How to Protect Your Financial Future During Separation

Mindy:
Hello listeners and welcome to the BiggerPockets Money Podcast, where we interview Tracy Conan and talk about divorce season.
Hello, hello, hello, my name is Mindy Jensen and with me as always is my fascinated by money co-host Scott Trench.

Scott:
Great to be here, Mindy. I have a forensic level of interest in financial planning. And today we get into financial crimes, making it even better.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else, to introduce you to every money story and every money situation, which can include divorce, because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business or learn about the very real challenges, cheating, lying, and fraud that happen in personal finance, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy:
Scott, it’s time for the part of our show called The Money Moment, which we share a money hack, tip, or trick to help you on your financial journey.
Today’s money moment is beware of ATM fees. Try and find an ATM that is for your bank to avoid fees. Most festival or bar ATMs have fees starting at $3.99 all the way up to $10 for one transaction, that seems ridiculous. If you’re going somewhere like a concert, a festival, or a cash only establishment, make sure to prepare ahead of time so you don’t have to pay needless fees.
Do you have a money tip for us? Email Money Moment at biggerpockets.com.
All right Scott, we’re talking with Tracy Coenen today, and she is coming back to talk to us about divorce season. Divorce season is from January to March, with another peak in August or September, where there is up to 33% increase in divorce filings. 33% seems like an awfully large spike in filings just for that short period of time. And divorce is an unfortunate part of life, but we want our listeners to be prepared in case this scenario happens to them or someone that they love.

Scott:
Yeah. And I think you’ll find Tracy to be an incredible source of knowledge on this topic. So with that, should we bring her in?

Mindy:
Tracy Coenen is a forensic accountant and fraud investigator. She’s also the author of Find Me the Money, and was on episode 439 of the BiggerPockets Money podcast.
Tracy, welcome back to the show. I’m so excited to talk to you today.

Tracy Coenen:
I am stoked to be back for round two of talking about divorce.

Mindy:
Yes. So if our audience didn’t hear your first episode with us, and they should go listen to episode 439 because it was an awesome episode, can you share with us who you are and how you became a forensic accountant?

Tracy Coenen:
Absolutely. My job is to do fraud investigations. Some of that’s on the corporate side where I’m investigating executives who are hiding money or doing other sorts of money shenanigans, and some of it’s on the personal side where I’m doing things like divorce. And my divorce work is mostly for people who are higher net worth and have complicated money situations. But I created the Divorce Money guide to help the average people going through divorce dig into those numbers themselves. Because I always say, in the average divorce it’s not all that complicated when someone’s hiding money.
I got into this because I was a criminology major who wanted to become a prison warden. And in the process of studying to become a prison warden, I took a class called Financial Crime Investigation, and that was life-changing. So here I am.

Scott:
Awesome.
In your first episode, your first appearance on the Money Show, we spoke about financial infidelity and what that is, and today we’re covering divorce season. Can you tell us what divorce season is?

Tracy Coenen:
Well, people like to talk about certain times of the year when divorce filings are much higher than other times of the year. And the most typical divorce seasons that we talk about happen in August and in January. January being the primary one. And the deal is that when families are considering divorce, typically mom and dad want to get through that end of the year holiday season, whatever holidays they celebrate, they want to give the kids the last holiday season together. Or sometimes they’re thinking maybe let’s try and tough it out for one more holiday and see if we can’t fix things, let’s maybe do one more family vacation. And when that doesn’t work or when they get through the holidays as planned, January is the time when people are filing for divorce.

Mindy:
What are some of the most common reasons people choose to get divorced?

Tracy Coenen:
Well, of course there’s stressors that push people towards divorce. Of course there can be a fundamental incompatibility. But if you want to talk about the stressors in a marriage, it is typically issues surrounding the kids or issues surrounding money. Those tend to be the things, and I think money even more so is the straw that broke the camel’s back. There’s a lot of problems that we can have and can work through, but when the money starts to fall apart for many people that’s something that they just don’t seem to recover from at some point.

Scott:
Diving a little deeper on money as a cause, what are the primary subcategories of money problems, if you will, that are contributing to, is it a difference in values on spending? Is it, “Hey, our lifestyle is being forced to reduce because of external pressures.” What do you typically see?

