Worried? Here are 20 Questions to Uncover Financial Infidelity

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What questions should you ask if you are worried about financial infidelity?

If you’re worried your spouse is being financially unfaithful,  here are 20 questions we ask a client who suspects their spouse of financial infidelity. They are all meant to uncover underlying causes or avenues for financial infidelity. You should ask yourself these questions before accusing your spouse of wrongdoing.

  1. Do you have separate bank accounts?
  2. Is your name on the family bank accounts?
  3. Is your name on the mortgage?
  4. Do you have a relationship with the family financial advisor?
  5. Do you know how much your spouse earns and how they get paid?
  6. Who gets the mail and pays the bills?
  7. Are there credit cards you know nothing about?
  8. Are your family bank and investment account balances lower than you would expect?
  9. Are there unopened boxes or clothing hanging in the closet with tags still on it?
  10. Is money an emotional conversation in your marriage?
  11. Does your spouse gamble?
  12. Does your spouse day trade a stock portfolio?
  13. Are there abnormally large expenditures charged to debit cards at department or grocery stores?
  14. Do you suspect your spouse of having an emotional or physical affair?
  15. Are you on an allowance?
  16. Does your spouse do business with family members?
  17. Do you suspect your spouse of misusing prescription or other drugs?
  18. Have you ever wondered where your spouse got the money to buy a big ticket item?
  19. Does your spouse own their own business?
  20. Is it possible your spouse has been planning for divorce for a long time?

 

Call Wellspring Divorce Advisors for professional financial help if these questions heighten your sense of concern. Click here for an overview of financial infidelity in a previous post.

Protecting Your Assets: What is Financial Infidelity?

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Protecting yourself.

What is Financial Infidelity?

Financial Infidelity is the misuse, mismanagement or misappropriation of marital assets and incomes during a marriage. Financial Infidelity can stem from many causes including:

  • shame from a job loss
  • extra-marital affairs
  • addiction
  • poor communication
  • downright fraud.

What are the signs?

Clients have come to us suspecting their spouse of buying gifts or lavish trips for the mistress, frequenting strip clubs and major gambling losses. We have also had clients learn of their spouse’s transgressions only when they saw the poor condition of their family finances during divorce proceedings.

Regardless of the reason for the suspicion or the reason for the financial infidelity it can wreck marriages and the long term financial security of the victim. A recent Harris poll showed 42% of poll respondents have committed some form of financial deception. 39% hid a purchase, bank account, cash or a document of some type like a bill or credit card statement. 16% admitted to a lie about the amount of debt they had or the amount of money they earned. 25% of couples experiencing financial infidelity in the poll ultimately separated or divorced while 25% said it had no effect on their relationship.

Take care of yourself.

You owe it to yourself and your children to be diligent and engaged in the finances of your marriage if only to fight for what is left in a divorce. Read on for a detailed overview.

  •  Click here for a list of 20 questions we ask clients who suspect their spouse of financial infidelity.
  •  Click here for suggestions of first steps to take if you are concerned about financial infidelity.
  • Click here for some real world examples of financial infidelity from our practice.

 

Protect your Assets: Prenuptial Agreements 101

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What is a prenuptial agreement?

A prenuptial or premarital agreement is a negotiated agreement reached between two parties in advance of marriage. The agreement typically deals with the ownership of assets in the event the marriage ends in divorce. Some prenuptial agreements will also cover alimony and child support. There is a great overview from a legal perspective here.

Do I really need a premarital agreement?

About half of marriages end in divorce in the United States so it may be prudent to consider signing one. Following are some considerations to help guide your decision making.

Timing is everything

Many newly engaged couples believe the entire concept of prenuptial agreements is unromantic or even disgusting because the party proposing the agreement may be planning for the marriage to fail. If you plan on asking for a prenuptial agreement in your future marriage we suggest you start the conversation early so expectations are not shattered weeks in advance of the big day.

Many jurisdictions even require a party be given a certain amount of time to review and negotiate the terms of a prenuptial before the marriage date. If the adequate time is not provided the agreement can be rendered unenforceable. In California the party receiving the prenuptial agreement must be given at least seven days to review the agreement before it is signed. If someone is not given the seven days, a court may consider it to be signed under duress and refuse to enforce it’s provisions.

Protect yourself.

Prenuptial agreements should be negotiated with the assistance of licensed and independent legal counsel. Independent is a key word. We have seen many prenuptial agreements drafted for couples by one attorney. Usually the drafting attorney is working for the person with the money. So how could the other party hope to get fair and complete representation from this lawyer if they are already working for their soon to be spouse? Unfortunately they usually do not.

In the State of California the party receiving the prenuptial agreement must be represented by independent legal counsel at the time of signing the agreement or waive their right to do so in writing. If independent counsel is not present the agreement may be rendered unenforceable.

This facet works to the advantage of both parties. For the party receiving the prenuptial agreement they will have access to competent and experienced legal counsel to ensure they understand what they are signing. For the person offering the prenuptial it provides additional assurance the agreement will stand up in court if the day should come. Bottom line don’t use your fiance’s attorney.

Protect your future.

