Children and finances are the two biggest issues in almost every divorce. The law considers a married couple to be a “financial unit”—think of it as a partnership, and when that partnership ends, there are assets, liabilities, and income that must be distributed between the partners. Without an accurate picture of the couple’s finances, the Court cannot effect a fair distribution.
The division of assets is the easy part—it’s almost always very close to a 50/50 split unless there extenuating circumstances. And sure, there are spouses that make efforts to hide assets. (Be careful, though, financial disclosure is a sworn declaration. Intentional misstatements are punishable by perjury.)
What upsets many parties in a divorce, though, is having to disclose the records of their spending. Divorce practitioners are used to delivering the most recent three years of financial records in discovery and review these records with an eye to a few subtle issues.
The first is “marital waste”—spending that does not further the economic unit. Marital waste is not when one spouse buys his or her workday lunches at local restaurants while the other prepares his or her lunch at home. Think of a spouse blowing thousands on sports betting or a drug habit. Waste is also spending marital funds to further an extra-marital relationship. (Adultery itself does not bring a financial penalty, but the spending on the adultery is certainly objectionable.)
Another possibility, not typically thought of as “wasteful” would be inordinate gifts to third parties without the knowledge or consent of the spouse. If waste can be proved, the innocent spouse will be entitled to a credit or an offset, equal to up to half of the wasteful spending. The credit might be a cash offset, or an extra asset awarded to the innocent spouse.
The second major issue that such a review will reveal is whether a spouse is siphoning off money and secreting assets. The classic example is someone transferring $1,000 a month somewhere that the spouse doesn’t recognize. Most people are sophisticated enough not to do a wire transfer to their account in the Caymans. Usually, you see this as large, regular cash withdrawals that lack any reasonable explanation. The first financial disclosure is a “statement of net worth”, where each party discloses their assets, liabilities, income, and expenses. If a person’s credit cards, paper checks, and cash withdrawals are hundreds of dollars more than their declared expenses, that’s a red flag. Also, if a spouse’s credit cards demonstrate regular use, but the spouse is spending $2,000 per month in cash, the reviewer will start asking questions.
A payor’s expenses generally won’t affect how the Court calculates child support and maintenance (alimony), but sometimes, a spouse could argue that it properly does. For example, if a spouse’s employment requires them to pay certain business expenses that a regular W-2 employee would not normally cover, he or she would have to prove those expenses by disclosing records of their spending. The other spouse would have the right to argue against considering them, and if the parties can’t reach a settlement, the Court will have to decide after conducting a trial.
Does all this sound complicated? It certainly can be. There are many I’s to dot and T’s to cross. The assistance of an experienced divorce practitioner can make the difference between winning and losing. Here at Zimmet Law Group, P.C., all our divorce attorneys have been practicing law for over twenty years. Call us today or contact us online to learn more about our services, experience, and how we can assist you and your specific circumstances.
