You’re getting divorced. It’s likely one of your biggest arguments is over money. After all, there are often inequities in contributing to the marital income and assets. Common examples are one spouse works outside the home while the other quit their career to raise the children or one spouse had substantial savings before getting married while the other came in with credit card debt. Sometimes a gift from one spouse’s parents was used for a down payment on the house.
There are so many factors that come into play when trying to divide the assets “fairly” and decide how much child support and spousal support should be paid. But to even hope for a reasonable financial settlement in a divorce, all the financial cards must be on the table.
It’s not uncommon for one spouse to be accused of hiding money or financial information. Sometimes it’s both. Lots of people suspect their spouse is hiding money. Are they just paranoid?
Red Flags of Fraud
Red flags of fraud in your marriage (and now, divorce) are warning signs that something is wrong. If you identify a financial red flag, it doesn’t necessarily mean that there is fraud. It just means there is a greater chance that there is hidden money or improper spending. The more red flags you see, the more likely it is that fraud has occurred.
Red flags on the financial side can be easy to spot. There is a whole laundry list of suspicious behaviors your spouse could engage in, but here are a few:
- Being very controlling over financial matters, maybe restricting your access to accounts or statements
- Doing secretive transactions or refusing to explain transactions to you
- Having a history of lying, especially about money
- Asking (or coercing) you to sign legal documents that you don’t understand or haven’t been allowed to read
- Engaging in expensive bad habits such as drugs or gambling
- Being involved in an extra-marital affair
In addition to evaluating your spouse’s behavior, it’s also important to look at what has been happening with the money to see if there are any red flags there. Some of those financial or transactional red flags might include:
- Lots of cash transactions (because your spouse knows they don’t leave a paper trail)
- Moving money around to make things confusing
- Having bank accounts or credit cards that you never knew about before
- Keeping a stash of separate money, while using shared funds to pay for everything
- Valuable assets have disappeared
Remember, seeing one or two of these red flags is probably not a big deal. But seeing several of them in your marriage is cause for concern.
You have a right to know the truth about your financial situation before you agree to a divorce settlement or go into a trial. That means you’ll have to take matters into your own hands to get to the bottom of the finances.
You’ll need to gather all the statements for the accounts that you know about, including bank accounts, credit cards, investment accounts, and retirement accounts. There may be accounts you don’t know about or don’t have access to (because your name is not on them), and your attorney will have to get the documentation for them through the discovery process of your divorce.
There are three options for digging into the facts about the money in your marriage:
- Have your attorney look at the numbers – Divorce lawyers have seen a lot of numbers in divorces, so some of them will analyze the financial statements (or have their paralegal do it). Your attorney might be a whiz with numbers, or they might not be, but this is a great place to start. They can advise whether they think it’s worth pursuing forensic accounting and, if so, if they have the experience to do the analysis.
- Hire a forensic accountant – This is your most comprehensive option because forensic accountants are experts at finding money. But it’s expensive. Prepare to pay upwards of $10,000+ for services. Even with the high cost, their hourly rate is typically less than your attorney’s billable rate.
- Look at the numbers yourself with expert guidance – You could try to save on costs by gathering all your documents, organizing, and analyzing the transactions, then go to your attorney or a forensic accountant so they can leverage the data you gathered. The Divorce Money Guide can help you dig into the numbers on your own. While you won’t become a forensic accountant overnight, with the guide’s ten steps you’ll be able to walk through what documents you need, how to get them, and what to look for to find evidence of missing money.
Whatever you decide, it is important that you be fully informed about your financial situation. You must understand what the numbers mean before you can make a good choice about a settlement offer.
Remember, if you see a couple of red flags of minor importance, it might not warrant further investigation. But if you see several financial red flags and they relate to significant issues or a lot of money, you need to protect yourself.
The greater the issues, the more likely there are other red flags that you haven’t recognized yet. Don’t walk away from your marriage feeling like you didn’t have enough information or that you were cheated. Uncover the truth about your family’s finances with guidance from an expert. Email TheNextChapter@bdfllc.com for a Red Flag Quiz to help you assess how likely it is that your spouse is hiding assets.
Is there marital money to find in your divorce?