Tracy Coenen:
You pretty much hit it, Scott. I think there’s two major ones. One being that there ends up being a fundamental incompatibility with the money. And I think that a lot of people know about this incompatibility before they go into marriage. They say, “Well, he’s not as good with money as I am, but I think it’s going to be okay. I’ll keep an eye on the money and everything will be fine.” And then they get into the marriage and see that their spouse is spending recklessly, not letting them be responsible for the money, things like that. And that incompatibility can really be a stressor.
And the other one, as you mentioned, is some external source. It might be a job loss, a really expensive catastrophe in the family, be that some medical bills or a home fire that isn’t covered by insurance or something like that. Those really expensive things can certainly be one of those stressors that can break the camel’s back.

Mindy:
Without giving names or sharing explicit detail, well identifying details, can you give us any examples of some of the divorces you’ve worked on that were predicated by money issues and some things that you have found?

Tracy Coenen:
The cases that I’ve worked on where the money issues were really at the forefront of the divorce typically have involved affairs. That’s one of the things that I didn’t mention in terms of marriages breaking down of course. Affairs and money issues are really closely tied. One, because there is a fundamental lack of integrity there with the affair, and that often spills over into lying about money as well.
But also affairs are expensive, and the money has to come from somewhere. And so those two things are intertwined so heavily. So I’ve worked on countless divorces involving affairs, and my work in those is to really figure out how much has been spent on that affair partner. Is there a secret account that’s been open somewhere that’s been used to fund this affair? Is there that secret credit card? Might there be some secret real estate somewhere?
I often talk about one of the cases where the wife didn’t even know that there was an affair, she just thought they were getting divorced because they were incompatible. She didn’t want the marriage to end, but that’s just how it was going to be. But she was concerned about some money issues, and I was brought in to look into them. And it was a payment to a utility company that ultimately ended up uncovering the secret townhouse that he owned and that his girlfriend lived in. So it became an infidelity issue where that wasn’t initially the concern.

Scott:
Would you say that infidelity is a primary problem in divorces and the money issues that are related to them for high net worth divorces?

Tracy Coenen:
Ooh, that’s a really great question. I’m not sure that it happens any more often than in the general population. It’s disappointing to me how often I see these affairs, but I don’t think for wealthy people it’s necessarily more prevalent than it is for average people.

Scott:
So your job is a forensic accountant and I’m assuming some people are exceptionally sneaky with how they’ve handled certain of these things. So if you are someone listening to this and you have suspicions or whatever around this, how do you go about validating them? Do you even have a chance in some cases or how do you go about pursuing your suspicion that this might be happening in your marriage? If you feel like your spouse is not telling the truth.

Tracy Coenen:
If someone is wealthy, they have all sorts of sneaky ways that they can hide money and they can do things with shell companies and multiple accounts and potentially overseas accounts and they have a lot of creative things that they can do and it can get really complicated because I’ve seen cases where they bounce money from account to account to account and they do this on purpose to try to confuse things.
When you talk about average people getting divorced, I say the 90 to 95% of us normal people getting divorced who aren’t wealthy, there are some pretty typical ways that they hide money and that’s why when I created the divorce money guide, I said, “You can find the money that’s been hidden because I can show you exactly where to look even if you’re not good with numbers.”
So for example, super easy, how do you find a secret bank account? Where would you start to look? People think there’s no way I could find that. Well, guess what? Most of the times if your spouse is opening a secret bank account, they’ve got to get money into that account somehow. Most times they’re going to just transfer money straight from your joint account to that secret account because they think you are not looking at the bank statements and you’ll never know. It’s that simple in many of the cases, believe it or not.

Mindy:
I think the people who are having an affair, maybe In the beginning they’re like, “Oh, I’m going to get caught. I have to be super sneaky.” But after a while, especially if it’s been going on for a while, they’re like, “Oh, she’s not catching on, he’s not catching on. I don’t have to be so secretive. I don’t have to be so… Trying to cover my tracks.” But like you said, you found that one utility bill, people who are cheating aren’t thinking clearly.

Tracy Coenen:
Well, this guy with the utility bill opened a bank account at the same bank that he and his wife had their joint checking account at and he simply made a mistake. He went to go pay that utility bill and paid it from their joint account instead of from his secret account and that’s how we uncovered it. But they’ll do things like use a lot of cash for the affairs, so start going to the ATM a lot or withdrawing cash from the bank because they think, “Well, if it’s cash, you won’t know what I spent on,” true I won’t know what my spouse spent the money on if it’s cash. But what I will see is, “Oh my goodness, my spouse has gone to the ATM three times a week every week for the last year,” that’s a problem. So yes, they took a step to cover up what they were doing, but they didn’t take all the steps.

