DON'T OVERREACTWhile an abundance of caution is usually good, especially when a marriage is unraveling, don't automatically go looking for trouble, says
Noah B. Rosenfarb. Rosenfarb, a CDFA with Freedom Wealth Advisors in Short Hills, N.J., says he's seen "numerous cases where distrust leads one spouse to spend hundreds of thousands of dollars in expert fees to try and find hidden money when none existed."
In one case, he recalls, a couple had worked in the shipping industry for company the husband founded. By the time they were divorced, they had accumulated $20 million, but the husband had questions about the amount because his wife had continually moved the business' money between multiple accounts. "He spent $400,000 in fees to determine how the cash flow went into 80 mutual funds and 40 bank accounts," says Rosenfarb, a former forensic accountant. "I spent all this time trying to prove to the husband that his wife had this need to keep moving money around, but did not take any out."
In another case, a wife was concerned by the couple's apparent living beyond their means. "The husband was in businesses that involved cash and they were spending $50,000 a year more than they made," says Rosenfarb. "But only $10,000 of it was from cash. The other was from debt, refinancing debt, that the wife didn't realize they had."
The bottom line, says Rosenfarb, is that when you have a concern, do investigate it. But be realistic. "Weigh the costs of the investigation against the potential recovery," he says. Rosenfarb offers an example of a wife who suspects that her husband has hidden millions of dollars kept off shore. It will cost $400,000 to $500,000 to determine that. "But with a settlement north of $10 million, would she really get more?" asks Rosenfarb. "You have to make an investment decision, not an emotional decision and look at your return on investment."
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