Prenuptial agreements are all about money. One or both parties have it or the expectation of having it and want the money protected in the event of divorce. They are not only for celebrities or the super rich. Say you started a business before you were married and the business is just starting to gain traction. If the business grows to a value of millions of dollars during your marriage, the value may be considered part of your marital estate and you will have to pay your spouse to keep it in a divorce.

You may wish to have the business carved out as your separate property through the use of a prenuptial agreement. If the business does not take off as expected you would still have the peace of mind to know it is yours. If it does take off, you and your new spouse probably enjoyed the fruits of this success during your marriage through the income it was able to pay you.

Be prepared.

Prenuptial agreements require diligence and full disclosure. One of the many problems we see with prenuptial agreements is a complete lack or poor effort at disclosure of financial information. A good prenuptial agreement will include exhibits attached showing the assets, debts, income and expenses of both parties. You may not be able to prove assets not disclosed in the financials of the prenuptial agreement are governed by the provisions.

Take for example a brokerage account. You sign a prenuptial agreement saying all assets owned at the time of marriage are considered the separate property of the owner. What if the brokerage account was with Lehman Brothers who subsequently goes bankrupt and their records are no longer available. Your account balance will not have disappeared with the bankruptcy but your ability to prove it existed at the time of your marriage may have. If you cannot prove it existed at the time of marriage you may not get it awarded as your separate property in divorce. Start with full disclosure, be diligent about keeping records and consider updating or amending your prenuptial agreement as circumstances change and assets move around.

 

Stay tuned for more on the topic as we dive into Best Practices, explain Common Provisions, uncover Postnuptial and cohabitation agreements, share some horror stories of Prenuptial Failures and maybe even convince you Prenups are Romantic.

QDRO Process Explained: Click here to find out how to get started.

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What do I need to know about a QRDO?

The QDRO process can take months to complete making it very important the process is started as soon as possible. Following is a timeline of the process you should expect when filing a Qualified Domestic Relations Order.

Let’s get started.

  1. An attorney experienced in drafting Domestic Relations Orders is identified and engaged by the parties.
  2. The QDRO Specialist drafts the Domestic Relations Order in accordance with specific plan provisions and the agreements reached by parties to the proceedings.
  3. The parties, together with their respective attorneys and financial experts review and approve the draft document.
  4. The Draft Qualified Domestic Relations Order is submitted to the Plan Administrator for pre-approval.
  5. The Plan Administrator responds to the drafter with any necessary revisions.
  6. Requested revisions are made to the QDRO and the revised copy is sent to parties and attorneys for review and signature.
  7. The approved QDRO is signed by both parties and sent to the court for the judge’s signature.
  8. A copy of the singed and court certified Qualified Domestic Relations Order is sent to attorneys or parties.
  9. The certified singed copy of the QDRO must be sent to the Plan Administrator for processing. Some QDRO experts will send the approved document to the plan administrator for the clients. Make sure you know who will take on the responsibility and do not make assumptions.
  10. The Plan Administrator will send a letter to the participant and alternate payee with instructions on how to access the plan and a timeline for completion of the division. It may be necessary for the Alternate Payee to stipulate an outside account for benefits to be rolled to.
  11. The Plan Administrator calculates the division of the plan pursuant to the QDRO and creates a separate account for the Alternate Payee.
  12. The Alternate Payee will receive confirmation that their benefits have been partitioned into a separate account or rolled over into the account previously stipulated.

 

For more information about the Qualified Domestic Relations Order and how it can affect you, visit our article Retirement Accounts & Divorce: Why you need a QDRO.

 

At Wellspring Divorce Advisors, we use state of the art divorce financial planning and forecasting tools for long term projections, retirement plan valuation, support scenario comparisons, and negotiation tools including child support and alimony guidelines. Click here to find out how we can help you.

What is a Qualified Domestic Relations Order?

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Retirement plans such as 401(k)’s and defined benefit pension plans are often among the largest assets to be divided during the division of a martial estate. Many of these plans are governed by a set of federal laws known as the Employee Retirement Income Security Act of 1974 or ERISA. ERISA allows an Alternate Payee such as a former spouse to receive a portion of the employee’s benefits with a court order. A Qualified Domestic Relations Order (QDRO) is the court order required to give notice to a retirement plan administrator that an Alternate Payee is entitled to a portion of the plan. Without a QDRO the plan administrator cannot legally make payments to the Alternate Payee.

Who Should Draft My QDRO?

A Qualified Domestic Relations Order should be drafted by an attorney familiar with this subset of legal practice. The drafting of a Qualified Domestic Relations Order is an important step in the divorce financial planning process. Financial planners have specific and far reaching knowledge of retirement plans and the underlying laws that govern them but are ill-equipped for drafting the actual Domestic Relations Orders as they are usually not attorneys.

For a QDRO to be valid and accepted by both the court and the plan administrator it must contain specific requirements under the law as well as be tailored to that specific plan. Retirement plans may even reject court certified orders that were not pre-approved by their own staff. For this reason it is necessary for a draft to be sent to the plan administrator for pre-approval prior to seeking court certification.

Wellspring Divorce Advisors suggests the qualified domestic relations order be drafted and pre-approved prior to finalizing the global financial agreements. We have seen many individuals still fighting to get their share of the retirement plans awarded to them years after settlement because the other party refuses to sign. See more on the QDRO Process here.