5 Signs Your Spouse May Be Hiding Money From You

Unfortunately, in this day and age, the word “money” is more synonymous with marriage than the once more important synonyms such as allegiance or life partner. In addition, the termination of marriage is at an all-time high, with 75% of marriages currently ending in divorce.

That being said, although marriage rates have declined in recent years, there is no sign of the institution of marriage ending anytime soon. Therefore, every spouse should be an active financial participant in their marriage, both before the nuptials and throughout the marriage. This is especially true if the other spouse is the breadwinner, or what is known as the managing spouse.

Having knowledge of marriage finances is not only important during the marriage but imperative in the event of a divorce. Many non-earning spouses become ‘lazy’ during the marriage and do not inquire into the marriage finances. Instead, they rely on their spouse’s promises that they ‘will be taken care of.’ This is very poor advice and gives the spouse a false sense of security.

What many people do not understand is that, despite the fact that your husband or wife is the working spouse and handles investments, any and all money earned during the marriage is part of the community property (meaning jointly owned by both spouses), with each spouse having a one-half interest.

Spouses concealing money from each other is not only unethical and illegal, but it is also one of the most common occurrences in marriage. Below are five of the most common signs that your spouse may be hiding money from you, and what you can do to ensure that you receive your proper share of the community estate in the event of a divorce:

1. Your spouse does not answer, or is not candid, in answering your questions regarding the family finances.

Spouses owe each other what is known as a “fiduciary duty.” This duty obligates the spouse in control of the finances to allow the other spouse access to all finances related to the community. Additionally, all finances related to any property acquired by a spouse before the marriage, which may affect the community, must be made accessible. This includes access to all financial records related to: any businesses owned by either spouse or in which either spouse has an interest, investments, stocks, bonds, checking accounts, savings accounts, trading accounts, etc.

Therefore, your spouse is legally obligated to answer any questions you may have regarding the family finances and provide you with access to all information related to the family finances during the marriage.

If your spouse refuses to answer questions regarding the family finances, this should raise a red flag and is usually a sign that he or she is hiding something. Remember, even though your spouse may be the “working” or “earning” spouse, half of this earned money is yours, and you have a right to know where it is, how much there is, and how it is being handled—just as if you were receiving a paycheck yourself.

Additionally, having an interest in the family financial situation gives the non-earning spouse a sense of involvement and purpose in family planning and may even result in providing constructive guidance and assistance to the managing spouse.

2. Your spouse keeps financial accounts in his/her name.

This is a common method employed when spouses intend to keep their earnings separate. There is a common misconception among married people that by keeping financial accounts in their name alone, they can separate the assets of these accounts from their spouse.

This is not true. Without a specific written agreement signed by both parties to the contrary, all earnings—regardless of what account they may be held in—are community funds, and thus equally shared by both parties. Without a written and signed agreement by both parties, it does not matter if money earned during the marriage is deposited into an account in one spouse’s name; this money is still considered community property.

However, in the event of an impending divorce, many spouses will attempt to withdraw money from accounts and hide these funds to avoid splitting the funds with their spouse. This is why it is imperative that spouses play an active role in the finances of the marriage so they will have an idea of where money may be located in the event of a divorce.

3. Your spouse does not involve you in preparing annual tax returns.

The preparation of tax returns is the one time of year when every person is legally obligated to report all income to the IRS. This is also when business interests and financial accounts will be divulged and analyzed. In essence, the preparation of an individual’s and business’s tax returns provides a ‘snapshot’ of the financial situation of an individual and/or business.

It is also during tax preparation when some people may misrepresent their income. This is why it is important to be involved in the preparation of tax returns. The preparation period is when all financial information is disclosed and discussed (usually with an accountant).

In the event of a divorce, tax returns are a presumptively correct indicator of income for the purposes of spousal and child support, and the burden will be on you to prove otherwise should your spouse be underreporting income to the IRS.

There is no legitimate reason for your spouse to not involve you in the tax return preparation, and if they refuse to involve you, this is almost a sure sign they are hiding something.

4. Your spouse, despite your interest, does not involve you in the nature of his/her businesses.

Another common misconception among married couples is that if your spouse started their business before the marriage and was the only one responsible for the business’s earnings during the marriage, any money earned from the business is considered separate money.

This misconception is prevalent among non-earning spouses. Not only is this not true, but a successful business is often the greatest source of community assets. Regardless of when a business was started, all earnings by either spouse during the marriage are considered community property, and therefore either spouse owns such property jointly and is entitled to half of its value upon divorce. Furthermore, if the value of a business increased during the marriage, that increase becomes part of the community property (subject to certain specific rules).

Therefore, it is prudent that every spouse keep an active interest in any family business.

Anyone who denies their spouse an active interest in the family business is generally hiding financial aspects of the business that they want to keep secret. In the event of a divorce, it will be up to you, or your lawyer (who will be charging you an hourly rate), to analyze and value your spouse’s business. This can be a very time-consuming, costly endeavor, which can be greatly reduced through proper due diligence during the marriage.

5. Your spouse routinely uses cash for purchases.

Dealing with cash is by far the most common method used to hide income—not only from the IRS but from spouses, creditors, lien-holders, and anyone else with an interest in their assets. Cash flow is extremely difficult to trace and very easy to conceal. Furthermore, with the prevalence of credit cards, debit cards, ATM cards, interest-bearing savings accounts, and free checking accounts, there are very few legitimate reasons to use cash for anything other than routine, inexpensive purchases.

Although you may not know exactly where your spouse keeps all of the family money, as long as you have a good idea of how money is being spent and where it is being kept, you will play an integral role in the division of marital property, the determination of child support and spousal support, and your spouse’s contribution to your attorney fees.

Therefore, as you can see, every spouse, regardless of the status of their marriage, owes it to the well-being of themselves, their children, and their future to be thoroughly involved in the finances of the marriage, from the beginning.

Jeff Layfield, Attorney at Law
Los Angeles, CA
(818) 324-5123