122: Uncover Hidden Money in Divorce: Red Flags and Financial Tips with Forensic Accountant Tracy Coenen

This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit hartmanmedia.com. Welcome to win the Women Investing Network, the podcast where you can learn from successful entrepreneurs, business leaders and real estate investors who are winning in business and life. Learning from others is the fastest way to grow your skills, gain knowledge and avoid pitfalls so you can win. Join your hosts, Jason Hartman and Rich dad, author Sharon Lechter. Sharon is a business mentor, international speaker and best selling author. Jason is a self made multimillionaire investor, entrepreneur and highly acclaimed thought leader. Together with their successful guests, you'll get the tools you need to win.

It is my pleasure to welcome Tracy Conan to the show. She is a forensic accountant and the author of Find Me the Money, Take control, uncover the truth and win the money you deserve in your divorce. I should say that the book is written for the context of divorce. However, her practice is broader than just divorce as well. So I think you can learn a lot with us. Welcome Tracy, how are you? I'm great.

Thanks for having me.

Jason, good to have you. So how did this come about? What I'd like you to do, if you would, is just talk a little bit about the problem first. People, when they split up, they start trying to squirrel money away, hide money, tell us about some of the things they do. Sure.

Well, I've been a forensic account for 25 years and part of my practice is in the divorce space. And as you said, when people split up, they are squirreling money away. But some people actually start ahead of time. I call it divorce financial planning. So they start squirreling money away before the divorce happens. But what I see typically happening in many marriages is it starts small. There may be some small deception related to money, maybe an online subscription that your spouse doesn't know about and wouldn't approve of, or maybe some shopping, smaller spending. But it can grow over time. And where we typically see this go and where it becomes a real big problem, where I might get involved in a divorce is when we have secret bank accounts that our spouse never knew about, secret credit cards, we're diverting paychecks so that they're not going into the family bank account and things like that. Those are some of the most common ways that money is hidden in the context of marriage and divorce.

So divorce financial planning, you know, that's a great term actually.

Yeah.

Isn't that really what a prenup is?

Well, it's divorce financial planning in the positive sense. Absolutely. Prenups, I recommend actually for everyone Even if you think you don't have enough money, you don't make enough money. Why a prenup is so important is because it is that roadmap for how you would untangle the finances if you ever split. So it is great planning. It is a wonderful way to start conversations about money and head off some problems. Now when I use the phrase divorce financial planning, I'm using it in a little bit more of a tongue in cheek way to talk about that secret scheming that someone is doing to hide money or make their finances look terrible so that when the divorce happens, they're probably going to be able to keep some money and assets for themselves without their spouse ever knowing.

Right. So take us to a deep dive into that of what people do. So you mentioned, you know, of course paychecks come in, they don't put them in the community bank account. What are some of the things that people would be surprised at? I mean, I, I don't think they'd be too surprised about that one.

Well, they wouldn't be too surprised. I actually don't have much to tell you. That's super surprising because in 90% of divorces there are some pretty typical ways that the money is hidden. And those typical way ways don't take any special skills from someone like me to uncover. So we have things like giving money to family or friends, either just trying to hide it all together or calling it a loan when it's a fake loan. We have people doing work for cash on the side and trying to hide that money. We have people taking cash out of bank accounts, either at the ATM or in the bank branch, and then hiding that cash somewhere. Maybe as simple as a box of money in the house or even under the mattress may in a secret bank account. So the methods really aren't that creative or clever. They're all probably something that you've heard of before in passing.

Well, I guess it sounds like this book and maybe your practice is geared around people with normal middle class or modest means. What about the wealthier clients?

Well, that's really interesting you asked that because my practice as a forensic accountant is for the wealthier ones. So I work with people who have probably 10 million or more in assets, have higher earnings and they don't fit the typical profile that the laws were written for. You know, there are child support charts or percentages or calculations. That doesn't necessarily apply to my clients in the consulting practice. I actually wrote the book and created my online product, the Divorce Money Guide for the average person. Because I wasn't able to help those average people. So I'm so glad that you asked that because there is a huge distinction and people are saying, why did you make this product? Well, it's because it's to help all those people that I'm not able to help in a one on one in my consulting practice.

