THE BLOG

Time to Reform Divorce Process to Stop Wealth Being Hidden

28/03/2015 20:52 GMT | Updated 27/05/2015 10:59 BST

Divorce is a messy business, but often made more so when one party, usually the richer, tries to hide assets.

There have been a number of cases recently where wealth, usually from the main earner in a relationship, is allegedly hidden away, undisclosed, denied, invisible.

The Government should toughen the consequences for those in unequal financial relationships who deceive their spouses in this way. Some people appear to think the price of non-disclosure worth the jail time if the fortune is big enough.

But another step would be to simply stop trusting people to disclose their wealth, perhaps when initial legal submissions suggest the amount in question passes a certain threshold, and require independent assessment.

Forensic accountants should be on the speed dial of a divorcing party anyway. If people rushed as quickly to an accountant as they do a lawyer, more might be recovered and less litigated.

After all, trust is usually the first thing to have gone from a failing marriage. But sometimes trust is not even the issue.

There needs to be a single objective valuation of assets, particularly if a business or pension fund is involved, in even the most amicable separation.

Lawyers are many things but they are not experts is crunching numbers or discovering where money is hidden, or in how to assign a proper value to such imponderables as future earnings from an enterprise.

It also has to be said that somebody planning a divorce has the advantage of also being able to plan under which mattress and in which country to hide their money.

Involving forensic accountants as a matter of course, or even legal requirement, would deter deception and reduce the pain and anguish. if assets were valued at the start of a separation the process of divorce might generally be less fraught.

This may not help put a value on the family pet, but it does at least mean there is no dispute about what the rest of an estate is worth.

There are signs this is already happening voluntarily. Most of my forensic work is uncovering criminal deception, but an increasing proportion is concerned with valuing assets fairly when couples decide to separate.

This hardly surprising, particularly with so many horror stories of assets being dissolved into legal fees as a couple bicker away over valuations, a dance toward mutually assured destruction.

More emphasis should be placed by Government on drawing the sting from what is often contested. Maybe part of the problem is that lawyers, with the best will in the world, are usually rather keen arguers. Litigation also earns bigger fees than mediation.

Accountants have different skills, but at a time when people are trying to avoid being sucked into court, with all the attendant cost, these should to the fore.

Divorce lawyers are not always about fighting corners, of course. All offer mediation services these days to try and keep legal costs down. But somebody still has to offer an independent valuation of what is being divided, in an ever more complicated financial world, as the starting point.

One option is for both sides to agree to a Single Joint Expert to give an objective valuation of business income and other areas. Such an expert is required to be neutral in any court proceedings, which helps reduce friction.

But whatever the mechanism, divorce is as much about the physical spoils of a marriage being shared equably. Too often that is not happening.