Mindy:
Let’s go back to Divorce Season. It is coming up in January, the big one. When do people start planning for a divorce? How far in advance would you say?

Tracy Coenen:
Well, when kids are going back to school in the fall I think is when things get real for people. So I mentioned that divorces are a little bit higher in that August time frame when family vacations are done. If the divorce filing doesn’t happen then, I think there’s the serious discussions that are happening in that August, September, October time frame and we’re making a plan saying, “Okay, we can stick it out for another few months through the end of the year.” So that’s a pretty typical timeframe for planning.

Scott:
How much greater of a magnitude of divorces are happening in January and August or filings than other months? Is this a blip or is it a huge spike and it’s a very disproportionate skew towards those months.

Tracy Coenen:
It’s a noticeable increase but not a huge, huge spike. I can’t give you the exact stats, but it is certainly a noticeable increase.

Mindy:
If someone is planning for a divorce or thinking about a divorce, what financial moves should they be making or should they be looking for their partner to be making that indicate that they’re planning this?

Tracy Coenen:
Right. There’s the two different sides of that planning. There’s the one where if you’re my client, I’m saying, “You need to plan and protect yourself and do certain things.” And then there’s the what if your spouse is planning and doing something shady? So let’s talk about it first from the standpoint of you are my client and I want to help you be prepared.
I always tell people to start gathering important documents like passports, birth certificates, marriage certificates, things like that, the facts and figures about yourself, but then also start gathering account statements. I want you to start getting those account statements while you still have access to the accounts while your name is still on them. Because oftentimes when a divorce is filed, someone’s name gets taken off an account, someone gets locked out of an account and it’s not as easy to get information.
So on the information side, that’s what I want you to do. On the money side, I always tell people, “I want you to have access to money that is protected in an account that’s only in your name. So your spouse who is soon to be your ex-spouse, can’t shut that account, cannot take that money out of the account.”
One of the really unfortunate things that I see in divorces is a spouse who is a stay-at-home parent who has no source of income because they haven’t been working, they’ve been raising the kids and all of a sudden divorce is filed and the bank account is drained, the one that they relied on, that joint account or their name is taken off. And so having an account in your own name with money that is then secure is really important.

Mindy:
And on the flip side, what are some things that your clients should be looking for that would indicate that their spouse is considering a divorce?

Tracy Coenen:
The other side is doing it, I like to call it divorce financial planning, and I don’t mean that in a good way. I mean it in a sneaky way of course. Look for them starting to make some money moves that don’t make sense. So if you’re keeping an eye on your bank account and your credit cards, do you see larger amounts of money moving in a way that doesn’t make sense, maybe being transferred out of an account? Sometimes I see things where they’re asking you to sign things, potentially not even letting you read them or coercing you to sign things.
It might be related to the house or to a loan or to wills and things like that that make me really uncomfortable. And then I would also look at them potentially playing some games with the taxes, maybe not getting the tax returns filed, maybe pushing to file them really quick without letting you see them. I always say anything out of the ordinary to have to do with the money that gives you that little feeling in the pit of your stomach that just this is unusual or doesn’t seem like it always was or doesn’t seem quite right. That’s what I would be concerned about.

Mindy:
Yeah, I would say don’t ignore that niggling feeling in the pit of your stomach that is saying, “I think something’s wrong.”

Tracy Coenen:
I think it’s really important to listen to our intuition and when you’re in a marriage where there is conflict and you are heading towards divorce, it’s really easy for your spouse to say, “You’re being paranoid, you don’t know what you’re talking about, you’re looking for problems,” and they try to talk you out of your intuition and I’d like for people to actually lean into their intuition if something doesn’t seem right, I would rather have you assume that there’s this divorce financial planning going on so that you can take steps to help yourself.

Scott:
I understand that there are premarital agreements, postmarital agreements, state law that determine the financial outcomes of marriages. So when folks are doing this divorce financial planning, are they really getting anywhere or is someone like you going to come in and say, “Nope, this is how it’s going to work out at the end of the day,” what percentage of the time are people trying to get away with this sneaky stuff and what percentage of the time do you think people are getting away or are actually succeeding in getting away with it? In some degree.

