When a contentious divorce is pending, a spouse is justified in searching through the family tax returns to find hidden assets, says Diane Pearson, personal chief financial officer for Legend Financial Advisors Inc., an RIA firm based in Pittsburgh.

“The first place to turn for information is the tax return; it could be personal or corporate,” she says. “Look back five years and check such things as capital gains and itemized deductions. You are looking for such things as real estate that you might not know about or gambling losses, because if there are losses, there are also winnings.”

Pearson conducted a webinar Wednesday for financial advisors and investors called “Divorce Settlements: Which Assets Are Best For You?”

Advisors need to “make it clear that a fifty/fifty split isn't always the answer to every divorce,” says Pearson. “Clients need to understand their assets and the ramification of distribution of those assets now and in the future.” They also must comply with the laws of each state, including states where clients acquired certain assets, even if they may no longer live there, says Pearson, who often works with divorce attorneys and mediators. “I've actually been brought in by attorneys, where I've not necessarily had a client involved.”

She also talked about where to look for family assets that one spouse might be trying to hide.

“Check the spouse’s business expense reports and ask about uncollected bonuses, which can be used to hide income,” she adds. Also, look for any expenses that have gone up dramatically, because that can be a way to hide assets.

Advisors should have their clients see whose name is on any child’s savings account, such as a 529 plan, and make decisions to safeguard it for the child before the divorce.

Other assets that need to be considered are pension plans and IRAs. Many pension plans require a qualified domestic relations order, a legal order issued by a judge or mediator to divide retirement assets, to be signed before the divorce is final. Pension values are determined by the person’s age and how long the couple have been married.

Not only that, but modern retirement accounts are much more complicated today. They might hold a legacy defined benefit plan, stock options and a defined contribution plan with a 401(k). Such accounts might include multiple mutual and ETF funds, individual bonds, and more recently actively managed accounts, alternative investments (antiques, artwork, private equity) – and annuities that guarantee a steady check in retirement. Says Pearson, “Alternative assets in tax returns become ten times as complicated unwinding in the divorce process.”

Advisors who have been handling the finances for a client can be invaluable during a divorce to assure the attorney understands which assets need to be addressed and the details of how the marital finances are arranged.  Pearson said clients may assume that their attorney will follow up with joint documents, such as auto loans, credit cards or investment accounts, but they need to be sure the new ownership is recorded. She said she once asked a client, prior to signing the divorce decree, if she had checked to be sure her estranged husband, who planned to refinance the family home, had removed her name from the mortgage. The answer was no. But isn't it logical to assume the divorce attorney would take care of it, since it's a binding contract? No, says Pearson. “That is one of the areas they do not look at."