Dealing with Financial Infidelity in Divorce Matters – By Jacqueline Harounian, Esq.

Romantic partners lie and betray in the financial arena just as much as the sexual arena. Usually it is a “white lie”, as in, “What he doesn’t know won’t hurt him”, and involves hiding the cost of a family trip or shoe shopping splurge. But at least 25% of the divorce matters I see involve pervasive financial infidelity that significantly undermines the rights of the innocent party.  It can be tens of thousands or even hundreds of thousands of dollars, if not more.

When it comes to money, financial infidelity involves spending, borrowing, transferring and hiding income and assets. It can also involve secret debts, expensive shopping and dining habits, tax debts, liens and judgments.

One of the side effects of the pandemic is that it is harder to track down and untangle assets during divorce. There is less access to the courts, and attorneys have to employ different strategies, there are reversals in income, loss of jobs, breakdowns in communication, and strategic filing a foreclosure and bankruptcy.

Hidden assets include missing bank accounts, offshore accounts, assets in other countries, and reported income, cash income, assets that are hidden and trusts and other entities, assets that are transferred to LLC ‘s, hidden rental income, secret credit cards or stock options, luxury items including jewelry, gold, boats and cars, even tools, cash and Bitcoin, and safe deposit boxes.

The emotional and psychological responses by the “innocent” partner can be as painful and explosive as finding out about a mistress or paramour. Shame, humiliation, and anger are the most common responses. The financial damage is also real and undeniable. Technology has made financial infidelity easier than ever because there is no paper trail of statements and receipts. When the evidence is discovered, it creates real fireworks and sometimes leads to divorce.

Marriages can continue for years with deep dark secrets, and wrongdoers usually get caught only when the marriage deteriorates.  As divorce attorneys, we have a duty to act zealously on behalf of our clients, and they are counting on us to help them get the best possible outcome with regard to their legal and financial rights.  Our advice?  Always be aware of the four main metrics of financial stability:  income, assets expenses and debts. Review your tax returns every year. Don’t ignore red flags when it comes to your relationship.  Don’t live in denial. If necessary, get the best possible advice from an experienced matrimonial attorney, accountant or financial advisor. Or preferably, all three.