Tracy Coenen:
People are getting away with it and the problem is that we don’t have good stats because we don’t know for sure when they’ve been getting away with it, but they get away with it and it’s worth it for them to try because even if they don’t get away with it, at least they tried. So I’m working on a divorce case right now where my client found notes that her husband made about how he was going to move money to try to deprive her of some of it and he laid out on his notes his best case and worst case scenario of how he was going to come out of this divorce.
He’s trying to move this stuff around and the truth is if we find everything that he moved, he’s probably not going to get penalized at all for it. He’s still only going to have to split it with her, so it’s worth it to him to try to hide it and hope she doesn’t find it because he isn’t going to get penalized. That is the unfortunate part of this all.

Scott:
What percentage of the time, and this is going to be a skewed statistic of course, but what percentage of the time that you are hired are you finding these types of moves in a divorce setting?

Tracy Coenen:
Almost always because by the time someone wants to make that investment to hire someone like me, we’re talking 10, 15, $20,000 to get me involved, they’re pretty sure that something bad has happened. They probably have evidence of one or two things that have happened, maybe some evidence of some payments that were improper or some transfers that were improper and so the cases that I get involved in almost always have something like this going on. Now you asked earlier about in what percentage of cases do you think people are actually hiding money and my best sense of that is at least 25% of the time, probably about 50% of the time in divorces.

Mindy:
How long does a divorce take? If you have to step in and you start looking for all of this and unfortunately find some of this stuff, I’m assuming that just extends the timeline for a long time.

Tracy Coenen:
Yeah, the cases I work on probably are taking two to three years to get resolved. Normal divorce cases, if you agree on most things, you can probably have your divorce done in something like three to six months. And believe it or not, there are divorces that are very amicable in that way where, “Hey, we just decided we no longer belong together as a married couple, but we agree you get this, I get that this is what’s fair,” and they can get it done pretty quickly. If you are arguing about things, I think six months to a year is probably more typical and if you’re going at it like cats and dogs, probably a year to three years would be pretty typical for how long it might take to get divorced.

Scott:
Let’s break down costs in each of those scenarios and the other softer costs like the fact that probably assets are locked up, they can’t be sold or repositioned or reinvested or anything like that. What’s the cost of an average amicable divorce?

Tracy Coenen:
So one of those divorces where we’re agreeing on everything could cost you almost nothing up to maybe two or $3,000. Let’s say if you have… You might want to hire an attorney to draft up the agreement. We agree on everything, but we want that legal document drafted by an attorney or if you use one of the online companies that does do it yourself divorce, you can probably do it for a couple two or $3,000 or maybe even less.
If you’re getting to where it is one of those what we call contested divorces where we are arguing about things, we might have to go in front of a judge, something like that. They say the typical cost is 10 to $15,000 per person, so you can plan on your divorce costing you 20 to $30,000 if we are going to go and really fight it out.
So there’s certainly incentive for people to come to agreements on their own. I’m a huge fan of mediation. You can each have your own lawyers, but then you hire a mediator who is in the middle and is talking with both sides to try to get you to come to agreements on something and do that give and take, that can save you a lot of money.

Scott:
And what happens to assets like the house or rental property or a business or whatever in the interim, if there’s a back and forth that could last up to three years.

Tracy Coenen:
It gets really complicated sometimes because typically one person will stay in the family house and then the question is, who makes the mortgage payment? Who pays the utilities? This is especially complicated if you have a stay-at-home parent who stays in that house and doesn’t have a source of income of their own, the breadwinner of the family has moved out and says, “I’m not going to pay rent on my apartment and make the house payment. We can’t afford to do both of those things,” and yet both the rent and the house payment need to be made so it can get complicated.
Ultimately, we’re going to have to figure out something that works. In this day and age when it’s hard to refinance loans, when interest rates are so high and it’s becoming impossible for some people to refinance their loans. We are seeing people who are getting divorced, still living in the same house together and deciding that one person lives upstairs, one person lives downstairs and it’s horrible. It’s horrible for them. It’s horrible for the kids because it’s hard to get along, but sometimes financially that’s the best option.

