By Eric Laubacher, Family Law Attorney
We’d like to believe our soon-to-be-former partners are honest people, but that’s not always the case. After all, dishonesty may be the reason you’re seeking a divorce in the first place. Even if you have no reason to suspect your ex is lying to you, you still have good reason to be weary of their finances heading into divorce proceedings.
A study conducted by Harris Poll found that two in five Americans with combined finances have admitted to committing financial infidelity against their partners. That’s just the percent of the population that was willing to admit it. The real ratio is likely higher and an impending divorce only raises the likelihood that financial deception will occur.
Even though failing to truthfully disclose assets and liabilities is against the law, you can’t count on the law to deter everyone. Many of today’s couples have complex financial portfolios with investments in retirement plans, stock options, vacation properties, and more. It can be extremely difficult to track all of these moving parts making the temptation to hide various assets even greater.
If you are considering divorce or are in the middle of one, it’s important that you look into financial deception on the part of your ex. Hidden assets will cheat you out of the assets you can obtain and the marital and child support you can receive. Fortunately, deception can be easy to uncover, because there are nine predictable places where money is commonly hidden.
Your husband can collude with close family and friends by making payments for fake products and services which will then be reimbursed after the divorce. The payments will likely come out of his private bank account, but they could also be from his business to reduce revenue. It’s worth reviewing your husbands personal and business transactions if you can.
Like payments to family and friends, your ex may also funnel money out of his business with a nonexistent employee. All he has to do is write salary checks to a make believe employee and void the checks at a later date. This sneaky trick can be revealed with an audit of the company payroll account.
Should your ex-husband be involved in any type of enterprise where he’s directly receiving cash, then he may be able to get away with pocketing a portion and excluding it from his financial statements. Unbeknownst to you, he may have more money than you’ve been lead to believe. This situation is obvious when your lifestyle costs are greater than the combined income between the two of you. However, unreported income cases aren’t always that obvious. Nonetheless, it’s worth looking into.
Your husband could convert cash into expensive, lavish items and under-report their value. He may buy new furniture or artwork to later resell. Don’t expect to find anything new showing up around the house. Normally these purchases are sent to the office. Purchases of new office desks and paintings are common.
Bonuses, stock options, and raises are all income that could be added to the books during divorce proceedings. These items are added to the marital estate and can significantly impact how much money is shared with you. If your husband is friendly with his boss, he could request delays in promotions and raises until the divorce is finalized.
There’s always the chance your ex could be hiding physical cash in a safe deposit box. It’s possible there may be a deposit box somewhere within your house where your former spouse is stashing cash, but the box could also be located elsewhere. A thorough house cleaning could reveal hidden money you never knew existed. There are several deviously creative places cash can be stashed from the inside of books to a head of lettuce.
Similar to a safe deposit box, your ex-spouse could hide cash by setting up a custodial account in the name of one of your children using your child’s social security number. Should your former husband decide to do this, he’ll be violating multiple laws. Not only will he be hiding assets from the court, but he’ll also be irrevocably transferring ownership to his kids. Should he later pull money for a use that doesn’t benefit your children, then he’ll be stealing from them.
Interest accumulated from Series EE savings bonds and municipal bonds don’t have to be reported on tax returns. With this being the case, there could be interest your husband is accruing without your knowledge. An investigation into his investment portfolio would reveal these types of bonds.
Transferring stock is a relatively easy procedure. Your husband could transfer his stock ownership to family members, business partners, or even fake companies to hide financial instruments. After the divorce is finalized ownership can easily be transferred back. Sudden, large transfers of stock are a good indicator that something may be up.
Should you have reason to suspect your ex-husbands financial situation is not as it appears, you’ll want to notify your divorce attorney immediately. Your attorney can acquire a forensic accountant to dig deeper into your husband’s finances to uncover hidden assets. It’s a bit more work and an additional fee, but you could end up discovering a lot of hidden cash you were rightfully owed in the first place.
Article by Eric Laubacher