In our last post, we began discussing the issue of financial fraud in divorce. Hiding assets from a spouse is obviously a risky undertaking, but it is a risk that some are willing to take. It is particularly important for the financially weaker party in divorce to work with an experienced team of professionals to ensure that he or she is not going to be defrauded in property division.
One of the tools that can be used to track down hidden assets is forensic accounting. Professionals who work in this area are able to track paper-trails of funds through marital accounts, identify co-mingling of marital and separate assets, and determine whether one of the spouses may have engaged in “dissipation” of assets. The services of a forensic accountable can be very valuable in ensuring that property is fully accounted for and fairly divided in divorce.
Forensic accountants and the attorneys that work with them are able to identify the warning signs of potential fraud. Some of the signs including: unexplained changes in the way a spouse is behaving, particularly with respect to finances; withholding details of financial transactions from the spouse; unexplained cash withdrawals from bank accounts; and giving money to family or friends without first telling the spouse. These and other behaviors can indicate that a spouse may be engaging in fraud in preparation for divorce, or during divorce as well.
Fraud is also a concern when negotiating a prenuptial agreement. When spouses don’t have full knowledge of the assets each other owns at the time a prenuptial agreement is executed, a court may refuse to enforce the agreement. We’ll look at this issue in a future post.