and expenses to join him at places he had traveled to during the past year so that the two of them could easily continue their affair.

As if that wasn’t enough of a shock, I received even more upsetting news from my female divorce attorney as we started to move forward. The divorce attorney advised me that because my husband was currently receiving one year of severance pay from his previous high paying, marketing position and now did not have another similar type of position, we could not count his high income as a continuing source of income when it came to determining what his income would be for spousal and child support purposes.

As a stay-at-home mom for 20 years relocating for his career many times, I never imagined that I could end up in a divorce situation this bad. Was the husband I trusted for so long really this calculating? I had trouble accepting the fact that he had schemed all this ahead of time to be sure that his income was zero at the time our divorce got started.

Yet having an income of zero was exactly what he and his divorce attorney planned to prove at court.

During the prior year when I didn’t have a clue about his affair, he convinced me that he wanted to be his own boss and not work for anyone else as he had done for so many years. He was hell bent to become a small business owner and convinced me that we should cash out some of our retirement savings to start a new franchise location in our city.

Although I was very unsure about his plan to start a brand new business, he assured me that now he would no longer need to travel for work constantly and that this would greatly improve our marriage.

He also assured me that I could handle the marketing part of our new business while he would deal with finding a suitable location. Together we traveled to a franchisor’s headquarters where we both signed a 20 year franchise partnership agreement and then set up joint business accounts at our bank when we returned home.

Since we knew that money would be much tighter than usual as we began our new venture, my husband insisted that we list our marital home for sale and downsize locally to a much smaller home. Our suburban two story home was on the market for nearly six months with no offers when I received the life-altering phone call from a stranger that ripped apart the fabric of our family’s life forever.

As our divorce began, I found out that proving what my husband’s self-employment income and expenses were required that I pay up front for a forensic accountant to analyze the documents that my divorce attorney subpoenaed and then provided to the accountant.

In addition, my divorce attorney advised me that in Ohio where we lived, I was entitled to legally ask for half the money back that he spent on the other woman or on himself when he made purchases that I hadn’t  known about. She called this “economic misconduct.” But proving what he spent marital money on required that I sit in the forensic accountant’s spare room for hours looking through my husband’s bank accounts and credit card statements with a yellow highlighter and a box of Kleenex.

Although I was not able to get my husband’s income calculated at his prior six figure earning level, I did manage to get his income figured at a higher level than zero with the help of the forensic accountant.

Next I found out that I would have to give up being part owner of the business. The accountant told me that I would have to remove myself legally from the franchise agreement right away unless I was prepared to work with my husband at the franchise location every day while the divorce war continued with no end in sight. Clearly that was not going to work out-especially since the other woman was already working alongside him there.

When I finally reached the end of the divorce after two years, I thought that I’d no longer need the services of the forensic accountant.

But I needed to hire the accountant again one year later when I filed a motion to have my child support increased since I knew that my husband’s business was beginning to thrive. My legal motion for a child support increase was flatly turned down by my ex and ended up becoming an eighteen month ordeal that included a trial with both of us and our accountants having to testify.

Just like before, my divorce attorney subpoenaed my now ex-husband’s financial records and I once again paid for the forensic accountant to analyze them, put together a full report and then come to court to testify.

Things got even messier when I discovered that accountants can use different methods when calculating income derived from a business.

My forensic accountant had used the accrual method of accounting to figure my ex-husband’s true business and self-employed income which included adding in future payments due to the business.

In response, my husband and his attorney also use a forensic accountant. My ex-husband’s accountant figured his income using the cash method of accounting which did NOT take into account any further payments owed to the business. He also argued at court that there needed to be a higher financial cushion set aside in the accounts for the purchase of more equipment that my ex-husband planned to purchase in the future.

When the judge finally issued a written ruling a year after the trial, he noted that he was disgusted that the two forensic accountants were nearly $100,000 apart in their calculations of what my ex-husband’s income should be for child support purposes.

He adjusted the child support upwards but not nearly to where I had expected it to be. And then the judge warned both of us to not come back to court - as if I could have afforded to come back. 

How can you prepare for your divorce?

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