Cash

Ex-Spouse Hiding Income to Avoid Child Support and Spousal Support Payments

Is your ex-spouse hiding income to avoid child support and spousal support payments. Or alternatively, is your ex-spouse falsely accusing you of hiding income to avoid child support and spousal support payments. Unfortunately these are common issues. Ex-spouses can turn routine divorce proceedings into a complete circus.

For example, the Ottawa Citizen recently reported on an Ottawa businessman who went to Court and said he burnt $1 million in cash. Allegedly, he had a bonfire with no witnesses and no video. The Judge didn’t believe him and sent him to jail for 30 days, with more to come if he continued to thumb his nose at the Court.

Earlier this summer, the Ontario Superior Court of Justice issued a harsh decision against a father who refused to co-operate. Clearly this was a bitter dispute and the husband had not co-operated over a period of time. The decision was for a trial in which the father was allowed to observe, but couldn’t participate.

 

My Ex-Spouse’s Lifestyle Doesn’t Match His Tax Returns

The couple married in 2000 and had three children together, who are now all teenagers. The couple separated in 2014 in circumstances that led to criminal charges against the father. Court proceedings have been ongoing until this decision was issued in June 2020.

The father operated a small construction and tree business, which primarily generated revenue through contracts with municipalities. The father claimed approximately $30,000 in income each year.

While claiming minimal income, in a separate Court proceeding, the father claimed to have given a family member $22,000 to purchase a property. The father then spent $230,000 for improvements to that property. In reviewing the credit card statements of the business, there were interesting purchases over a four-month period in 2017, including:

  • $6,000 for a resort in the Turks and Caicos;
  • $12,000 in spending in Las Vegas;
  • $24,000 for a travel agent; and
  • $4,000 at a local casino.

Effectively the father had spent approximately two-years of alleged income on travel and casino over short period of time. These type of expenditures didn’t match what the business was involved in and therefore were not legitimate business expenses.

 

My Ex-Spouse is Hiding Income and Assets in a Corporation

The wife hired an accountant to review the financial records of the husband and his business. Since the husband was not co-operative in this process, very little in the way of financial records were disclosed. The husband refused to answer any questions and would not provide any information to assist in the financial analysis.

The accountant completed his work and noted the gaps in the information. The biggest issue was the potential to keep profit in the corporation for capital spending. For example, for a construction and tree business, there may be a need to purchase significant equipment to assist the business. There was no evidence that the business had made any capital purchases and because the husband was not co-operating, the Judge did not find any legitimate reason to allow profit to remain within the corporation.

The Judge also found that the profit reported by the business decreased substantially immediately after separation. Typically, income can be imputed over a five-year period, but there is broad discretion for the Court. In this case, because the five-year period did not include amounts pre-separation, the Court found that extending this five-year period was appropriate.

In this case, the Judge found that the husband’s income ranged from $234,000 per year to $404,000 per year, with and average of $294,000. As there was no evidence available that this amount would change, the Judge fixed this amount as the husband’s income going forward. The only way that the amount would change is if the husband brought an application to review child support and spousal support.

 

Retroactive Child Support and Spousal Support When an Ex-Spouse is Hiding Income

In this case the father had not paid any support between separation in 2014 and trial in 2020. The Judge reviewed the law on the availability of retroactive child support and spousal support and found that the husband needed to pay retroactive support.

The children were splitting time between the mother and father, resulting in a set-off of child support. This means that the father would pay child support based on his income and the mother would pay child support based on her income. Even with this set-off, the Judge ordered the father to pay $115,000 in retroactive child support.

Spousal support was also reviewed and the Judge found that the husband owed the wife over $548,000 in spousal support. Ongoing spousal support of $8,800 per month was also ordered.

 

My Ex-Spouse is Falsely Accusing Me of Hiding Assets and Concealing Income

Sadly, this is also a common issue and one in which you need legal advice. Simply holding a corporation can mean ex-spouses believe you are earning far more than you actually are. Without a true appreciation for the legitimate expenses a corporation incurs, this becomes an unnecessarily contentious issue.

Defending yourself from these false accusations will mean effective and meaningful disclosure. It also means that you will need to effectively cross-examine any so-called expert your ex-spouse has found to attribute additional income to you.

If you find yourself in this situation, you need a lawyer who understands the issues.

 

How to Hide Income From Child Support in Ontario

Understanding how income is hidden is important in determining whether or not your ex-spouse is deliberately hiding or concealing income. Much like hiding assets, income is concealed through the use of corporations or by earning cash income.

Cash income is particularly difficult to establish. While cash is becoming more uncommon as a form of income, it is still an option for many. Determining cash income requires a dedicated approach through a thorough examination of all financial records and an analysis of assets obtained and expenses paid for.

Similarly, if you earn a cash income and your ex-spouse is accusing you of making far more than you do, you will want to actively defend yourself. Hiring a lawyer who understands these issues is essential in getting a fair income for everyone involved.

 

How to Find Hidden Assets and Concealed Income

The only way you will find hidden assets and concealed income is through an aggressive litigation approach. This can become very expensive and there is no guarantee that there will be any success.

Like many other countries, Canada does permit the use of a type of “civil search warrant” called an Anton Piller Order. This allows for an Order to be granted by a Judge, without hearing from the defendant. It is used when there is actual evidence that what you are looking for will be at the place you want to search. Though more than that, you also need to prove that the evidence you are looking for will be destroyed if you request it in the usual manner.

Ex-Spouse is Hiding Income to Avoid Child Support and Spousal Support Payments

If you believe your ex-spouse is hiding income and assets to avoid paying child support and spousal support, seek legal advice. Addressing this issue takes a careful approach and if successful, is of tremendous benefit to the children.

Peter Hearty of Hearty Law brings twenty-years of policing experience primarily in the area of money laundering. There is significant overlap between money laundering investigations and parents avoiding support payments. In both situations, the person is trying to benefit by deliberately trying to hide income.

Contact Hearty Law with any questions on financial issues during your divorce, including: hidden assets, concealed income, child support, spousal support, retroactive support, division of property or any other family law financial need.

Email toronto@heartylaw.ca or ottawa@heartylaw.ca to get more information.

Hearty Law serves Toronto, Ottawa and surrounding communities.

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