Scott:
Actually, I don’t even know how to react to that. That sounds terrible.

Tracy Coenen:
I know that’s stunning. For people who are listening, I wish they could see both of your faces, because it’s something that a lot of people don’t think about that that can become a reality when you’re in divorce. And you mentioned businesses and rental properties and things like that. All of these assets, when it’s time for divorce, we have to come to a decision. Is one of us keeping it and then we’re probably buying the other one out or are we going to sell that asset and then split the proceeds from it?

Scott:
I have another question here about how assets are distributed going through a divorce and if there are any broad rules or state law that are fairly common across the country around what’s your property, what’s marital property, how is that marital property split, how does alimony get paid, all those kinds of things? Can you give us a framework for how that’s often handled or pick one state and say it’s handled there if it’s truly completely?

Tracy Coenen:
It is different state by state and there are little picky details from state to state that can really impact how that’s going to turn out. And so sometimes people when they’re in online divorce support groups or things like that, they’ll ask questions about asset division, about alimony and the response they get back is a little bit frustrating because it’s, “Ask your attorney.” And the reason for that is really because it can vary so much by state.
We have community property states where the general rule is everything is owned by us equally. That’s a handful of state. The vast majority of states are equitable distribution states where they look at everything and say, “Yes, it’s marital property, but it’s not necessarily 50, 50. It’s going to be divided in a way that is fair.” Now when I as a forensic accountant am talking about the assets and the money and divorce, I do start with a presumption that we’re looking at dividing things 50, 50, but then we move that needle one way or the other depending on the circumstances of your case.
Here’s a great example. A man and a woman are married. The woman has been a stay-at-home mom for the last 15 years, doesn’t have a source of income of her own, they have a house with equity. We’re going to start with talking about are we splitting that equity 50, 50? That would seem fair. We’ve been married for a long time, we acquired this house together, we own it together, let’s split the value of it.
But if she goes back to work having been out of the workforce so long, her earnings will probably never catch up to where her husband is earning. She’s behind the eight-ball, with her career, with her peers, with regaining some skills she may have lost, she may have gotten behind in the technology. In that case, we might be saying, “Hey, she ought to get a larger share of the equity to make up for the fact that she’ll never be able to earn as much as him and she’ll probably never be able to save as much for retirement as he can.” So that’s how I like to look at it.

Mindy:
And is that something that you make recommendations for as part of your forensic accounting practice is that you say, “Okay, well here’s their financial situation, but really here’s how they should divide it,” or is that something that a mediator would suggest?

Tracy Coenen:
Well, when I go into cases, my role is primarily to figure out where the money went. To trace that money and say, “This money was here and now it’s here and it went through this series of transactions to get there and therefore this money has been spent on an affair or I’ve identified this other account that has $50,000 in it,” all of those kinds of things. And so that’s my role with the court is to be an expert on the facts about the money. But behind the scenes you touched on one of my favorite parts of cases, which is working with my client on strategy.
So I’ll say, “If I were you, I would be going for a larger share of the house and here is the argument that we could use.” And so I’ll work with the attorney on how we would present an argument like that. What numbers are the most important and one of the important things to remember is that judges typically aren’t numbers experts, and so we want to make an argument that is really easy to understand.

Mindy:
Is there a threshold or a minimum that you think your spouse is hiding that triggers a call to a forensic accountant? When do I need to call a forensic accountant in a divorce?

Tracy Coenen:
I don’t know that there’s necessarily a threshold because even if you thought $10,000 was missing, it might still be worth the phone call to get some direction on where you’re going, but I always like to say, “It’s going to cost you at least $10,000 to hire a forensic accountant. So you probably ought to have at least 50 to a $100,000 that is potentially at stake in the case because by the time you pay the forensic accountant, by the time you pay your attorney to argue about whatever is found, you could end up spending more than you could ever possibly recover.”
So I like thinking about 50 to a $100,000 of potentially missing money in order to get an expert involved. But if you don’t know where you are on that yet, because people are saying, “Well gosh, if I knew how much money was missing, I wouldn’t need a forensic accountant now would I?” The idea is that I want you to try and do some legwork for yourself to try to get your arms around what could possibly be missing.
And that might involve looking at what we’ve been making every year and comparing that to what went into our bank account and then what went out of the bank account and seeing does it make sense? Does what’s in our account today make sense? Gosh, I thought we had a lot more money. Let’s try to ask some questions surrounding that to see if we can get some better idea of how much might be missing.

