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Financial Infidelity and Divorce: Some Ways to Protect Yourself

Trust can break down in a contentious divorce. Sometimes it happens slowly, over an extended period of time. In other cases, it can happen suddenly, when you realize that your spouse has been misleading you.

When misleading behavior concerns finances, it can be so egregious that it is known as financial infidelity. This doesn't only happen in high-asset divorces, but the stakes are usually higher there.

Spending money on a new relationship is the most obvious example of financial infidelity. But even smaller acts of withholding or twisting the truth about money or other marital property can qualify.

In other words, betrayal can take many forms - and when it takes financial form, you have to be prepared to do things like go find assets that your spouse or ex-spouse has hidden from you.

This process can involve forensic accounting and other investigative steps. You will want to scrutinize things like bank records, to determine whether your ex made purchases or withdrawals of cash that were not disclosed to you.

You should also look closely at your tax returns. If it was a joint return, and the IRS finds that all of the taxes due were not paid, the IRS may come after you for the tax debt. If your spouse took improper actions, you may be able to show that you were what the IRS calls an "innocent spouse." But this kind of dispute is one you should avoid if possible.

Another line of inquiry should be making sure that your spouse hasn't changed the beneficiaries on key insurance policies or retirement accounts without your knowledge. The designation of those beneficiaries should be handled through the divorce process, not as an under-the-table executive decision by your spouse.

Source: "Finding Your Ex's Hidden Assets," Huffington Post, Brendan Lyle, 7-12-12

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