If you are currently in a dysfunctional marriage, or considering divorce, you may be wondering if your spouse could be hiding assets, income or debts from you. Sadly, your fears are not that unusual. In fact, financial mischief is fairly widespread among couples today, even if they are not in the process of divorce.
According to a study conducted by The National Endowment for Financial Education (NEFE), 31 percent of individuals who combined finances with their significant other have been deceptive with their spouse/partner about money. And of those who were deceptive:
- 58 percent said they hid cash from their partner/spouse
- 54 percent hid a minor purchase from their partner/spouse
- 34 percent said they lied about finances, debt, money earned
As a marriage unravels, it is not uncommon for spouses to wonder if their partners could be hiding marital assets, income or debts from them. In Texas, all income earned and debt incurred by married spouses is considered “community property.” That means both income and debt is shared between spouses, regardless of who earned the income or incurred the debt. So, while some earners feel they have a sole right to their earnings, the law says otherwise.
Here are some unethical practices to look for:
- Cash may be stored in a safe deposit box at the bank, or in a home or office safe.
- Income can be underreported to the IRS on tax returns and/or on financial statements.
- A spouse can overpay the IRS or creditors, and then get a refund later, after the divorce is final.
- Salaries can be deferred, signing new contracts can be delayed, and commissions or bonuses can be held back until after the divorce.
- Spouses can create phony debt, collude with family members or friends to create fake loans or expenses; then later get back money paid to these individuals.
- Stocks or investment accounts can be transferred temporarily to family members, business partners or “dummy” companies.
Dealing with a spouse who might have financial dirty tricks up a sleeve, requires you to think financially, not emotionally.
Be careful not to use illegal methods or software to “spy” on a spouse. There are many gray areas about what practices are acceptable and legal, and about what’s admissible in court. And this can vary not only from state to state, but also from court to court within a state. According to most experts, information obtained illegally is usually inadmissible in court. An experienced divorce attorney can advise you as to a method’s legality in your state.
Social networks offer opportunities to do simple snooping, if certain lines are not crossed. As people put more of their lives and careers online, it’s getting much easier to find clues to secret activities that are hidden in plain sight. By legally monitoring social media accounts, such as Facebook, Instagram and LinkedIn, investigators and spouses may find out quite a bit.
Sometimes, uncovering mischief just takes some basic, electronic detective work. One forensic accountant did a quick search on a client’s husband’s employer website and discovered he was eligible for a large pension—something he had hidden from his spouse for more than a decade. Another expert searched a free public database and discovered that his client’s husband owned real estate in another state. A simple Google search discovered a client’s husband had sold his company for millions of dollars when he had told his wife it had no value.
What you can do now
- Pull together and organize all your important financial documents
- Get credit reports on yourself and your spouse, and review them closely
- Review bank and credit card statements, over the last few years
- Review your income tax forms over the last several years, and your spouse’s W2 forms
- Identify and explore any unusual activity on financial documents
- Report any suspicious transactions or activity to your divorce attorney
If the financial documents are daunting and you have questions, get help from a savvy, experienced Certified Divorce Financial Analyst, such as myself.