How to Know if Your Spouse is Hiding Money During Divorce (2024)

When I am helping a woman navigate the financial issues of her divorce, sometimes she tells me she suspects her husband is hiding money.

I previously wrote an article on the four ways to prevent financial infidelity in a marriage. After following these tips, it would be unlikely that either spouse in a marriage would be in the dark once they start engaging in divorce settlement negotiations.

However, when a wife has not been highly involved in investing the assets or managing the debts in a marriage or she has not assisted in the preparation of tax returns, it would make sense that she would have no idea if her spouse is being transparent when the time comes to disclose assets in a divorce proceeding.

In most cases, it is an unfounded fear. However, hiding money from one’s spouse can and does happen in a variety of ways, some direct and some indirect.

Disclosing Assets, Debts, Income, and Expenses

One of the first steps in a divorce settlement negotiation is for each spouse to disclose all assets and debts he or she knows about. Generally, there will be three buckets: marital assets, separate property assets, and commingled assets. State law determines how assets and debts are characterized.

I generally work with couples in mediation and they usually do their best to accurately disclose all their assets and debts. Mistakes happen but it is rare I see one spouse intentionally hiding money. Unwelcome surprises do occur, however, such as the financially-uninvolved spouse having no idea that the marital net worth (assets minus debts) is so low. These are situations I commonly see:

• One or both spouses racked up a lot of credit card debt during the marriage.
• Student loans existing before or taken out during the marriage were not paid down much during the marriage.
• The couple had refinanced the mortgage on the house and pulled out some of the equity.

It may not be an issue of hiding money or assets…it may be that there just is not much value to the marital estate.

Easy Ways to Search for Missing Accounts

The joint tax return (or a spouse’s individual return if married filing separately) is a good place to search for accounts that might not have been disclosed. Interest, dividend, and capital gains income will be associated with an account or property.

Sometimes earnings from an employer may be direct-deposited into more than one account. The spouse’s pay stub will show where the money (after deductions) is being deposited.

A lot of information can be found on a loan application if your spouse has recently applied for a loan such as a mortgage or business loan. The lender will typically require copies of recent pay stubs as well as a list of the spouse’s joint and separate assets and debts. Before a lender decides on a rate, amount, and term of a loan, creditworthiness, and ability to pay must be considered along with other factors. In two of my recent divorce cases, we learned a lot about marital and separate assets and debts by reviewing loan applications.

Exaggerating the Expenses of Running a Business

While exaggerating the expenses of a business does not fall into the category of “hiding assets,” it is a way to make it appear income available to support children or an ex-spouse is lower than it really is.

I see this one often. All of a sudden a husband’s business will be suffering. “Revenue is down and expenses are up,” he will tell his wife. He makes certain to let her know that she should not expect much in child support or alimony because there just isn’t much income available.

A certified divorce financial analyst (CDFA) or forensic accountant can be brought in to study the financials of the business and historical corporate and individual tax returns. We are trained to see if revenue is being deferred or expenses are being padded. We also can add back some personal expenses or tax deductions to achieve a clearer picture of what gross income or cash-flow really is.

How Much Does Fear Cost?

If, after asking her spouse to provide additional documentation and analyzing the information he provides, my client still fears that her husband might be hiding money, I ask her to estimate how much she thinks her spouse may be hiding from her. If she guesses it is less than $15,000 (with her share potentially being half of that) I advise her that she would probably spend more paying her attorney to chase down this “missing” money than she would collect. How much is she willing to invest in legal fees in order to possibly collect money that may or may not be there?

An attorney can be retained to initiate a discovery process during which the attorney may request documents from the other spouse such as tax returns, account statements, loan applications, and financial records. The spouse may also be required to provide testimony under oath. This can be an expensive exercise. A cost-benefit analysis must be made.

“Loaning” Money to a Friend or Family Member

Husbands are not the only ones hiding assets. Sometimes women confide in me that they are going to transfer money from a bank or brokerage account with their name on it to a friend or family member for safe-keeping until after the divorce is final. They figure since the account is only in their name, their husband will not be able to access the account or statements, and when assets are disclosed, the account balance will be lower than it previously was.

I do not condone this type of behavior and direct them to an attorney to find out what their state’s laws have to say about this type of activity. Unless that money is the wife’s separate property (such as from an inheritance that she has not co-mingled with a joint account), it could be considered her husband’s money too. Depending on the state, there may be a requirement that all assets and debts must be disclosed, even if they are one spouse’s separate property.

All the husband’s attorney needs to do is ask for the last few years of monthly bank statements and the transfer of funds will be there in black and white. A subpoena can be used to get the bank to release records.

Enjoyed this post? Check Out Our Article “How To Start Over After Divorce With No Money“.