Financial Fraud In Divorce: How You Can Protect Your Interests

If you believe that your soon-to-be ex-spouse will be honest about the disclosure and division of assets and income, think again! According to the National Endowment for Financial Education, nearly one-third of U.S. couples filing for divorce engage in financial infidelity.

Financial fraud in divorce commonly involves one spouse hiding or misrepresenting assets to tweak the divorce settlement in his or her favor. Moreover, the sting of failing in a relationship can leave couples too stressed to think of such matters.

Don’t let money matters take a back seat amidst the emotional drama that unfolds during a divorce proceeding. Use the valuable information shared in this post to stay protected from the common financial frauds in divorce.

1. Know the Different Types of Financial Frauds in Divorce

Family law matters offer deceitful spouses a solid motive and opportunity to engage in financial misconduct before, during, and after the divorce.

Before filing a divorce, a spouse may attempt to hide assets, cash, and marketable securities by transferring them to a secret account or a friend or relative. Some engage in the sale of assets to a distant friend or relative at an amount lesser than market value with the intent of reversing the sale after the divorce settlement. While Illinois law provides remedies for this type of conduct, added steps to neutralize the fraud means added costs to an already expensive proceeding.

Further, the spouse may engage in tax fraud, asset dissipation, failure to disclose assets, forgery, credit card, and loan fraud, and insurance fraud, among others.

When a spouse engages in tax fraud by not disclosing income, and you sign a joint tax return, you expose yourself to sanctions and penalties as if you personally committed the fraud, likewise with insurance fraud for claims on joint assets.

Spouses who own a business can manipulate their income and expenses, thereby impacting the final divorce settlement. For instance, he or she may not record cash sales with the intent of underestimating the business income. Or your spouse might falsely identify personal expenditures as business expenses to reduce personal income. Other ways of manipulating business finances involve creating false payroll entries to hide income.

Financial fraud may continue after the divorce. A spouse may attempt to show a decline in his or her income to support a reduction in maintenance or child support. Further, if the maintenance is based upon a percentage of income of the paying spouse, he or she may play accounting games to avoid paying higher maintenance.

Divorcing spouses who have deceit on their mind cannot resist the temptation to cheat or lie to improve their divorce settlement. Being aware of the various types of frauds in divorce can help you preemptively prepare to combat them and protect your interests.

2. Protect Yourself

Divorce is one of the most challenging times in a person’s life. Whether you have been married for a year or several decades, you may have joint accounts with your spouse that you may or may not be aware of. Moreover, your spouse may be keeping a tab on all your emails and online banking passwords, which makes you vulnerable to financial mischief.

First, order and review your credit report to take stock of your debts and credit lines. Inform your creditors and lenders of your divorce and wherever possible remove your spouse as an authorized user of an account, reducing the risk of gathering unauthorized debts. When necessary, close open credit lines and freeze other joint credit. If joint accounts are left open, your spouse can add more debt to them, adversely impacting your credit score and increasing your liabilities.

Keep a close eye on your credit report to prevent instances of identity fraud or accumulation of debt. Opt for smart features like credit monitoring, fraud alerts, and credit freeze. Credit monitoring will alert you of an irregular transaction in your credit report. Fraud alerts will enable the credit card companies to dig deep before extending credit. And, a credit freeze will prevent your ex from creating new accounts in your name.

While Court rules require spouses to honestly disclose their assets at the time of divorce, some don’t follow those rules. Seek a lawyer experienced in discovering and investigating your true net worth.

3. Watch Out for Red Flags of Financial Fraud in Divorce

A spouse engaging in fraud may exhibit several suspicious behavioral changes tipping you off as to their misdeeds. For instance, he or she may spend hours on the computer and close the screen when you walk in or may get aggressive or defensive about sharing the financial documents.

Besides these common behavioral changes, it is critical to pay heed to the red flags of financial fraud in divorce. You may have a solid reason to suspect your spouse if he or she –

Is unusually secretive about his or her financial matters.

• Isn’t willing to share the bank account details and online banking passwords.
• Owns a separate email address or P.O. Box for receiving bank statements and bills.
• Acts aggressive when asking for your signatures on important financial documents, such as tax statements and deeds.
• Has a dubious financial advisor (who has lately become his/her close associate).
• Reports sudden and unexplained business losses or decrease in the value of the marital property.
• Manipulates the income and expenses in his/her favor.

Watch out for these signs of financial fraud in divorce and talk to an attorney who is experienced in handling such cases.

4. Hire an Experienced Divorce Lawyer

If you suspect your soon-to-be-ex-partner is hiding or understating assets, overstating debts, and reporting a lower income and higher expenses than the actual amount, get in touch with your divorce attorney immediately for advice. If you don’t yet have a lawyer, find one experienced and appropriate for the issues in your case.

An experienced divorce attorney knows how to handle divorce cases involving dissipated or hidden assets, forgery, manipulated income and other forms of financial fraud in divorce.

Look for a lawyer who knows the local divorce law like the back of his or her hand. In addition, seek a lawyer with a sophisticated understanding of financial valuation and classification. Reputed divorce attorneys often work with forensic accountants, who can dig out hidden and transferred assets, thereby protecting you from financial frauds. In fact, Peskind Law Firm employs a certified public accountant for the purpose of identifying and accounting for financial improprieties.

During a divorce, it is expected that both the spouses will openly and honestly disclose their income and assets, allowing for a fair resolution of the case. Unfortunately, some spouses play dirty tricks to hide or understate assets and income and overstate liabilities and expenses, thereby leading to an unfair divorce settlement.

In this age when financial frauds are rampant, the tips shared in this post will help you protect your interests when filing a divorce.

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