FAQ: What are the consequences of hiding assets during divorce?

We’re not sure how many times we’ve had to clarify the fairly broad and unambiguous requirement: “you must disclose all of your assets and debts, regardless of when they were acquired.” Follow-up questions often include: “even if I just opened this account yesterday?”; “even if I inherited it?”; “even if I was stockpiling money for our son’s college because I didn’t think he would contribute?”. Yes, yes, and yes. We cannot be more clear about this. Aside from the financial consequences of losing the value of the entire asset to your ex in the event your deception is discovered, you burn bridges with the judge, your ex, but also your attorney — the person who represents you and your decisions. It is very hard for an attorney, in good faith and in compliance with their ethical duties, to make arguments to the judge as to why you intentionally engaged in such conduct. In such a case, you may end up with an attorney who feels that they have to withdraw from your case.

Read on for additional thoughts about hidden assets in divorce cases:

 

neil-foresterNEIL FORESTER

Pursuing a strategy of “hide the ball” during a divorce – especially a heavily litigated one – can have dire consequences if your dirty dealing is discovered. And in ways that you might not immediately recognize. First, if your spouse is able to find assets that have been deliberately hidden (either by not disclosing them on paper, or by actually hiding a physical asset), you stand to lose not just your 50% community property share of that asset. You stand to lose 100% of that asset without any offset to account for your share of it. The famous law school case I remember that is right on point is the wife who won the lottery with a group of friends, then immediately filed for divorce without telling her husband about the $2,000,000 she had recently come into. The court found out, and she lost all of it to her ex. But maybe worse than losing the asset is losing your credibility in front of the judge. That judge is never going to believe another word that comes out of your mouth if she thinks you play dirty pool.

 

MICHELLE STOWELLmichelle-stowell

A number of my clients believed that if they could keep an asset secret from their spouse, they could keep that asset for themselves. Nope!!  When you marry someone, you owe them the same fiduciary duties that you owe to a business partner. In fact, the California Family Code actually references these Business Code sections. In my own practice, I have gone after ex-spouses who have attempted to hide assets.  The court has a lot of discretion to punish parties who try engage in such conduct. Not only have I been able to recover 100% of the value of the asset, but I have also been successful in getting the offending party to pay my client’s attorney’s fees. The bottom line is this – you risk a lot when trying to hide an asset.  Very smart people have tried and failed.  The consequences (losing the asset plus paying your ex’s attorney’s fees) just aren’t worth the substantial risk.

 

matthew-purcellMATT PURCELL

California’s system for dissolution is predicated on both parties providing a FULL and COMPLETE disclosure of their respective incomes, assets, and debts. The only way that the parties or the court can equitably divide property or set support is if everyone involved knows what is being divided and what support is being based upon. This is a fundamental principle. If one party attempts to hide an asset, it throws the whole system out of alignment and makes an efficient resolution impossible. Not only does attempting to hide an asset open a party up to the statutory penalties of losing up to 100% of that asset’s value in the dissolution, but the party also incurs the “hidden fees,” of additional litigation that will undoubtedly be required to address the issue, loss of credibility in the court’s eye, and the loss of any chance of reasoned settlement from the other side. If the point of hiding an asset is to gain some sort of financial advantage, in practice it works the exact opposite result. I urge my clients to understand that the best way to get and maintain an advantage in the dissolution process is to be seen as the most reasonable party.

 

ABOUT THE FIRM: FORESTER PURCELL STOWELL PC is a Northern California law firm focused exclusively on specialized counsel for complex divorce and family law issues. Its shareholders are Certified Family Law Specialists, recognized by the State Bar of California’s Board of Legal Specialization. The firm regularly represents business owners, professionals, and other high net worth individuals (or their spouses) in divorce, custody disputes, premarital agreements, and related actions. Attorneys can be reached at info@foresterpurcell.com or 916 293 4000. This information is general in nature and should not be construed as legal advice.
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