The Effect of Financial Infidelity on a Divorce

The Effect of Financial Infidelity on a Divorce

Despite the potential consequences, a Harris Poll found that 43% of respondents had been deceptive about their finances at least once in their relationships. Financial infidelity occurs when a person hides debts, assets, accounts, or spending from their spouse and can be viewed as a major betrayal. In many cases, financial infidelity can lead to divorce and affect the case’s outcomes.

What Is Financial Infidelity?

Financial infidelity refers to deception regarding money in a marriage or relationship. Many people report it is just as devastating as a spouse engaging in an extramarital affair. A survey of U.S. adults reported by Yahoo Finance revealed that 52% of the respondents believed financial infidelity was just as bad as physical cheating, and 12% believed it was worse.

Some examples of behavior that amounts to financial infidelity include:

• Hiding debts
• Opening secret accounts
• Hiding cryptocurrency assets
• Lying about investments
• Secretly making major purchases
• Opening multiple credit cards secretly
• Hiding gambling habits and losses

Financial infidelity can take multiple forms, but they all share a common foundation of deception and dishonesty about money. If someone continues to engage in financial dishonesty with their spouse, it can destroy their family’s budget and permanently damage the trust their marriage depends on.

Financial Infidelity Consequences

When a spouse engages in financial deception, their conduct can cause serious consequences in their marriage, including:

• Arguments
• Loss of trust
• Communication breakdown
• Increased marital debt
• Stress
• Tension
• Resentment
• Divorce

When a spouse discovers their husband or wife has been dishonest about finances, they may experience a feeling of severe betrayal. Financial infidelity is also sometimes associated with other related issues, including buying presents for an affair partner with marital funds. When the deception involves hiding debts or lavish spending, the spouse who discovers the hidden debts or their spouse’s compulsive spending can feel overwhelmed by the strain of the added financial burden. They might feel they are bearing the burden of their spouse’s debt or spending and want to end the relationship.

A spouse’s financial misconduct can affect divorce proceedings. When a spouse has hidden assets or debts, it can impact property division and the determination of alimony. If you are dealing with these issues, your divorce attorney can petition the court to consider your spouse’s financial deception when deciding how to distribute the assets and debts equitably.

Divorce Implications of Financial Infidelity

While it is not a fault ground for divorce, financial deception in a marriage can have an impact on divorce proceedings in the following ways:

• How property is divided
• Spousal support determinations
• Payment of attorney’s fees
• Determination of child support amounts

Asset and debt division can be greatly affected by financial infidelity when one spouse has hidden assets or debts. For example, if a spouse has hidden several hundred thousand dollars of investments, the court will likely order that the other spouse receive an equitable share. In some cases, a judge might hold a spouse who has hidden assets in contempt of court and order them to serve time in jail until they disclose everything.

By contrast, if a spouse has racked up thousands of dollars of debt during the marriage without the other spouse’s knowledge, the court might decide to make the debtor spouse solely responsible for those balances instead of dividing them. The court might also grant a larger share of other assets to the spouse based on the debtor’s actions and deception.

Alimony can also be affected by financial infidelity. If a spouse has secret accounts and spending, the court might award a higher amount of support to the betrayed spouse based on the deceptive spouse’s income and standard of living.

Child support could also be affected if the deceptive spouse has hidden assets, income, and accounts. If the other spouse uncovers these assets, the child support awarded could be significantly higher.

Finally, the court might order the deceptive spouse to pay your divorce attorney for their legal fees based on their financial deception.

Evidence of your spouse’s financial deception can strengthen your position when negotiating a settlement. Legally exposing your spouse’s financial infidelity can protect your rights, help you recover your fair share of the marital assets, and prevent you from being unknowingly burdened by your spouse’s debts.

Evidence to Gather

If you decide to file for divorce based on your spouse’s financial deception, gather as much documentation as possible to support your case and protect your financial interests. It is best to gather this evidence before you file. It is much easier to get the documents while you are still married and living together than trying to get them from your spouse after you file a divorce petition.

Some examples of documents to gather in a divorce involving financial infidelity include:

• Checking and savings account statements
• Credit card statements
• Credit reports for you and your spouse from each of the three major credit reporting agencies (Equifax, TransUnion, and Experian)
• Loan applications and other debts
• Income tax returns
• W-2s/Business profit and loss statements
• Documentation of any suspicious asset transfers by your spouse to family members or friends
• Lease statements from hidden apartments
• Investment account statements
• Retirement account statements
• Deeds and titles
• Receipts/records from suspicious purchases

In some cases, your divorce attorney might recommend retaining a financial professional to help track down hidden assets and purchases. These might include the following:

• An accountant to analyze records, looking for transfers, irregularities, and indicators of hidden assets
• A valuation expert to evaluate asset values and determine a fair distribution
• A forensic financial analyst to investigate finances thoroughly and find hidden funds or evidence of fraud

Protecting Your Interests Through Binding Agreements

You and your spouse can enter into binding agreements before or during your marriage to protect your financial interests. When properly drafted and executed, these agreements can determine how your assets and debts should be divided in the event of divorce. They can also be used to determine whether spousal support should be awarded and include the following:

• Prenuptial agreements – You and your intended spouse can work with your respective attorneys to create a prenuptial agreement before you marry to outline your financial arrangements, responsibilities, and how assets and debts will be divided if you divorce.
• Postnuptial agreements – If you and your spouse didn’t create a prenuptial agreement before marriage, you can draft a postnuptial agreement. You might also choose to create a postnuptial agreement after discovering your spouse’s financial infidelity if you intend to try to work things out instead of getting divorced.

Bottom Line: Don’t Engage in Financial Deception

The consequences of financial deception can be severe and destroy your marriage. Always be honest about your finances, assets, and debts with your spouse or partner. Sit down with your spouse or partner and go over your respective finances as a regular part of your routine. If you understand your finances, it will be much easier to identify if your spouse begins attempting to hide assets or debts.

Consult an Experienced Divorce Lawyer

If you believe your spouse is hiding assets or debts or you have uncovered evidence of secret accounts or lavish spending, contact an experienced divorce attorney at The Law Office of Kelly Berton Rocco. We can review your documents and explain how your spouse’s financial misconduct could affect your case. Contact us today at (201) 343-0078 to schedule a confidential consultation.