Financial infidelity can have a very damaging effect on a relationship. The term refers to one spouse’s intentional misrepresentation of their financial circumstances to the other and possibly even to legal authorities like the family courts.
Hiding debt is a common form of financial infidelity. Under-reporting personal income and hiding a portion of each paycheck is another form of financial infidelity. Awareness of such issues has been on the rise in recent years, and many couples may end up considering divorce because of financial infidelity. For those divorcing later in life, the financial misconduct of one spouse can lead to particularly serious challenges in a divorce.
Financial infidelity can affect property division
One of the biggest concerns about financial infidelity is that it could unfairly prevent one spouse from claiming an appropriate share of the marital estate. Financial infidelity that involves hiding assets or income could mean that one spouse accepts an inappropriately low valuation of the marital estate or an unfair property division settlement because they don’t know what assets they have to share and how much those assets are really worth.
Other times, financial infidelity could put someone at risk of having responsibility for debts that they were not aware of and may not have benefited from in any meaningful way. One spouse may try to coerce the other into paying some of those secretive debts when they divorce.
Proof of the misconduct can help
When one spouse has financial documentation helping affirm their claims of the dissipation of marital resources or the misrepresentation of marital assets, they may be able to ask the courts to consider that financial misconduct when dividing their property. In some cases, judges will exclude certain debts from division or award one spouse more property as a penalty for the other’s financial misconduct. If someone does not discover financial infidelity until too late, it could put them at a real disadvantage in a gray divorce scenario where their quality of life during retirement will depend in no small part on what resources they secure in the property division settlement.
Recognizing that financial infidelity is a common complicating factor in gray divorces can help people take the right steps to protect themselves financially during a divorce.