Mindy:
Okay, so I don’t even want to say, “Let’s say I’m going through a divorce,” but let’s say I’m going through a divorce, I find what appears to be very damning evidence that my spouse is hiding large sums of money, I hire you. You find large sums of money that he has tried to hide. Can I ask the court to make him pay your fee because if he hadn’t hidden it then I wouldn’t have needed you in the first place. Can you ask for accounted costs or costs from your-

Scott:
And should I hire you before or after filing for divorce in that situation?

Tracy Coenen:
Well, we’ll do Scott’s question first. You can hire me before or after filing for divorce, it doesn’t matter. I always say, “The sooner I get involved, the better off you are because the longer we wait, the less you get. The longer we wait, the more chance your spouse has to hide more money that we can never find.” So I do like starting earlier rather than later.
So back to Mindy’s question, can you ask for costs? Yes you can. We have done this in a number of cases where we’ve said, “It’s his shenanigans that were the reason why I had to be hired. So judge, please order him to pay my fees.” I will say there is less success on that argument than I would like to see. Judges… Yeah, judges like to say, “You know what? You guys got divorced, you were fighting over stuff. You each pay your own costs.” A lot of times that’s how it works out. The cases where they are more likely to force someone to pay the costs of the other would be a case where one party doesn’t have a source of income but the other one does.

Mindy:
That just seems like wrong. I am so offended for all the people who have asked for costs and not gotten them when it was the ex-spouses shenanigans that necessitated your hiring in the first place. I mean, that just seems wrong.

Tracy Coenen:
I’ll insult you more. In order to ask for those costs, you have to pay your attorney to draft and file a motion and probably go in front of the court and argue that motion to ask for the cost. So it’s going to cost you money to ask to have the other side pay some of your costs.

Scott:
Mindy and I have talked about the marriage and money many times on the BiggerPockets Money podcast and we have consistently reinforced get a prenup. If you don’t get a prenup, you already have a prenup. It’s just the laws of your state that are in there. Have you found prenuptial agreements or postnuptial agreements to be beneficial to both parties in the cases that you’ve worked on? And would you echo the advice?

Tracy Coenen:
They are super beneficial. What I have seen with older prenups is that they tend to protect one of the parties, typically the person who is moneyed, who has the source of income or maybe who comes into the marriage with some wealth. What I like though in this modern day is really thinking about how the prenup can protect both people. Someone who makes less money or who is planning on quitting work to become a stay-at-home parent might say, “Well, I don’t need a prenup because I don’t have money that I’m protecting,” so not true.
What you are protecting is, “Hey, I’m going to be giving up my career. Let’s outline if I give up my career and I’m out of the workforce and then we do end up divorcing how am I protected financially and what will I receive from our marital estate in consideration of the fact that I put my own career on hold and things like that.” So I am with you Scott and Mindy. Prenups are the most wonderful thing in the entire world because they are your chance to say, “This is how we want our divorce to happen,” versus how some lawmakers want our divorce to happen.

Mindy:
Yeah. Episode 301 of the BiggerPockets Money podcast we interviewed Aaron Thomas who is a prenup attorney. He helps you draft your prenup. He came on the show and I’ve been married for 21 years, almost 22 years, and my husband came to me and said before we got married, and he’s like, “Hey, do you want to talk about a prenup?” And I said, “If you bring that up again, we’re not getting married at all.” So he never brought it up again and we didn’t really have anything to protect at the time, and that worked at the time.
But now our circumstances are very different. And Aaron’s episode changed my thinking on prenups. He was able to explain how it isn’t just a plan for our divorce, it’s actually a plan for how you want your marriage to run and you can literally put anything in your prenup. So he’s got all these ideas and suggestions and examples of things that people have put into his prenup. If you are getting married or thinking about getting married, listen to episode 301 because it is a really great episode on the concept of the prenup.

Tracy Coenen:
Well, it’s a contract for how the money is going to work between us during and after the marriage. And the cool thing is a prenup is not forever unless you want it to be. You sign that prenup and it continues. It’s a contract, it’s in enforce. But if you are married, let’s say four years into the marriage, some things have changed with your circumstances and you think that what you’ve got in that prenup doesn’t apply to you anymore, doesn’t really work. You can do a postnup, the same kind of contract, it just is post after you got married. And you can say in that postnup that, “Our prenup that we signed is now null and void and we have this new contract that’s going to dictate things.”

