Signs of Financial Fraud in a Divorce

As many people who have gone through a divorce can attest, when a couple has decided to end their marriage, the relationship between the two of them is usually pretty strained. Often, there is anger, frustration, hurt, and other emotions that can make it difficult to communicate with each other in order to negotiate a satisfactory divorce settlement. There can also be strong feelings of distrust, especially if one of the spouses was having an affair or engaged in some other behavior that leaves the other spouse feeling betrayed.

This contentiousness can lead to financial fraud by one spouse in an effort to deny the other spouse their fair share of the marital estate. In some situations, the spouse may have taken steps to hide assets even while the couple was still together. In addition to hiding assets to avoid making them part of any property division settlement, they may also hide assets to avoid paying their fair share in child support or alimony payments.

Signs of Financial Fraud

There are often red flags that can signal a spouse is engaged in some type of financial fraud. These include:

• • A sudden change in your spouse’s behavior, habits, or personality
  • Your spouse refuses to have any discussions about marital finances or always puts off having these conversations
  • Financial statements are no longer coming in the mail or you discover your spouse has secretly opened a post office box to receive these documents
  • Your spouse refuses to tell you the password for joint financial accounts or share any details about the accounts
  • Your spouse become evasive or secretive about their finances
  • Your spouse is hiding their activities on a shared computer
  • You discover that your spouse is taking large, frequent, or unexplained withdrawals from your bank accounts
  • You discover that your spouse has loaned or given money to family or friends without telling you
  • Your spouse has a substance abuse issue

Once the divorce has been filed and the legal process has begun, the spouse may engage in other activities to hide their assets. For example, if they own their own business, they may put off invoicing clients until after the divorce is final in order to falsely deflate their income. If they work at a corporation where there are periodic bonuses, stock options, or other financial benefits, they may work out an arrangement where they delay the receipt of funds so that money won’t be included in any support calculations.

What to Do If You Suspect Financial Fraud in Your Divorce

Having a seasoned divorce attorney advocating for you is critical when it comes to protecting your rights in a divorce, especially when a couple has substantial assets, like the family home, bank accounts, retirement accounts, pensions, and more. During the divorce process, each party must complete financial affidavits that list their monthly income, assets, debts, and monthly expenses. These documents are filed under the penalty of perjury, however, that caveat does not always deter a spouse who is determined to commit financial fraud.

In addition to the financial affidavits, additional financial information can be requested by each side during the discovery process, however, there really is no way to know if the other party is providing all of the information requested. If you suspect your spouse is attempting to hide assets, there are steps that your divorce attorney can take to uncover that fraud, such as hiring a forensic accountant.

A forensic accountant is often able to uncover financial fraud by reviewing the parties’ bank accounts, tax returns, credit card statements, retirement accounts, property appraisals, business ledgers, and other pertinent documents. Their financial expertise enables them to find funds which have been hidden. Some of the ways assets can be hidden by a spouse includes:

• • Unfunded trusts
  • Hidden brokerage accounts
  • Deferred compensation plans (bonuses, expense accounts, stock options)
  • Business owners hiding assets in company accounts
  • Secret safe deposit boxes

Dissipation of Marital Assets

In addition to hiding assets, a spouse may also be guilty of dissipation of marital assets. Dissipation of assets is when one spouse spends marital assets without the other spouse knowing or consenting to the use of these funds. The most common ways this occurs are:

• • Spending marital assets on extramarital affairs (gifts, hotels, travel, etc.)
  • Gambling
  • Drug addiction
  • Shopping addiction
  • Excessive spending on hobbies
  • Loaning family or friends money

Intentional wasting of marital assets is also a type of dissipation and is often done to minimize marital assets to commit financial fraud. Some examples include:

• • Letting a property fall into disarray in order to lower the value of the property
  • Letting a property fall into foreclosure
  • Selling assets for much less than what they are worth
  • Transferring property into someone else’s name

When a spouse is guilty of intentional dissipation of marital assets, the other spouse is often entitled to a larger share of the marital estate in the divorce settlement.

Do You Suspect Your Spouse of Financial Fraud?

If you suspect your spouse is guilty of financial fraud, skilled Rhode Island divorce attorney can help uncover that fraud and make sure that your marital rights are protected.

For more information on how we can help you, contact Kirshenbaum Law Associates at 401-467-5300.