Category: Finances

With divorce looming on the horizon, it’s important to get your proverbial ducks in a row. Particularly when it comes to finances.

During the process, you and your soon-to-be-ex need to provide records of income, assets, debts, and all the rest. These will then be divided according to the law based on various factors.

You may be tempted to try to hide some of your valuables. That, however, has serious consequences if you’re found out, including fines, contempt charges, and even jail time.

But what if your ex tries hiding assets? It’s all too common for people to squirrel treasures away when divorce is imminent. It can help protect your rights and your financial future if you know how to look for certain red flags.

Signs They May Be Hiding Assets During Divorce

This is not an exhaustive list by any means, but here are some common signs your ex might be hiding assets. These don’t automatically mean that’s the case, but if you see one or more of these, it might be worth closer examination.

1. Self-Employment

Being a business owner isn’t in and of itself a warning sign of hidden assets. That said, if your ex owns a business, it does provide creative opportunities to conceal money.

Be wary of drastic changes in reported income and unexpected increases in operating costs.

Purposely running a business into the ground may signal something is amiss. Not letting you access the business’s financial records may also tip you off.

If either of you owns a business, it makes divorce that much more complicated. There are many specific concerns and potential consequences you face in that situation. It may even impact business partners. In these situations, it’s likely in your best interest to talk to an experienced professional.

2. Income/Lifestyle Discrepancy

If your ex lives large, but claims to have no money, or reports an income below the poverty line, that may indicate something is awry with the financial disclosure.

If your ex buys a new car or vacations in Cabo, only to assert there’s no money, keep an eye open.

Additionally, changes in how much or how often your spouse contributes to family expenses can be a warning sign of hiding assets.

Related Reading: How Does Divorce Mediation Work?

3. Changes in Deposit/Withdrawal Activity

If you notice sudden changes in banking activity, it might be worth taking a closer look. Patterns shifting after years of consistency and predictability may indicate your ex has something to hide.

It isn’t uncommon for spouses to make cash withdrawal or to start diverting money into new accounts when a divorce is inevitable.

Cash transactions are more difficult to track. Thanks to this, it’s an attractive avenue for people trying to stash assets out of view. Once cash is removed from an account, it can be tucked away in any number of places until the divorce is final.

Related Reading: Rebuilding Your Finances After Divorce

4. Overly Assertive About Financial Documents

If your ex insists you sign important financial documents immediately, it may signify an attempt to hide assets. Pressuring you to act quickly may be a strategy to get you to overlook something significant.

This can encompass everything from wanting to be added to property via title or asking you to sign quitclaims that release interest in titles or accounts.

Don’t give in to the pressure and don’t sign anything just because it’s easier. Take the time to read all documents. If you don’t understand them, find someone who does, the more experienced the better. This is important whether you think your ex is hiding assets or not. Either way, your financial future hangs in the balance, make sure to do things right.

Related Reading: The Cost of Divorce in Washington

5. Secretive About Finances

Is your ex being secretive about finances or getting cagey when you ask about bills, expenses, income, or spending? Sure, some people don’t like to talk about money, but that may also be a red flag that someone is hiding assets.

You can help yourself by paying close attention.

Keep an eye on credit card statements and monitor credit reports before, during, and after divorce. Spouses commonly max out lines of credit or open new accounts.

People often accumulate clothes, jewelry, and other expensive items on joint accounts. Depending on the situation, this debt may be divided in the divorce, and you may wind up on the hook.

Related Reading: How to Split Debt in Divorce

6. Sudden Change in Business Profitability

Again, businesses offer a variety of ways for people to try to hide assets during a divorce. If a business has been profitable but then takes a sudden, drastic downturn, it may be a red flag.

Keep an eye on reports of record losses or skyrocketing costs. This may require a closer look.

Overstating expenses and understating income are two methods of making a business appear less profitable, and thus less valuable than it is in reality.

Related Reading: How Is A Business Divided in A Divorce? Can You Protect It?

7. Gifts

Giving gifts of cash or assets to family members is a common way people try to hide assets in a divorce. If your spouse starts handing out money or property to friends or family before filing for divorce, those assets may be out of reach when it comes to the division of property.

This is especially challenging when it comes to overseas relatives. Money held in offshore accounts can be particularly difficult to locate and even harder to recover. If you suspect your spouse is trying to hide assets in an offshore account, you may need to hire a detective who specializes in financial fraud.

Related Reading: Is Inheritance Considered Separate Property in Divorce?

8. Unfamiliar Financial Institutions

Divorce or not, pay attention to bank statements, credit card bills, and other financial documents. That’s just basic money management.

If you start seeing documents from financial institutions where you don’t have accounts, take note. This may indicate your spouse opened new accounts and is trying to move funds from joint accounts to one you can’t access.

Finances are complex under normal circumstances. As with most things, divorce only further complicates the matter.

