Today, I wanted to talk about an issue that comes up for a lot of couples in mediation, which is that one or both people don’t trust their spouse and they have a legitimate question as to whether or not they can be in a mediation process without trusting the other person. The answer is yes and no.
You certainly can be in a mediation process if you distrust your spouse, but you have to have certain structural protections in place that allow you to trust the information that you’re relying on when you are negotiating your settlement.
What do I mean by that? Well, it certainly does not make sense, and no one should ask you to, simply rely on whatever your spouse reveals about his or her finances, be that income, assets, or debts, to simply rely on that with absolutely no backup for it, and to base your entire settlement on one or both spouses’ representations of their own financial situation. That doesn’t really make sense but for in the very, very rare cases where people feel 100% trust in the other person and typically also are quite well-informed about the other person’s financial status. So they know what the person earns more or less, and there’s not a lot of uncertainty around that,. And they know what assets and debts they have.
But for couples where one or both people feel like, “I actually have really no idea about your income or your business or what assets you have or what accounts you keep. We’ve always kept our finances really separate,” and on top of that, whether it be because of infidelity or different acts of being dishonest about finances specifically in the relationship, that spouse is left feeling like, “Not only am I uninformed, but I definitely don’t trust whatever you represent to me about your situation.” So, for spouses in that situation, you can be in mediation, but you need a couple of procedural protections in place.
Essentially, you need to have verification of (typically financial) information that’s in question, of the financial information that you need from your spouse, to make decisions about your ultimate settlement.
You need either documentary verification of that, so statements from their bank account going back whatever time is relevant in your situation that you can look at and verify, “Okay, yes, this is the amount of money in this account. This is what was taken out of this account last year. This is what was deposited into the account. This is how much cash has come out of the account.” Whatever your questions are for really straightforward accounts, investment accounts, bank accounts, retirement accounts, they’re pretty good about providing documentary evidence of what has happened in that account, and you don’t have to rely on your spouse to recount or represent to you what’s happened in the account.
Then there are other types of assets or income situations where it’s a little bit more complicated, and there’s not exactly a statement or statements that you can rely on to verify what your spouse is representing to you. So in that circumstance, the structural protection you would need to put in place is to have some kind of independent, neutral expert come on board and tell you, “Yes, I have looked at your spouse’s business books and tax returns for the last three years or five years, and here’s what, in my expert opinion, I observed to be his or her realistic income from the business. Yes, I did see that a lot of personal expenses were run through the business, and I’ve looked through those, and I’ve excluded those, and I conclude that this is the right amount of income to use for your spouse when you’re talking about support,” for instance. Or, “I’ve looked through the accounts and the spending, and it doesn’t seem likely to me that there is money being siphoned off into some secret account because roughly your spending matches your income.” Or whatever is relevant in your specific case. Your questions or the issues may be complex enough that they’re not simply answered by sharing account statements.
I should have said credit card statements also. If you’re wanting to understand more about how marital monies were spent during certain parts of the marriage, credit card statements, and also bank account statements, can be very useful for that because you can track what the purchases were. You can ask questions about them, and you can come to understand whether those purchases feel like they were made on legitimate marital expenses or not, and then determine how to deal with those things.
The bottom line is you don’t need to trust your spouse, but you do need to trust the source of financial information that you are relying on in the process. Whether it be a documentary source, like statements, account statements, credit card statements, or whether the source be an independent expert who is weighing in on your situation, having examined whatever relevant documentation and interviewed whatever relevant people they needed to interview that what they conclude is the reality of your particular situation or of this particular financial asset or income source.
A couple of recommendations in addition to that, if you are the person who is in the position of feeling not trusting of your spouse and wanting to make sure that you have these structural protections in place to ensure that your mediation process or whatever process you’re in, if it’s a collaborative law process or just an out of court settlement negotiation, that it is a process that has some integrity.
So first of all, you want to put on the table, from the very outset, that this is an issue for you, that you don’t trust your spouse’s representations of his or her finances, and that for you to participate in a mediation process or any kind of out of court negotiation process, you’re going to need some kind of agreement and plan about how you will verify, to a degree you feel comfortable with, the financial data points that you’re relying on in negotiating the settlement in this case.
Going hand in hand with that has to be your spouse’s total willingness to cooperate in that kind of procedural setup. So if you don’t trust what your spouse is representing to you, and your spouse is completely unwilling to share documents for accounts and/or to have his or her business or income looked at more closely by an expert, I would say to you, mediation and any out of court process is really a no-go for you at that point. You need to proceed in court where there’s not an option. You are forced, both of you are forced, by the court to disclose documentation supporting the claims you’re making about your finances and also to open up your financial records and yourselves to evaluation by independent experts on whatever financial topics are relevant.
So, again, you need to state at the outset what is important to you to verify and really give a good, strong foundation to the financial data points that you’re relying on in the settlement negotiation. But then also, your spouse has to be absolutely willing to participate and cooperate with that.