Scott:
One thing you pointed out earlier is you got to be thinking about protecting both parties in these. And often when there’s a prenup involved, it’s probably is because either one or maybe both, but likely one party has a lot of money and the other may not in some of those situations. And so I think you’d probably agree with this, but both sides need to have representation that they trust going into that prenup that is separate. It’s not one counsel advising both of you, yeah.

Tracy Coenen:
I don’t know if any place that a prenup is valid if you didn’t have your own attorneys. I think every state requires that you have your own attorney representing you for that prenup.

Scott:
Okay. I have one final question here. Can you share the craziest or wildest financial mystery that you’ve unraveled or crazy case that you’ve worked on and the circumstances of it, perhaps a lesson that comes out of that?

Tracy Coenen:
Well, I’ve got two really interesting cases. One was a billionaire that I worked on for his divorce. I was representing his side and his wife wanted a million dollars a month of child support. They had a prenup under the prenup she was going to be fabulously wealthy by any stretch of the imagination. She wanted more. She wanted a million dollars a month of child support. And so that one was crazy because I went through all of their spending for the five years prior to the divorce filing.
I looked at everything they spent, categorized it all, and I was in a position what I was trying to do was figure out what does the lifestyle of the children cost? And so it got really interesting because you’re looking at, okay, so give me a list of all of the private jet flights that the kids were on, and then how much of the cost of each of those flights should we allocate to the kids because they are on there with mom and dad? And so some really interesting concepts there. So that was one that, not crazy, but just interesting to see how does a billionaire live?

Scott:
And we ended up with only $500,000 a month?

Tracy Coenen:
It was not $500,000 a month. It was not. And the terrible thing is, I’m not allowed to say what the number was because of confidentiality reasons.

Mindy:
A million dollars a month I could probably squeeze by on that.

Tracy Coenen:
And it was great, and I can talk about this part of it because it was made public in the press because my client was a very private individual and his wife knew that. And so part of the way she tried to get leverage over him in the divorce was by leaking things to the media that were private about him and about their divorce because she thought that he would settle the divorce in order to stop that from happening. But she needed a million dollars a month because she needed a certain allocation money for a wardrobe because you certainly couldn’t go to PTA meeting in the same outfit you wore to another school event a month prior. You must always have a new outfit.

Scott:
We talk a lot about the four levers of finance here at BiggerPockets with you can spend less, earn more invest or create, but I think we’ve just learned about a Fifth Avenue here to passive income.

Mindy:
Marry and divorce a billionaire.

Tracy Coenen:
Hey, it might be fun to try.

Scott:
What was the other story you were going to share with us?

Tracy Coenen:
The other story was an interesting one where my client, the wife, was bringing me into the case to investigate the money. She didn’t necessarily know if her husband was doing anything inappropriate, except she did know that after they separated, he got a young, beautiful, former model girlfriend that he seemed to be spending a lot of money on.
And the way that it worked in their case under the state laws that they were under, any money that he was spending while they were separated and before they were divorced was marital money. So it was part hers and she was worried that he was spending really large amounts of money on this girlfriend. So I was going through the finances and there was a credit card that was primarily used and it really seemed like there were a lot of expenses on this credit card for the girlfriend.
He denied that the girlfriend had a card in her name. The credit card company said, “No, the girlfriend doesn’t have… There’s no one else’s name on this account, no authorized user or anything like that.” And I said, “I’m pretty certain that she’s going shopping with his credit card, but I don’t know how to prove it.”
Until we found the Instagram account where she would go and take selfies when she was shopping at high-end stores, selfies when she was at a fancy restaurant the same day that she was shopping, pictures of herself with her fancy meals and her Hermes bags and all the things. And so I started cross-referencing Instagram posts with credit card charges. And when all of a said and done, $400,000 was spent on this girlfriend.

Scott:
Well, I hope this guy paid not only for all of those things, but also for your fees in this particular situation. Was that the case?

Tracy Coenen:
I don’t know how that one worked out on the fees. They had a settlement. And it’s interesting because I am not always privy to exactly what the settlement ends up being. Sometimes they consider it confidential and they won’t even tell their expert what they settled for. So those are fun cases.

