Financial Assets & Divorce
When a spouse hides debt, overspends, or conceals assets, the damage isn’t just financial—it’s emotional. Known as financial infidelity, this type of deception can shatter trust and complicate divorce proceedings, especially in California. If you’ve discovered hidden financial actions in your marriage, you may have legal options to protect yourself and your future.
Learning that a spouse has hidden debts or concealed assets can feel disheartening
Honesty and trust are fundamental to a healthy marriage. When a marital relationship breaks down, however, that essential trust can be difficult to rebuild. Money is often a sensitive subject in marriage because how spouses handle their shared assets and how they choose to take on debt can have significant implications for their shared future and that of their children. Thus, when one partner lies about their financial actions and intentionally hides financial information, that deception can doom the relationship.
This type of dishonesty is known as financial infidelity, and it is unfortunately common. According to a 2021 poll from the National Foundation for Financial Education, 43% of respondents admitted to committing an act of financial deception in a relationship in which they had combined finances. Among those, 85% reported that it had affected the relationship in question, with arguments, reduced trust, and decreased privacy noted as the most common outcomes.
In California, a community property state, someone learning that their spouse concealed debts or spent marital assets for purposes that did not benefit the marriage, may fear that they will be stuck with the financial fallout of decisions they had no part in making. That is not necessarily the case. The court has the discretion to adjust the financial outcomes of divorce cases when financial infidelity has occurred. Substantiating claims of financial deception and having effective legal representation to protect your rights are essential to limit the damage.
Financial Infidelity in Marriage
Financial infidelity is a term that encompasses a wide variety of deceptive behaviors in a relationship that should be characterized by transparency, honesty, and shared decision-making. A spouse might lie about their income, earnings, or financial losses. They might have hidden assets or secret property. They could spend extravagantly, gamble, or make speculative investments without their partner’s knowledge. They may also open bank accounts or credit cards to either conceal money or take on debt that their partner knows nothing about. The net result is that the couple’s financial reality may be nothing like what the deceived partner thinks it is.
It is often not immediately apparent if one spouse is racking up debt or lying about their spending, with only a series of subtle clues leading the other to conclude something isn’t right. These signs of financial infidelity include:
- Being defensive or evasive when asked to discuss finances
- Being overprotective of their phone or computer, possibly because they are hiding financial accounts or transactions
- Cutting off financial statements from or access to shared accounts
- Unexplained withdrawals or charges on credit cards
- Cash flow issues without a clear explanation, especially if the couple’s income should be sufficient to cover their expenses
- An unexpected drop in credit scores
- Discovering a bank or credit card account that was previously unknown
Indicators of financial infidelity can start out small and then become more obvious and pronounced over time. At whatever stage someone discovers the first evidence that their spouse is engaging in financial infidelity, the steps they take next can be key to discovering the full picture and protecting their interests.
Uncovering Financial Infidelity in Divorce
Learning that a spouse has hidden debts or concealed assets can feel like discovering a growing chasm where one once felt like they were on stable financial ground. To effectively address this situation, it is crucial to discover the full extent of the problem. The affected spouse should start by gathering all available evidence to start piecing together an accurate picture of the couple’s finances: bank statements, credit card bills, tax returns, loan documents, credit reports, etc.
At this point, they may not be able to get full visibility into any hidden accounts, but what they do have access to may reveal discrepancies that can give financial and legal professionals the opportunity to uncover more. Note that it may not be advisable to directly question a financially deceptive spouse about suspicious information, as this can give them an opportunity to work further to cover their tracks.
The divorce process in California requires both spouses to make full financial disclosures, but it is entirely likely that a spouse who has already engaged in financial deception will not be honest at this step. It may be necessary to engage a forensic accountant to help determine where large sums that have vanished might have gone, or what purpose they were used for, and to divine the existence of previously undisclosed debts or hidden assets.
Their work can provide the basis for a family law attorney to seek additional information through interrogatories (written requests for further information), depositions, or requests for inspection during the divorce process. Uncovering the whole picture of any hidden debt is essential not only for informing property division, but also ensuring that the deceived spouse is not blindsided by loans or credit card debt that may have been taken out in their name, as they will likely be held liable for joint debt by the creditor even if they were previously unaware of it.
How Financial Infidelity Can Affect Divorce Settlements
In general, when spouses divorce in California, they are considered to share equal rights in their marital property and equal responsibility for their shared liabilities. But financial infidelity introduces special circumstances that can influence the court to adjust property division to more fairly reflect the fact that one spouse was misled and not fully responsible for their shared financial circumstances.
For example, the court has the discretion to declare “debts incurred by a spouse during marriage and before the date of separation that were not incurred for the benefit of the community” as separate debts per Family Code § 2625. This statute allows the court to assign those debts solely to the spouse who incurred them, rather than expecting both spouses to pay equally. When financial infidelity in divorce occurs in conjunction with a gambling problem or spending addiction, this provision can help prevent the victim of the deception from entering their post-divorce life with crippling debt they didn’t create.
Further, if the financially deceitful spouse misuses marital assets for purposes outside the marriage without their partner’s consent, this can be considered dissipation of marital assets. Consider, for example, the real-life cases of men who pay for their affair partners to have IVF treatment, combining both sexual and financial infidelity. In such a situation, the court may award the injured spouse a greater share of the remaining marital assets in property division to compensate them for the loss of misappropriated assets.
Before someone who has been the victim of financial infidelity assumes they have no recourse to recover from the losses inflicted on them, they should consult a knowledgeable family law attorney about the circumstances of their case. This will help ensure they get the benefit of every legal protection they are entitled to as they divorce.
Expert Financial Infidelity Attorneys in Silicon Valley
If your spouse has committed financial infidelity, you need experienced legal representation to hold them responsible for their actions and secure your financial future. At Hoover Krepelka, our attorneys can help you understand your rights and advocate vigorously on your behalf. We work closely with experienced forensic accountants when needed to illuminate the hidden facts of your finances and achieve the fair divorce settlement you deserve. To schedule your consultation, fill out the form below today.
FAQS
What is financial infidelity in marriage?
Financial infidelity is when one spouse hides money, debt, or financial decisions from the other without their knowledge or consent.
Can financial infidelity be used in divorce court?
Yes, it can impact the division of assets, especially if one spouse intentionally hid money or lied about finances.
How do I prove my spouse is hiding money?
Look for hidden accounts, unexplained withdrawals, or missing financial records—and consider hiring a forensic accountant if needed.