Another suggestion that I think is important, in particular, if you’re the person who feels like they’re not able to trust what their spouse represents about their finances, is to be working with an attorney who is supporting you in the process. If you’re in a mediation process and don’t know whether you should be working with an attorney or not, where you have an issue of being able to trust the accuracy of what your spouse is representing about his or her finances, you should really be working with your own attorney outside the mediation process, or if you’re not in a mediation process, working with an attorney to help you identify, “Okay, what kind of verification do we need to trust these financial data points?”
Also, to help you understand what kind of verification is reasonable to ask for. So it’s not that you have a blank check if you feel untrusting of your spouse, that you are able to demand whatever kind of verification you want, that they be followed by a private investigator for three months straight. No. Probably not. Typically wouldn’t happen in court, and there’s really not a reason why it should happen out of court.
Running those things by an attorney, who is your advocate and there to support you, can give you a helpful reality check as to “Yes, asking for X number of years of statements is totally standard. That’s what would happen in court. But no, asking for 20 years of credit card statements, probably not going to happen in court. Not really reasonable in your particular situation, so I would let that one go.” That’s helpful advice to get from your attorney, even if it’s disappointing to you, because it’s going to save you time and money and strife in the negotiation process if you’re asking for something unreasonable, which your spouse is not likely to agree to.
Essentially, the goal of what you’re doing in asking for this verification is to try to approximate outside of court what would happen, the different kinds of verification you’d get, if you were in a litigated process. Everything that happens in litigation in terms of exchanging information and verification of the different financial claims you’re each making can be duplicated out of court by your agreement. You both have to agree to do it, but if you’re both willing, you can have all the same procedural protections in your mediation process, your collaborative law process, your settlement negotiation, as you would in litigation, but you just have them by mutual agreement rather than basically by law or by order of the court.
Another thing that is helpful to be aware of is that when you sign your ultimate settlement agreement, a contract between you. There’s a lot of language in that contract that has each person swearing effectively that they have accurately and completely disclosed all relevant financial information. It is, for that reason, good practice to go ahead and list out all of your assets so that you’re both going on the record and saying, “This is everything I have. I’ve told you everything and here’s the list of it,” so that if in the future, in the very unlikely scenario you came to discover that your spouse had not honestly or accurately disclosed financial information in the negotiation process, you will have the contract, first of all, saying that it was based on full, complete, accurate disclosure by both of you, but then second of all, actually reflecting what that disclosure has been, so that you can go back and say, “I discovered that you had this Swiss bank account because the statement came incorrectly to my home, and you never disclosed that Swiss bank account, and as reflected in our contract, I had no idea about it. And so now I have a legitimate claim that we need to have a separate discussion about what to do about this new account that you’ve disclosed.”
Of course, listen, if your spouse is hiding accounts, it’s pretty unlikely that you’re going to find them. That’s true whether you’re in court or outside of court. But it doesn’t mean that it’s not the right thing to do to take all the reasonable and responsible steps to verify what your spouse is claiming about his or her finances, so that you can, as best as you’re able, make your decisions in the process based on accurate financial information.
The final thing I did want to point out that you want to keep in mind, and if you’re working with an attorney, they’ll help you hopefully in making this assessment. You always want to be asking yourself if the amount of money that you are concerned your spouse is not accurately disclosing, if it is a financial benefit to you to spend the money on investigating whether your spouse has accurately disclosed his or her finances.
If you’re concerned that your spouse may have squirreled away $10,000 in cash, that’s not cool, but it’s also not in your best interest to pay a forensic accountant $30,000 to track every single expenditure of yours and your spouse’s over the last three years, and every single transaction and every single account you have, if you’re pretty confident that there’s no way that your spouse would have hidden more than a couple thousand dollars or $10,000. If what is in question is of less value than the cost that will fall to you to discover what’s in question, then you may want to consider just letting that item go.
Now, if you have no idea what might have been hidden or not disclosed, or you have some sense of it, and it’s a lot of money, then at least from a financial perspective, it’s well worth looking into it in depth. But that’s an assessment that’s very case-specific, and it really is a decision you want to be making thoughtfully, and hopefully with the input of an outside attorney who can guide you and say, “Yes, this process is roughly going to cost, bringing this forensic in is going to cost, $30,000.” And what kind of assets are we potentially talking about? If they’re not in excess of double that, because, by the way, if it’s a marital asset, you’re not likely to get 100% of it. So if you’re going to spend $30,000 on discovering a $40,000 marital asset, it still may not make a lot of sense for you. It’s a very case-specific consideration and decision to be making, hopefully with the support of your attorney.
Ultimately, the goal is to get you to a place ideally where you really feel confident that you have an accurate understanding of your and your spouse’s financial realities when you are negotiating your settlement. And if that’s not possible, for you to have at least thoughtfully weighed your options and decided, “You know what? I am not certain that I have all the information, but I do understand my options for getting that information, and I’m making the decision not to pursue them because of how onerous and costly those particular avenues are.” If that’s where you end up, it’s not ideal, but you’ve still made a thoughtful decision in the process about how certain you want to be of your finances and how much you want to spend to get there.
Finding the right balance is going to be different for every individual and every couple, but the importance is just that you understand that you have every right to have accurate financial information as part of this process, that your spouse be completely on board in working toward that goal, and that you then are making an assessment of what kind of investment in verifying financial information makes sense in your particular case.