Collaborative Divorce Following Financial Betrayal

I recently presented a workshop entitled “Collaborating in the Face of Financial Betrayal” at the International Academy of Collaborative Professionals 18th Annual Networking and Educational Forum, alongside my colleagues, Certified Divorce Financial Analyst, Ivy Menchel and Divorce Coach, Abby Rosmarin.

While this workshop was geared to the divorce professionals in the room, there are many lessons that anyone who has dealt with financial betrayal in his or her own marriage — and is contemplating divorce — should understand.

To start, we defined financial betrayal as the keeping of financial secrets in an intimate relationship. Financial secrets are different from other secrets because of the enormous ramifications that often result from them for many years to come.

Some examples of financial betrayal include:

  • not paying taxes;
  • the wasting of money on addictive behavior;
  • the incurring of large debts; and
  • liquidating assets, such as retirement accounts, without the consent or knowledge of your spouse.

There are many complicated legal, emotional, and financial issues that arise in the wake of financial betrayal. We offered the following advice to help resolve these matters in a collaborative way, and without the need for court intervention:

  • There are two sides to every situation. It’s easy to feel empathy for the spouse who was betrayed and easy to understand the feelings of sadness, anger, and fear following a financial betrayal and the end of a marriage. In a collaborative divorce, where we are committed to keeping our clients out of court, we need to also keep in mind that the person who is seen as the betrayer — who’s spending a lot of money, not paying debt, taking out loans, etc. — was likely feeling immense pressure during the marriage to keep the secret going. We often see that, like a gambler looking for that quixotic big win, the spouse who was keeping the financial secrets was hoping that everything will turn around without anyone finding out what was going on. As a result, the spouse who betrayed the other may feel great shame, guilt, sadness, and fear as well. The collaborative professionals need to recognize and manage all of these emotions while moving the couple toward a resolution that will allow them, as best as possible, to move forward.
  • Beware of willful blindness. In many cases, the betrayed spouse may have also been putting his or her head in the sand and pretending everything was fine. On more than one occasion I have heard something along the line of:
    • I knew my wife took a cut in pay, but we were still taking these great vacations. I assumed everything was fine.
    • He never told me to spend less, so I kept buying what I always bought.
    • I hadn’t seen a tax return in several years — I assumed I must have been signing them all along and just forgot each time.
    • Both spouses get sucked into different hemispheres of the same fantasy world.
  • If it’s hard on you, it’s twice as hard on the children. Changes in living arrangements are expected after any divorce, but the goal is usually to keep the children’s lifestyle stable and as close to normal as possible. A serious financial betrayal may not make that possible. These situations almost always result in greater disruption to the children’s lives because of the need to downsize homes, move to less expensive neighborhoods, change schools and camps, and have less access to whatever luxuries parents were able to provide during the marriage. The use of a child specialist in these collaborative divorces to make sure the children’s concerns and voices are heard can be very helpful.
  • Consider a postnuptial agreement. Even after a serious financial betrayal, couples may be committed to staying together and healing the issues in their marriage and financial situation. But the spouse who was betrayed does not want to be “burned” twice and may insist on some sort of protection. That is a great reason to use a postnuptial agreement, which allows the couple to stay married while writing their own set of rules for how the past or future financial betrayals will be handled should the marriage eventually end in divorce.

To learn more about how to deal with financial betrayal in your marriage and whether a divorce or postnuptial agreement may be the right choice for you, contact me.

Andrea Vacca

One Grand Central Place
60 East 42nd Street, Suite 1420
New York, NY 10165
avacca@vaccalaw.com