So you're probably pretty expensive. That's why wealthier people hire you. I mean, in a divorce, I'm just curious, people with 10 million plus in assets, I mean, what is your typical engagement? Are they spending, you know, 50 grand with you? How much are they spending? I mean, I know it varies.

Well, I don't do hourly fees, so that's great as well. I do fixed fees, so I'm a little bit different than other forensic accountants. The typical divorce engagement that I do is probably having fees of 25 to $50,000. But it is certainly not unheard of to work on cases for me with 100 to 150,000 in fees or more, depending on how complicated it is. I do a lot of detailed work with their account statements, getting all those transactions into a database and analyzing where the money went. A lot of what I'm doing is tracing, you know, money bounce from this account to this account, to this account and ultimately ended up going into a piece of real estate or there were business entities that were passing money back and forth, sometimes for legitimate business reasons where they are just helping each other with cash flow and sometimes because the money is being passed around to confuse things and make it such that no one knows what money really belongs where.

Okay, great. So the wealthier clients, what games do they play? Because I assume those games are a lot more sophisticated than, you know, money under the mattress, giving some money to a friend or relative, hiding a paycheck. What are some of these more esoteric.

These more sophisticated methods are going to involve business entities and trusts and they are going to involve probably a lot of bank and investment accounts and a lot of passing money between these accounts. What I see then is, you know, money starts out in one account, gets split up between three accounts. From there it's passed to six more accounts. And so there is this web that is created of money flying around and I'm busy trying to untangle what the source of this money and where did that money end up. And sometimes, of course, it involves accounts overseas and it involves entities like certain kinds of trusts that were unable to get information on or, or get any visibility into.

So how do you untangle that then? I mean, especially overseas, I can't imagine there'd be, you know, much authority or much ability to do anything about that. Right.

It is really difficult. Typically when there are overseas things happening. We were probably getting a private investigator involved who has some experience and expertise in dealing with financial matters overseas. We're probably getting someone involved who understands the laws in whatever country we're dealing with, probably having an attorney there involved as well. There are ways to tap into what's going on overseas, but it really takes some specialized knowledge. So for my work, what I do is really focused on if can get me documents, if you can get me statements, I can work with that. Anything that's not documented on paper is not something I can help with, but I can help you find the people who will be able to help with that.

In your book, you talk about a basic outline of understanding the divorce process. So maybe we're taking a step back now. I mean, doesn't everybody understand that already, or what are you pointing out there?

I don't think that people understand what the financial piece of their divorce process is going to involve. So it's important for me to help them understand some of the legal terms that they're going to hear. You know, what is an interrogatory? What is a deposition? Why are you going to have to answer all these questions? Why do you have to sit in a room with someone who's going to ask you questions about your finances and your personal life? What kind of documents are you going to be required to turn over to your soon to be ex? All of those kinds of responsibilities throughout the process are not well known by the average person. So I want to set that stage for them and help them understand what's going to happen to them in this process. Because if they can understand the process of divorce, they're going to perform better in it, and they're probably going to end up at the end with a.

Better settlement when they get into this. You know, it's funny you said that, or maybe it's not that you recommend prenups for everybody, Right? Why is that? I mean, if someone is coming into the marriage with less money, it seems like it would be advantageous for them not to have a prenup. And if someone is coming into the marriage with more money, they would want a prenup. That's sort of the usual dynamic, isn't it?

Right. But for the person in the lesser position, if they enter into a prenup, they can make sure that they are protected financially as they exit the divorce. Now, there's two pieces Here, one piece is you're not going to be subject to whatever the state law says you get or says is going to be divided, etc, so you and your spouse can decide for yourselves how the money is going to happen. That's the first important piece. But then that second important piece is maybe under the state law with a short term marriage, you're not going to be entitled to receive any spousal support as you leave the marriage and you're the lesser money person. Well, if you do a prenup, you could decide with your spouse that actually you would get some spousal support payments after the marriage is over. And so that person can really protect themselves as well.

Okay. By negotiating in advance.

Absolutely.

Yeah. Yeah. Seems like a real romance killer though, doesn't it?

Of course it seems like that. And here's what I tell clients. The marriage is not a business transaction, but the divorce is. So let's put together a contract now that specifies how a potential divorce would go down in, in the event that we go that route. I mean, of course it's not fun to talk about divorce at the time you're getting married, but it's a reality that we have to talk about because so many marriages end in divorce. So while we're happy and while we're in love, let's set forth the rules of the game.

