Divorces are almost always quite complex by nature, and the emotional and financial stakes can make the process even more challenging. Financial abuse in marriage is unfortunately a reality for many, and when it comes time to separate, these financial power struggles often come to light. The two most contentious divorce points are child custody and property division. In high-asset divorces, there is often a significant temptation from one or more spouses to commit some level of financial abuse or misconduct. When everything is at stake, the temptation to hide some of it in a “secret” account that the soon-to-be-ex doesn’t know about is pretty significant. As such, sadly, financial misconduct by a spouse is relatively common in the divorce process. Here are the three most common types of misconduct that any California divorce attorney will see.
What Is Financial Misconduct?
It’s worth defining this concept before discussing the three types divorce attorneys most frequently see. Any assets and debts that either party obtains during the marriage are considered community property within the state of California. These belong to both spouses equally.
When one spouse unfairly conceals, wastes, or manipulates those assets to gain an advantage during the divorce proceedings, we call it financial misconduct. This type of behavior may also be a form of financial abuse in marriage, where one partner tries to control or sabotage the other’s financial well-being. Marital misconduct can involve not just emotional or physical harm, but also the manipulation of financial assets, which can make the divorce process even more complicated.
What Are the Three Most Common Types of Misconduct?
If you’re currently going through the divorce process (or expect to be soon), you should know the most common types of misconduct so that you and your attorney can spot them if they arise.
The three most common types are the following.
1. Hidden Assets
Hiding assets is arguably the most common financial misconduct in divorce by a spouse. A spouse hides assets when they transfer them to secret accounts, understates the value of businesses, artwork, crypto, and more, makes “gifts” to friends and family, or willfully conceals income.
Hidden assets in divorce are not only deceptive—they also directly interfere with the court’s ability to fairly divide property. This can be especially damaging in high-asset divorces, where significant sums or valuable property are at stake. A knowledgeable Divorce Attorney in San Jose will know how to work with forensic accountants and legal tools to identify hidden accounts and trace missing funds.
This is not only deceptive—it can also be considered a form of financial abuse in marriage, particularly if one spouse has historically controlled the couple’s finances and left the other in the dark.
These actions can significantly impact the divorce proceedings. Without a clear and accurate financial picture, the computations of child support, alimony, and the asset division judgment will be inaccurate. Everything in a divorce relies on accurate information about financial situations.
2. Dissipation of Assets
One party often wastes marital assets on expenses unrelated to the marriage. For example, one spouse could “dissipate” assets by funding excessive gambling trips, overspending on luxurious things (like unnecessarily buying a Bentley to try to have fewer assets to divide 50-50), or supporting extramarital relationships. Please note that California has no divorce penalties for outside affairs. Still, courts can hit that party with unfairly dissipating marital assets if the court believes that you have been incorrectly “transferring” marital funds to an outside romance. This sort of financial recklessness often overlaps with marital financial abuse, especially when it leaves one partner financially vulnerable.
3. Inaccurate Financial Disclosures
Last but not least are the venerable inaccurate financial disclosures (and this is one of the most common overall acts of financial misconduct by a spouse). During the divorce process, both parties have a fiduciary duty to provide complete and honest financial disclosures. However, one party might decide to willfully fail to disclose certain assets in the hopes that the other party will never know about them. These inaccurate disclosures make all subsequent calculations incorrect since those original faulty numbers drove them.
If you’re wondering what is financial misconduct in divorce and how it might affect your case, it’s important to know that hiding or misrepresenting assets can dramatically alter the course of the proceedings.
If you have a Prenup or Postnuptial Agreement, accurate financial disclosures are especially critical. Misreporting or hiding information could potentially invalidate parts of the agreement—or lead to legal consequences.
Speak with an Attorney If You Suspect Financial Misconduct By a Spouse
If you suspect financial misconduct, please consult with us! Whether you believe your spouse is hiding assets, wasting money, or engaging in financial abuse in marriage, it’s critical to protect your rights. Call (408) 560-4487 or complete our secure online form to schedule a case evaluation as soon as possible!
Frequently Asked Questions
What assets cannot be touched in divorce?
In California, separate property, such as assets acquired before the marriage, through inheritance, or as a gift, generally cannot be divided in divorce. Additionally, assets protected by a valid prenuptial or postnuptial agreement or any personal injury settlements awarded to one spouse are also exempt from division. However, if these assets were commingled with marital property, they may still be subject to division.
What are examples of financial misconduct in a divorce?
Examples of financial misconduct in divorce include hiding assets, such as transferring funds into secret accounts or undervaluing property. Dissipation of assets, which involves spending marital money on gambling, luxury items, or an extramarital affair, is another form of misconduct. Additionally, failing to disclose accurate financial information can be considered misconduct and may affect the division of assets and support determinations.
How can I prove financial misconduct in my divorce?
Proving financial misconduct often requires a thorough investigation into your spouse’s financial records. Forensic accountants can help trace hidden assets or unreported income. Your divorce attorney may also help identify discrepancies or inconsistencies in financial disclosures.
What should I do if I suspect my spouse is hiding assets in divorce?
If you suspect financial misconduct, such as hidden assets, it’s essential to discuss your concerns with an experienced divorce attorney immediately. They can guide you through the process of uncovering hidden assets and may employ forensic accountants or other experts to ensure full financial transparency.
