It goes without saying that the COVID-19 pandemic has impacted many people’s everyday lives. People can no longer meet up with members outside their household, go to clothing stores or eat in restaurants. Some of the pandemic’s effects on people’s day to day lives are less obvious though. For example, the COVID-19 pandemic has affected many people’s marriages. More specifically, the pandemic has led to an increased interest in divorce.
Toronto-based divorce lawyer Ron Shulman, says he has received a greater number of divorce-related inquiries since the pandemic started. In the below section, we will discuss why the pandemic has led to a greater interest in divorce, why the pandemic could lead to an increased number of divorce-related financial improprieties and what a divorcing party should do if they suspect financial improprieties.
Why might the COVID-19 Pandemic be associated with a Greater Number of Divorces
Canada’s divorce rate is generally 38%. Economic downturns are usually associated with an increased divorce rate and increased interest in divorce. Additionally, COVID-19 has presented unique challenges which could result in an uptick in divorce rates like people not being able to socialize in-person with friends, differing views about social distancing among a couple and spouses spending extended time together in small spaces.
Why would the Pandemic Lead to a Greater Number of Divorce-Related Financial Improprieties?
Before the advent of COVID-19, non-disclosure of assets, during a divorce, was already a significant problem. In Ontario, most property, unless a pre-nuptial agreement exists, must be divided equally upon divorce. Property is not limited to real estate but includes shares, income, vehicles, furniture or jewelry. Additionally, one spouse may have to pay spousal support to another spouse. Since a divorce means that one spouse might be parting with a significant amount of money, unscrupulous parties hide assets, dispose of assets below the fair market value and they may not fully disclose their assets and income. Common forms of divorce-related financial improprieties include making large purchases, withdrawing money from bank accounts, creating fake expenses, “lending” money to friends and transferring shares in a corporation to other employees.
Since the start of the pandemic, many fraud examiners have noted an increase in fraud. Therefore, it would not be unreasonable to expect an increase in financial improprieties when couples are divorcing. Due to COVID-19’s negative economic impacts, people would want to hold onto money during these difficult economic times. An individual who is getting divorced might not fully disclose their income or dispose of assets below FMV. Additionally, COVID-19 could provide the perfect cover for hiding financial improprieties. Someone who holds shares in a private corporation could exaggerate the degree to which COVID-19 lead to a decline in their value. Similarly, someone could exaggerate a COVID-related pay cut.
How can a Divorcing Individual confirm their Spouse’s suspected Financial Improprieties?
If a divorcing individual suspects financial impropriety on the part of their spouse, they should hire a forensic accountant and/or a certified fraud examiner. Certified fraud examiners (CFEs) are accredited individuals who investigate allegations of fraud. Forensic accountants examine an individual’s or business’ finances to detect fraud or other financial improprieties.
Both know what to look out for. CFEs and forensic accountants can examine seeming innocuous trends, like declines in income, to determine if a spouse is hiding money.10 CFEs have experience interviewing individuals and now what behaviours are often reflective of lying.
Additionally, if a divorce unfortunately must be litigated, one can use the evidence obtained from a forensic accountant in court.
Conclusion
The COVID-19 pandemic has impacted many people’s everyday lives and marriage is no exception. The pandemic has been associated with an increased interest in divorce. Divorce is generally more common during tough economic times and lockdown orders have presented specific challenges that could lead to a greater number of divorces.
Additionally, parties divorcing during this time might face an increased risk of dealing with a financially unscrupulous spouse. Divorce-related financial improprieties are already quite common and economic downturns usually lead to an increase in fraud. Therefore, parties should seriously consider retaining professional help, like a forensic accountant or certified fraud examiner, if necessary.
Authored by Jennifer Lynch and Margot Mary Davis
This article was originally published by The Lawyer’s Daily, (www.thelawyersdaily.ca) a division of LexisNexis Canada.