Divorce can be tricky, especially when you don’t know what you don’t know about your finances. It is not uncommon for a married couple to have one spouse who is what’s known as the “out spouse,” who is a husband or wife who’s in the dark about the couple’s income, assets, and expenses.
Sometimes, this occurs because their husband or wife refused to give them details about their financial situation. Other times, the out spouse simply didn’t want to know about the money, or they never took the time to learn the details.
One of the biggest mistakes spouses make in a marriage is not knowing much, if anything about their finances. For example, if during the marriage your spouse has been handling all the finances, paying the bills, managing the investments, paying attention to the IRA or 401(k) accounts, filing the taxes and such, and you don’t know the facts about his or her income and assets, he or she has an unfair advantage in the divorce.
What You Can Do to Remedy the Situation
Do you suspect that your spouse is planning a divorce? Or, are you contemplating pulling the plug? Either way, now is the time to start gathering information – before the divorce is filed in court. Our advice is to one, run both of your credit reports to see exactly what is being reported and two, start gathering all of the financial documents you can find, such as:
- Credit card statements
- Bank statements
- Last three years’ tax returns
- Mortgage documents
- Auto loan documents
- Retirement accounts
- Life insurance policies
If you are concerned that your spouse may liquidate marital assets, such as real estate, behind your back or without your express consent, do two things: 1) send a letter in writing to the holder of the asset or property and 2) obtain a restraining order from your local court. Our advice is to pay close attention to the cash held in joint bank accounts and the cash value life insurance policies.
If your spouse decides to hide assets from you or transfer assets so you don’t get your fair share under California’s divorce laws, it may become necessary to hire a forensic accounting expert. Such an individual is trained in uncovering hidden assets in a divorce.
Should I Hire a Tough Attorney?
If you suspect your spouse is hiding assets from you, you may be asking yourself, “Should I hire a tough attorney to punish my spouse?” This is NOT a good idea. For one, your spouse may be a rotten person, but it’s highly unlikely that the court will punish him or her financially because they were emotionally abusive or controlling.
Second, if you hire the toughest attorney you can find because you want him or her to punish your spouse, to hit them where it hurts, it’s going to cost you a fortune because it’s going to take such an attorney a lot of extra hours trying to inconvenience your spouse in every way possible.
Your legal fees will be much higher than they need to be or should be. Increased hours mean higher divorce costs, which means less marital assets to divide – and a smaller settlement for you. In other words, you’ll walk away with less cash for you and if you have children, your family. Our advice is to treat your divorce like a business negotiation. Remove your emotions. To get the best revenge – live a good life after all is said and done.
Should You Consider Mediation?
If you have a high-net worth divorce, it doesn’t mean it has to involve litigation, which can be a costly, protracted court process. Even if you have been in the dark about your finances, especially if your spouse is the higher-earner, it doesn’t mean he or she can’t work with you to have a transparent, amicable divorce. There are many instances where high-net-worth individuals negotiated their divorce through divorce mediation.
Essentially, divorce mediation can apply to anyone. It doesn’t matter if you have $5 million or $500 in the bank – if you and your spouse can work together to create a fair and reasonable settlement, you should consider divorce mediation.
Instead of hiring two pitbull divorce attorneys, the couple works with one divorce lawyer who is trained in divorce mediation. The mediator does not determine the outcome of your divorce, nor does he or she act like a judge. The mediator is a neutral third party who assists you and your spouse in reaching a fair divorce settlement.
Some of our clients love mediation because their fate is not determined by a judge who does not know them or their situation personally. But while mediation offers a lot of freedom, flexibility and control, it is not for everyone.
If you have been in the dark about your finances and your spouse is hiding income or assets, or if they refuse to be open about their financial activities, you may be better off having the security of a court and a judge behind you, a judge who can force your spouse to produce financial records. Also, if your spouse is giving you a hard time and unwilling to compromise, mediation is probably not the best option.
If you’re headed toward divorce, our advice is to schedule a free consultation with a Los Angeles divorce attorney from our firm as soon as possible. We would be more than happy to answer your questions so you can make educated decisions about how to proceed.