The Secret Cash Stash: When to Hide Your Money

It’s a topic we get a lot of questions about – should I put money aside for a rainy day divorce fund? How do I hide money from my spouse legally? Is that even legal?

There are many reasons why someone may be inclined to hide away money. Maybe you are in a happy marriage but this stash gives you peace of mind that you would have a cushion if things were to go downhill. Maybe you sense that divorce is on the horizon and you just want to be prepared when the time comes and you are ready to leave.

A friend of mine has been happily married for 20 years, but her mother still occasionally sends her money to put in her “leaving fund.” Her mother firmly believes that every woman should have a similar fund just in case. This mindset may sound a little antiquated as plenty of married women have careers these days, and many even are the “breadwinners,” but it still begs the question of whether it is wise to have a little secret stash.

Keep in mind we aren’t talking about hiding away some money so you can go buy a new pair of shoes without your spouse knowing. We aren’t talking about hiding away money so that you can check into a hotel if you get into a fight. We are talking about having enough funds saved to enable you to leave the marriage, or perhaps enough money to hire an attorney.

Every situation is different, and while keeping a secret cash stash may be appropriate or even necessary for one person, it may cause more problems than it is worth for another person. Make sure you consider the consequences before you start sneaking away any money.

Hiding Money From Your Spouse

Take an Active Role in the Finances

Before we get into the nitty-gritty of whether you should start hiding away money, one thing you can do to protect yourself is to take a more active role in your families’ finances. For many families, one spouse is in charge of all the “money-related” tasks, like balancing the checkbook, paying bills, and investing money. If you are the spouse who is not actively involved in the finances, take steps to become more involved.

If you are the joint owner of an account, you should be aware of it. Make sure you have access (online or otherwise) to any account that you are joint owner of. Also, ask your spouse where money is being invested and ask about retirement plans.  Be aware of how much your spouse earns (including commissions and bonuses) and if his employment allows him to participate in stock options or other business perks.

Being more involved in the finances will ensure that you are not left completely in the dark if you end up having to split assets due to divorce.

For those who chose to turn a blind eye about the family finances, you could really be at a severe disadvantage when divorce proceedings begin. Consider a scenario where one spouse assumes that the finances are under control, smartly invested and that the marital estate is worth a substantial amount of money. Flash forward to divorce proceedings and it is discovered that the opposite is true and that marital debts outweigh marital assets and the estate is on the verge of bankruptcy.

The bottom line is that it certainly can’t hurt to take a more active role in the family finances.

The Problem of “Spousal Starving”

A good example of someone who may need to consider having a secret account would be someone who has no source of income.

Take my friend’s mother, for example. Her mother got married when she was 20, and had three children by the time she was 25. She was a stay-at-home mother until her children left for college, and then she became a stay-at-home wife. She never had a career, or any source of income other than her husband’s paycheck.

If something happened and she needed to leave the marriage, or her husband left her, she would have no financial resources to allow her to survive. While things are different today, there are still plenty of women (and some men) who stay at home and don’t have access to any earned income other than their spouse’s income.

You may be thinking – well I can take money out of our joint checking account whenever I want to, right? Why do I need to secretly hide away money, if I needed money to leave I could just take it?

The problem is that your spouse could easily cut off your access at any time. If your spouse senses that you are trying to leave, he or she may simply close the bank account and leave you with no access to funds. In that case you would certainly be relieved if you had some money hidden away that could get you by.

This cleaning out the bank account and leaving your spouse with nothing is sometimes referred to as “spousal starving,” and happens more often than you might think. While reading this, you may even be thinking “my spouse would never do that to me,” but rest assured that emotions tend to trump reason when people sense the breakdown of a marriage. Don’t simply assume your spouse will be level-headed when faced with divorce.

What About Alimony?

If you have no earned income, then you probably qualify as a dependent spouse and would be entitled to post-separation support and alimony. So if your spouse will be required to provide you support, then why is this secret fund necessary?

