People who come to my office seeking assistance with a divorce often ask one of two questions (sometimes both):
- “Do I have to tell my spouse about everything I own or owe?”
- “What happens if my spouse is hiding an asset?”
These are important issues that need to be addressed, since the process of dividing assets and debts can determine the quality of life for both partners following their divorce. Any attempts to hide property or mislead the other person by failing to disclose can have serious consequences for everyone involved.
In the course of a legal separation or divorce, California law dictates that each spouse must provide complete information about all of his or her assets (such as property, vehicles, financial accounts, business interests, etc.) and debt (loans, credit card payments, etc.). The statements made by each spouse concerning assets and debts are contained in what’s called a Schedule of Assets and Debts, and may also be disclosed in Community and/or Separate Property Declarations.
During the legal proceedings, each party is required to serve their financial disclosures on the other party and file a declaration confirming such service of disclosures with the court. Any Judgment of divorce or legal separation entered without such disclosures is generally considered void under California law.
In a situation where there’s an unintentional omission of assets, the court (once alerted to this omission) usually readdresses the division of property to make sure there has been a fair and equal division of assets overall. With an intentional omission of assets (such as the concealment of a party’s stock options or undeclared cash in the bank), the court may award the other party more than the typical 50 percent of the community property asset — sometimes up to 100 percent! The court may also demand that the offending party pay attorney fees and costs as sanctions for having to litigate this issue.
So how can one party find out if their spouse or partner is deliberately hiding assets?
A lot depends on the complexity of the particular case, but in general, legal professionals can call upon several resources to obtain information about undisclosed assets. During what’s called the “discovery process,” one party’s attorney can formally request production of relevant documents and other information from the other party or invoke the power of subpoena to third parties to get necessary information and/or documentation handed over. There’s also the option of hiring a private investigator to do an “asset search”—the results of which are regularly admissible in court.
What happens if a hidden asset is discovered after the division of assets has been completed? Unless otherwise ordered, the court maintains jurisdiction to address this issue should it arise, even after judgment has been rendered. An undisclosed asset can be subject to a further court order after the divorce has been finalized, so long as it is promptly thereafter brought to the court’s attention.
Post-Judgment penalties for concealing or misrepresenting one’s assets or debts may include payment of the other party’s attorney fees and costs, a dismissal of any of his or her own claims, reallocation of asset and debt division (if possible) and, even, incarceration. That’s why the safest rule of thumb in a divorce proceeding is to always disclose your assets and debts.
Any situation where significant assets or debts are concerned may be too complicated for the parties to resolve on their own. Consulting an experienced family law attorney is your best bet to ensure a proper division of assets and debts before the divorce or legal separation proceeding comes to a close.
Are you in need of legal counseling or have any questions about the above topic? The Law Offices of Ian S. Topf offer a free consultation in a variety of issues, ranging from family law/divorce, bankruptcy, and estate planning to criminal/DUI matters and landlord/tenant disputes.