Dishonesty in divorce: The six red flags of fraud and asset hiding

Fraud is relatively rare in divorce cases, but personal motives in divorce can lead to a party (for reason of wanting to keep their perceived “fair” share) overstating (or understating) asset values and incomes, or even omitting them altogether, to retain/ obtain a greater share of the marital pot.

It is usually the case that one spouse has a much greater knowledge and understanding of the assets, their values, incomes and overall financial wealth of the marriage.  That knowledge is regularly used, in conjunction with representations of “I am being fair” and similar terms to encourage the other spouse to enter into an early settlement, sometimes without legal representation to assist.

To be sure of obtaining a fair settlement, all assets and incomes must be identified and valued. If an asset is not included (through reason of being missed out accidentally or hidden/ misrepresented deliberately) in divorce negotiations it cannot be split, and that will lead to an unfair settlement.

Perhaps your spouse is refusing to provide explanations or hand over documentation/ statements or there is a lot of information absent when you receive the papers. Maybe the figures are just not stacking up and there is no way their current lifestyle could be afforded based on declared incomes and known assets.

With their combined 50 years of experience, our in-house Forensic Accounting team, Nick & Suzanne, have seen every trick in the book.  Their experience in reading between the lines of personal and business financial disclosure coupled with their accountancy background means they are uniquely able to assess whether the financial disclosure is full, frank and clear, or not.

Today they share some of their “red flags” to indicate whether your spouse may be being less than honest with their disclosure.

1  Changes to online accounts and passwords

Passwords are suddenly changed on shared email and joint bank accounts for no real reason. You are not allowed the new details so you have no access to the information.

2  Transfers of property or shares to children/ family members

A decision to transfer property to your children or family members should serve as a warning if there is no genuine reason why.  Assets you thought you owned as a couple are suddenly held by family members.

3  Unusual cash withdrawals and spending behaviours

You notice an unusual pattern of large sums of cash being withdrawn and a big change in spending behaviours.  Perhaps there is a flurry of high-value gifts or money is moved from the accounts you know about and seemingly disappears (overseas accounts are a popular destination).

4  Loaning or giving money to family and friends

A debt you did not know about to a family member suddenly gets paid off.  Unexpected cash gifts to family or friends. Both are signs that money is been funnelled off before a divorce.

5  A sudden “drop” in income

The lifestyle previously enjoyed by your family suddenly becomes unaffordable.  Your spouse has gone from being well-off to near insolvent and unable to pay for anything. Coincidence, or a sure sign of income deferral and divorce planning.

Funds for your spouse’s lifestyle continue to be available but funds for your lifestyle are dramatically reduced to minimise your future “income needs”.

6  A “reduction” in the value of the business/ changes in business structure

If your spouse has their own business they may seek to manipulate (understate) the value of the business and the income that flows from it in an attempt to reduce the final divorce settlement.

Take the case of Alison Sharland who received a £10 million settlement in 2012 believing it represented half of her husband’s wealth. However, it later transpired he had lied about the company’s value which the media valued at about £600m, not the divorce value of £47m and his undisclosed plans to float it on the stock market.

The above considerations may apply to a period many months, or even years, before the date you identified the marriage as being in difficulty.  The finances of divorce may be planned years in advance in much the same way as retirement planning.

Failing to disclose or wilfully understating the values of assets in a divorce case is fraud. Take the case of Young v Young, where the husband Scot became one of the first men to be jailed in Britain for failing to reveal details of the assets in a divorce case.  Although there can be redress after the settlement it is difficult to prove and costly to pursue.  Far better to get matters sorted fairly the first time around.

If you believe that your partner is hiding, or misstating the values of, assets or income to you or has lied about their assets in the divorce court proceedings, then you need to get specialist legal advice.

Our combination of divorce lawyers and specialist in-house forensic accountants will ensure you get all the right information and quickly.

You can contact Nick White below.


Source link