Getting support takes time, regardless of how you end up handling your divorce.

If you are able to address alimony in a separation agreement, it will still take at least a month (probably longer) for your attorney and your spouse’s attorney to draw up the agreement and negotiate terms that you and your spouse will both agree to.

If you have to litigate an alimony claim, that too can take months. You may get scheduled for a hearing in two or three months, but you show up in court and the calendar is full and your case isn’t reached. Or your spouse intentionally moves for a continuance because he or she knows you are desperate to start receiving support.

So while you may be entitled to support, what do you do for all of those months that you have no access to money and no job? This is another reason why a rainy day divorce fund might not be such a bad idea.

Consider Emotional Ramifications

After reading about the reasons why it may be in your best interest to start putting away some money, remember that every situation is different. If your spouse catches on to your scheme, there could be serious consequences.

If you have a “just in case” fund and your spouse somehow finds out about it, they will undoubtedly be upset. If you are in a happy marriage and just have the money set aside for some peace of mind, your spouse may still see this as you not being happy in the marriage, or it may create trust issues.

Depending on your spouse’s nature and temper, discovering a secret like this can also unfortunately lead to domestic violence.

Even if your spouse never discovers this secret fund while you are married, it will be discovered once divorce proceedings begin. When you get divorced, all of the assets and debts acquired during your marriage are subject to division. Both parties will have to give full disclosure and exchange extensive financial information; everything from retirement accounts to frequent flier miles are subject to division. That being said, your secret divorce fund will have to be disclosed.

Discovering your secret account after divorce proceedings have begun can also trigger certain emotional responses in your spouse. They may become less willing to negotiate or unwilling to reach an agreement – their entire attitude towards the dissolution of the marriage may change entirely.

Make sure you are prepared to deal with the consequences, or have an alternate explanation for the secret account if you choose to have a rainy day divorce fund.

Keep a Paper Trail

From a legal standpoint, there is nothing wrong with having a secret fund even though you are married. The law certainly does not require that married couples keep joint accounts, or that a spouse gives full disclosure to the other spouse regarding finances – that is until you start divorce proceedings.

That being said, you will want to make sure that you document where the money in your secret stash came from.

If the money funding your rainy day divorce account is money that is earned during the marriage, by either you or your spouse, it will be considered marital property and that value will be included in your property division.

In the case of my friend who receives money from her mom to put in her secret stash, she would want to make sure she could show that the money was coming from her mom. This could be considered a gift to her and therefore separate property, not subject to distribution.

To be safe, just make sure you document where the funds are coming from that are funding your rainy day divorce fund.

Watch Out for Penalties

Finally, you will want to be smart about where the money comes from that you fund your secret stash with. Not only will you eventually have to disclose this once divorce proceedings begin, you always want to be sure you aren’t moving the funds from accounts that have withdrawal penalties. For instance, if you were to take money from a 401K and move it to your secret savings account, you may have to pay a hefty tax penalty. The same goes for other investment vehicles – be sure you are aware of any penalties you may incur by moving money from one account to another.

Should I? Or Should I Not?

After reading this article, you may still be wondering if having a rainy day divorce fund is something you should consider or not. The truth is that every situation is different.

Having a secret account can certainly have its pros – it is secret, you can control how the funds are spent, and you will have a safety net in the event of separation and divorce. But there are also cons to stashing away money; you should be prepared to deal with the emotional ramifications of your secret stash being discovered.

Only you can decide whether setting aside money in a rainy day divorce fund is a good idea in your situation. However, if you are in a position where you could be left with no funds and no income in the event of a marital breakdown, it is probably in your best interest to establish some sort of safety net.

Whether the safety net is a secret credit card, bank account, or simply the peace of mind to know that friends or family would be able to support you financially, it can’t hurt to have a contingency plan. You never know if your spouse will engage in the spousal starving techniques previously discussed and having a safety net can help combat that.

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