In divorce, both sides are required to disclose their current and past finances within certain limits. This information is used to determine the division of assets, spousal support and child support. Details in financial account statements are particularly revealing and should be carefully examined for red flags that could indicate improper spending and/or hidden assets.
Right to Financial Records
Spouses have the right to access financial records such as bank, credit card, retirement and investment account statements; loan and mortgage documents; insurance policies; wills; trusts; deeds and title certificates; tax returns; business records; and other relevant documents as part of the divorce process.
The right applies to documents from the beginning of the marriage up until the date a divorce action is filed, regardless of how many years have passed. However, because this could be burdensome, typically, the last three years of records will be requested to start. If there is evidence of misappropriation or other improper action by a spouse, a judge may grant a request for additional years of information.
Need for Financial Account Statements
While all types of financial records are important, bank, credit card, retirement and investment account statements indicate every transaction. The history of deposits, withdrawals and transfers can reveal a spouse’s spending habits, suspicious activity and possible unknown assets.
Red Flags
All information in the financial account statements must be verified and tracked from one source to another. If the information doesn’t match up, it may indicate a problem relevant to the divorce action. For example:
- Deposits. Where are the deposits coming from? Can they be traced to known income? Is there more or less money in the account than there should be based on income and expenses?
- Payments. How are bills being paid and from what account? Are payments made for legitimate and known expenses?
- Withdrawals. Why was money withdrawn and where did it go?
- Transfers. Are there transfers going from your spouse’s regular account to an unidentified account? Why was the transfer made?
Discrepancies can indicate hidden income or accounts, improper spending, mismanagement of finances or other suspicious activities. This situation most often occurs when a spouse has a business or investments, is a 1099 worker, or has cash receipts, allowing him or her to more easily conceal financial information. Missing funds may also be attributable to a spouse with undisclosed debt, an adulterous relationship, or a gambling, alcohol or drug problem.
Consequences of a Superficial Review of Financial Statements
If financial account statements aren’t analyzed correctly, it may result in property division and spousal and child support awards that do not account for all income and assets or reflect instances where assets have been wasted by one spouse. Importantly, the wasteful dissipation of assets by either spouse is a statutory factor considered by the court in dividing assets in divorce.
If you’re considering divorce and suspect that your spouse is hiding financial information, it’s important to work with an experienced attorney and financial expert. Contact us to discuss how we can help you achieve a positive result in your case.