Scott:
But if you had to speculate in that case, this guy would?

Tracy Coenen:
In that case, I think that she ended up getting what she was entitled to. Let’s say that

Scott:
Coming into to today’s show, I would’ve thought, “Hey, of course we know money is a major cause of divorce in this country,” but what I think has been a big reframing of it in my mind from this conversation is that money problems are a symptom of infidelity in at least a lot of the cases that you’re citing that you work on. What do you think? Are the money issues a symptom of an infidelity problem in more cases than not? Or are they the root cause of the arguments that ultimately lead to divorce In many cases?

Tracy Coenen:
I think they can really be both. And what’s interesting when you’re talking about being a symptom of infidelity, they’re also a symptom of other things. So how your spouse treats you in regard to money is often how they treat you in regard to a lot of other things in life. I will see sometimes a spouse really financially abusing their partner, and it probably also goes hand in hand with disrespect in general in the marriage and things like that. So is it a symptom of other problems? Yes. Can it be the problem itself? Yes. So complicated. So many possibilities here.

Scott:
Okay, now I got to ask one more follow up. What is financially abusing a spouse look like? What does that mean?

Tracy Coenen:
It’s controlling your spouse with money, and it might be lying to them about money. It might be restricting their spending or their access to money. It might be hiding money from them being shady with the money in a way that is intended to deprive your spouse of the ability to have money, have access to money, et cetera.

Scott:
Well, this has been really, really fascinating. Tough subject. Thank you so much for joining us today to lend your expertise and your deep experience in dealing with these types of forensic accounting challenges that come along with a lot of divorces here. Really appreciate it. Learned a lot from yet, and hope to talk to you again soon, Tracy.

Tracy Coenen:
Well, thank you so much for having me. I know divorce is not a fun topic, but I hope that by talking about it more, we can remove some shame from it, especially shame surrounding the money and just get people more informed so that they can get a fair outcome in their divorces.

Scott:
Awesome.

Mindy:
Absolutely. Tracy, if people were looking to find you online, where would they look?

Tracy Coenen:
They can look for my website fraudcoach.com, because I am your fraud coach during your divorce, and I have a page just for your listeners. They can go to fraudcoach.com/pockets and they’ll find a number of the things that we talked about today on that page.

Mindy:
Well, thank you so much for setting that up for our listeners, I appreciate that Tracy. And I appreciate your time today. It’s always good to talk to you.

Tracy Coenen:
It’s always good to talk to you. Thanks for having me, Scott and Mindy.

Mindy:
Thank you, Tracy. We’ll talk to you soon.
All right, Scott. Holy cow. Those cases Tracy shared with us are wild. What did you think of the show?

Scott:
I think Tracy is just absolutely phenomenal what she does, what an obvious subject matter expert, probably no doubt listening to her that she’s among the best in the world at what she does and what a tough line of work. We also talked after the show for a moment about some of the other stuff that she does, and she has a lot of experience in financial crimes cases as well in the criminal space.
And so we’d love to pose a question to folks listening. If you’re interested, leave us a note on the YouTube channel in the comments or in our Facebook group at facebook.com/groups/bpmoney about whether you’d like us to explore financial crimes in a little bit more detail and the situations that investors or fraudsters have gotten themselves into. And maybe we can invite Tracy to come back and speculate on them or even provide insight on an anonymized basis, of course, without breaking confidentiality on cases she’s worked on.

Mindy:
Yeah, I think that would be fascinating to hear from not only just what she has found, but that’ll give you insight into what to look out for when you are dealing with investments and something pops up and you’re like, “Hmm, that doesn’t sound right.” Listening to what Tracy has to say about things she has found in criminal cases or things that she knows about in criminal cases, I think would be really helpful. I love information and data and you can never have too much of it.

Scott:
Yeah. Working title for this miniseries would be bigger fraud. All right, Mindy, should we get out of here?

Mindy:
We should. That wraps up this episode of the BiggerPockets Money Podcast. He is Scott Trench and I am Mindy Jensen showing you out Rainbow Trout.

Scott:
If you enjoyed today’s episode, please give us a five star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Mindy:
BiggerPockets money was created by Mindy Jensen and Scott Trench, produced by Kaylin Bennett, editing by Exodus Media, Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.