That's really interesting. That's a very good quote you just made. The marriage is not a business transaction, but the divorce is.

Absolutely.

Yeah, that's. That's interesting. That's a very good point. Are we expecting too much out of marriage? It's interesting that when you look at the historical reasons for marriage, right, it was to bring families together, to assemble, you know, land ownership and so forth, right. In the past, nowadays we expect it to be everything. And maybe that's the problem. And this is obviously a more general discussion. And I want to ask you about some of these red flags here in a moment. But just generally, because you've seen so much of this tension and these bad vibes, of course, are we just expecting too much? We expect it to be a business deal. You know, we expect it to be child rearing. We expect it to be love and romance and sex and companionship and all. All these things. I mean, is that just too high of a bar? Is that why we're disappointed so many times?

No, I don't think it's too high of a bar and I don't think it's that difficult to achieve those things. I think personal opinion, not related to the numbers outside of my area of expertise. But I personally think that too many people are going into marriage without the proper commitment to it and without being willing to put in the kind of work that it takes. Right. Marriage is work. It doesn't have to be grueling, awful work if you've married the. The right person, but it is a conscious effort to, you know, step up and. And do your part in the relationship.

Yeah. Okay. Talk to us about the red flags. When you're hired, you're hired by pretty much always just one side of the divorce, right?

Right. I occasionally am hired as a joint expert if they decide we want to save some attorney or say, some expert fees and just have one expert instead of each having our own. But most of the time I'm hired by one side or the other.

Right. Okay. So. So when you are, and forgive me, I interrupted you, so, you know, if you have something to say, but my question was going to be about how do you know there's fraud? Right. What are the red flags? What are the signs of that? What are the clues?

Right. Someone who comes to me has probably already seen signs like changes in behavior in their spouse, especially related to money. They've probably been iced out of the financial process. They don't have information. They are maybe locked out of online banking. They've prob seen some transactions or some activities related to the money that concern them. Maybe they've seen some spending that they didn't approve of or that went outside of agreements that they have. Maybe they've seen their spouse has been going to the ATM a lot when previously we never really used much cash. Maybe they've seen some transactions on the credit card statement that suggests an affair might be going on. Those kinds of things are some of the typical signs that people who come to me have seen.

Yeah. Okay. Anything else on the bigger scale clients that you want to share?

I think on the bigger scale clients, there is probably a little extra certainty on some of these things. There are the jewelry purchases that came to light that the spouse says, I know I didn't receive that jewelry. There's the travel that for whatever reason, they know involves an affair partner or maybe less of a red flag, but just a reality they understand. We have a really complicated financial situation. My spouse hasn't been honest to me with me about a number of things, and I'm worried that that is spilling over into the financial arena.

Okay. And then you're gathering these documents, tax returns, et cetera. What happens whether the couple is filing jointly or separately, how does that play out in a marriage or divorce? Of course.

Well, if you're married, of course you have to file your tax return as a married person, but you have an option to file together on a joint tax return or separately on your own tax return. Most couples choose to file jointly because it is less expensive overall. Most times the tax bill will be a little bit less if you're filing jointly versus separately. But when one spouse has some suspicions that the other spouse is not filing honestly or knows that they are committing tax fraud, there comes a point where sometimes it's just recommended. File your separate tax return to protect yourself so that you wouldn't be held responsible for fraud, you won't be held responsible for a big tax bill that you had no control over, et cetera.

Okay, Tracy, what else do you want people to know? You know, what else do you want to share? Just any questions I haven't asked you.

I think that it's super important to be knowledgeable about your finances in the divorce process. If you have been the spouse who has been hands off with the money, that's okay. That happens in a lot of marriages. But at the time of divorce, you really want to get your arms around what's been going on with the finances because you can't negotiate a proper settlement for yourself if you don't know the full story about your money. So I want people digging in to figure out, what do we have, where is it, how much is it worth, and what has our money been spent on for the last several years? You have to know the answers to those questions to make an informed decision when you're trying to negotiate that divorce settlement.

Good advice. Tracy. Do you want to share a website? The book is available in all the usual places, of course, but any website to share, absolutely.

My website is fraudcoach.com because I like to say I am your fraud coach during your divorce.

Good stuff. Tracy. Thank you so much for joining us.

Thanks for having me.

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