When it rains, it seems like it pours. Maybe your marriage is on the rocks, and your spouse’s business is suddenly hemorrhaging money.
Could the two be connected? “Sudden income deficit syndrome” is a rather tongue-in-cheek term to describe the fact that small businesses seem to thrive right until the principal operator’s marriage sours. When that happens, there’s a distinct possibility that the spouse who runs the business is tinkering with the books to make it seem like the profits are declining.
Why do they do it? The goal is usually to hide income and assets so that the business seems to be of relatively little value. That not only can make it easier for the owner-spouse to keep the business assets in a divorce, but it also lowers their income for support calculations.
How can someone make money just disappear?
The less you are involved in the business, the easier it can be for your spouse to “cook the books” and hide money. Money can be diverted in all kinds of different ways, but some of the most common methods include the following:
- Fictitious loans to close friends, relatives or even long-term business associates – with a private agreement that the money will be returned once the divorce is over
- Payments to fake suppliers, vendors or employees, which are used to hide the fact that the money is being diverted to secret bank accounts
- Overpaying debts or taxes so that the business accounts look empty, knowing that the money will eventually be refunded
If you’re approaching a divorce and your spouse’s business is suddenly on the rocks as well, it may be time to discuss your concerns with someone who can help.