Common Finance Deceptions In Divorce
January 14, 2019
When a marriage ends, the couple’s assets and liabilities must be divided. In order to do so, each spouse is expected to fully disclose his or her income, assets and debts. Unfortunately, people sometimes attempt to obscure the truth in order to get a better financial “deal” in their divorce. If your spouse hides assets or overstates debts, it can have a significant negative impact on your finances for years after the final divorce decree has been signed.
Here are several common ways divorcing spouses may attempt to tip the financial scales in their favor during divorce:
- Transferring or “gifting” assets. Sometimes, one spouse will try to remove assets by “gifting” them to a family member or friend with the understanding that they will be re-gifted after the divorce is final.
- Failing to disclose accounts. A person anticipating a divorce may also simply fail to disclose one or more bank or investment accounts intentionally.
- Overstating debts. One spouse may try to create fictitious debts or overstate the amount he or she owes to creditors, in an attempt to pay less in the divorce settlement and/or in spousal maintenance or child support.
- Underreporting business revenues or assets. When there are business assets involved in a divorce, one spouse may also try to hide income by not reporting it on the business’ books, to make the business appear less successful. Business assets or inventory may also be intentionally undervalued.
- Creating fake business expenses. Another tactic used by some unscrupulous business owners during a divorce is to create, and pay, phony bills. This can have the effect of both sheltering assets and making the business appear less profitable. A similar type of financial fraud occurs when a divorcing spouse uses business assets to pay his or her personal expenses but records those payments as business expenditures.
- Withdrawing cash. A spouse intent on hiding assets in a divorce may also make cash withdrawals from individual or joint bank or brokerage accounts in the months leading to a divorce, diverting that cash to a hidden account or converting it into money orders or cashier’s checks. Another less-obvious method of hiding cash is depositing less than the full amount of paychecks or other instruments.
- Wasting assets. Divorcing spouses may also attempt to destroy or waste marital assets by purchasing lavish gifts for others or spending excessive amounts on personal hobbies.