If you suspect your spouse is hiding assets, it’s vital to consult a professional. An experienced divorce attorney knows what to look for, how to handle these situations, and can help secure your financial well-being in the future.

Related Reading: Moving Out During Divorce: What to Know *Before* You Go

Ending a marriage has drastic financial implications, regardless of the spouses’ ages. But the longer the marriage, the more complicated a divorce becomes. In many cases of so-called gray divorce, you must address dividing retirement benefits, Social Security, and other specific financial issues.

What Is Gray Divorce?

Gray divorce generally refers to spouses over the age of 50 who end their marriage. The divorce rate for couples over 50 has more than doubled over the last 20 years. Roughly one in four divorces involve couples aged 50 and older, while approximately one in ten involve couples aged 65 and older.

Is Gray Divorce Different?

The same laws govern divorce at any age. However, couples approaching retirement face several unique potential pitfalls and challenges. Here are some common mistakes to avoid in divorce as you near retirement.

What Retirement Benefits Are You Entitled To?

Throughout a marriage, spouses’ lives intertwine. As time passes by, you become eligible for certain retirement benefits based on your spouse.

• For unions lasting over ten years, you may be eligible to receive Social Security based on your ex’s work history.
• If your spouse served in the military, you are entitled to collect a portion of any pension.

A number of such potential allowances exist, but if you’re not aware of them, you may leave money on the table.

Social Security Eligibility After Divorce

Being married for a minimum of ten years entitles you to half of your spouse’s Social Security benefits after divorce. That’s great, but, as with most things involving the government, it’s not that simple.

You must be at least 62 years old and currently unmarried.

Whether or not your ex remarries is beside the point. However, your ex must also be eligible for Social Security in the first place. If you hope to collect based on your ex’s work history, any benefit must be larger than your own.

Simply put, you get one or the other, not both. What you receive also depends on when you take them—if you wait until full retirement age, you will receive a higher amount.

Related Reading: 11 Strategies to Know Before Filing for Divorce

Common Financial Mistakes in Gray Divorce

Even beyond dividing retirement benefits, gray divorce presents several other unique and challenging concerns. To achieve the best settlement, it is essential to be aware of these and other potential issues.

Don’t Automatically Choose The House Over Other Assets

In many divorces, a shared home is often the most significant asset to be divided between the parties. It makes sense. This is, for most of us, the most expensive, significant thing we’ll ever buy. Also, it’s where we’ve lived for years, it’s our home. As a result, many people fight tooth and nail to keep the house.

However, this may not always be the best financial choice. Houses cost money to maintain and are often difficult to liquidate, depending on your market.

A more prudent move may be to withdraw retirement funds and let your spouse retain the house. Another option is to sell the house and split the proceeds. That’s money you can use to bolster your retirement savings.

Related Reading: A House Divided: Splitting Up the Home in Divorce

Don’t Ignore Tax Implications Of Retirement Benefits

Ignore the tax implications of retirement benefits divided in divorce at your peril. You may think you’re getting one amount but wind up with something very different.

It’s important to know the differences between things like a traditional 401(k) or IRA versus a Roth IRA or Roth 401(k). In this instance, one is taxable, one is not.

When you withdraw money from a standard IRA or 401(k), the IRS taxes you when you remove money. So, if you have a $100,000 401(k), you wind up with substantially less.

On the other hand, with a Roth IRA, you pay the taxes when the money is deposited into the account, not when you make a withdrawal. The money is taxed ahead of time.

On paper, a $200,000 IRA and a $200,000 Roth IRA may look the same, but in practice, they’re pretty different. Knowing such details may give you a leg up.

Related Reading: Can You File For Bankruptcy During a Divorce?

Don’t Raid Retirement Savings

It’s often tempting to dip into retirement savings early. After all, it looks like this big chunk of cash is just sitting there, waiting to be spent. This is especially enticing if you rack up significant expenses or lose income during the divorce process.

However, remember that every time you make a withdrawal, you erode your retirement savings. Not to mention, you face taxes, fees, and penalties for early withdrawals. It may be worth it or even necessary in some situations, but make this decision carefully.

Be Aware Of Mutual Debt

Washington is a community property state, which has a substantial impact on divorce settlements. Under these statutes, the court views all assets acquired during a marriage as belonging equally to both spouses and subsequently divides the property accordingly.

So, too, is debt.

This is an issue in marriages of all lengths, but if your spouse has been building debt for years without your knowledge, you could be in for a nasty surprise.

If you’re close to retirement, you don’t want to start a new phase of your life in a deep hole. It’s yet another reminder to keep a close eye on the family finances, all of them.

Like most situations involving money and ending a marriage, things get complicated when it comes to divorce and retirement. There’s a lot to consider and many moving parts, and these are just a few.

Related Reading: How Is Debt Divided During A Divorce?