Secret Cash Undermines Marriage and Estate Plans

Stashing secret cash at home is neither good for a marriage nor an estate plan. Cash, unlike nearly all other assets, has no indicia of ownership, no title, no deed, no receipt. Cash is just cash.

Many people in the Baby Boomer [and older] generation, place less trust in financial institutions so they kept spare cash stashed around the house or office. Younger folk, being digital natives, prefer electronic currency; they prefer to move cash through apps.

From time to time, our law firm represents spouses going through divorce, or family members litigating probate matters. In some of those cases, cash is stashed in a safe. More often than not, when the process results in opening the safe to verify the amount of cash, the safe is empty.

This post examines the risks associated with stashing cash from an estate planning perspective, and from the perspective of a marriage.

Estate Plans and Hidden Cash.

The biggest risk of stashed cash in the estate planning context is that too often, no one knows its there except the decedent. And the decedent usually does not leave instructions on where to find it; that is the very nature of stashed cash.

Cash is frequently stashed in the walls of a decedent’s home, placed between the pages of books, hidden in the freezer, and many other creative hiding places. Cash, gold bars, gold coins, silver, and other precious metals and jewelry are assets of the estate.

At best, the owner risks the cash and valuables not going toward their intended destination; at worst, it could be a total loss. Common risks include theft, fire destruction, water damage or other disasters.

In addition to crimes, the decedent risks having the hidden assets misappropriated by a family member or friend; this is especially true in families undergoing conflict and with people suffering from cognitive decline. Mental challenges such as Alzheimer's disease or severe paranoia can operate to fuel a cash hoarding mentality. Such a person may not recall their intent for the hidden funds or at the very least, they forget where they placed the money and how much was hidden.

Quite apart from a total loss, there is a lost interest opportunity that affects stashed cash and valuables. Most cash funds could easily double had they been invested rather than hidden in a drawer for the better part of a decade.

Because cash has no ownership records, the identity of the legal owner is very unclear; there is no paper trail with cash except the paper denotations of the cash itself. Inheritances can get very messy with cash to the extent that estate plans rarely account for hidden assets.

When family members noticeably begin to slip mentally, it may be time to install a power of attorney to shore-up the operations and make sure personal finances flow smoothly. Alzheimer’s, dementia, or severe paranoia are mental conditions that sometimes cause people to revert to behaviors such as hoarding, cash stashing, or hiding valuables. One of the biggest risks of such behavior is that the person forgets where they stashed the cash, or that they hid the cash altogether.

The classic estate planning dilemma is to ensure that elderly parents have an estate plan that includes, if necessary and appropriate, a revocable trust, a “pour over” will, and basic powers of attorney. These instruments provide flexibility and control for the settlors -or trustmakers- while simultaneously providing a layer of security if the parent or spouse continues to decline.

Like estate planning, hidden cash stashes can complicate a marriage.

Marriage and Hidden Cash.

We had a case several years ago where the husband diverted a very modest amount of his bi-weekly paycheck into a secret savings account to be able to purchase a diamond necklace for his spouse on their 10th anniversary which was nearly 4-years away. Long before the anniversary, his wife discovered the shortfall in her husband’s paycheck and called him out on it.

In the tense discussions that followed, he came clean thinking she would be touched by such a “thoughtful” gesture. Guess again. She was highly irritated because: a) she did not believe these were his true intentions with the hidden account; and b) she detested surprises and thought her husband knew that feature of her personality.

Like stashed cash in the estate planning context, hidden cash within a marriage is rarely a good idea. Well intentioned money secrets can and usually do backfire, leading to feelings of confusion, resentment, and frustration with the other spouse.

Sometimes, a spouse conceals money to hide conduct that is unbecoming such as a gambling or drinking habit. Other times, hidden cash fuels a shopping mania which can belie a mental condition one spouse does not wish to disclose to the other. Eventually, what was hidden often comes into the light of day.

A recent Bankrate survey referenced in the New York Times indicated that over 40% of adults in the US admitted to withholding a financial secret from their spouse. Of those, nearly 20% admitted to a secret bank account. The reason for so many secrets: a desire to control their own financial destiny.

Despite these motivations, secret bank accounts can cause tension and distrust in a marriage. Trust is a central pillar for building a strong financial partnership in a marriage. Obviously, hidden accounts and secret stashed cash, once it comes to light, erodes the trust critical to a financial partnership.

Another commonly cited reason for hiding cash in a marriage: distrust of the other spouse’s ability to properly manage finances. We see numerous divorces where one spouse is a disciplined saver while the other is a spend thrift.

Women of an older generation are sometimes prone to stashing cash. And who could blame them considering that until the Equal Credit Opportunity Act was passed in 1974, women did not have a legal right to open a bank account (or a credit card) in their own name.

Partners in unstable relationships can feel like they need to build a secret “walking-out-the-door” fund. Knowing they have some money stashed provides a sense of empowerment.

In sum, there is nothing wrong with a certain level of financial independence within a marriage or a relationship. However, we here at Clarkston Legal have learned that “honesty is always the best policy”. Therefore, consider building separate accounts with an ethos of full disclosure; with each spouse or partner contributing the same agreed upon amount into their own respective accounts.

This way, financial independence can be achieved within the context of trust. That in turn strengthens a marriage or a serious relationship.

We can help.

If you or a family member are facing a difficult probate issue or marriage conflict arising from a hidden stash of cash that has come to light, contact us to discuss your legal options.