Dealing with Hidden Assets During a Divorce

A fiduciary is an individual in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit. A fiduciary relationship encompasses the idea of faith and confidence and is generally established only when the confidence given by one person is accepted by the other person. In a fiduciary relationship, one party has an obligation to act for the best interests of the other. The most commonly cited fiduciary relationship is between an attorney and a client. The attorney, regardless of how they may feel personally, must act in their client’s best interest.

A couple going through a divorce has a fiduciary responsibility to each other with respect to their community property until that property has been divided. This does not mean either side has acted for the best interest of their soon-to-be ex-spouse at the expense of themselves.

In California, divorcing couples are required to file forms with the court that truthfully disclose all their assets including bank accounts, real estate, income, and other high-value assets, such as cars, boats, vacation homes, jewelry or art, creating that fiduciary agreement.

If one party submits these forms with a false or inaccurate account of assets, they are breaking that faith and confidence.

California is a community property state, meaning all assets that a couple acquired during the course of the marriage are usually divided equally between parties. Whether one person earns or receives more income or property, those assets are jointly owned. When a party attempts to hide some of those assets from their partner they are not holding up their part of the fiduciary responsibility.

If a husband, for example, knows that divorce is on the horizon and decides to skim some funds from a joint account into a private account, or if a wife were to use their joint account to buy a horse, or a new condo, or take lavish vacations, they are not living up to their responsibility. Lowering your bottom line by moving funds or going on a spending spree is the same as hiding assets.

Assessing a property’s actual value as opposed to the perceived value is best done by an unbiased third party, to reduce the likelihood of one or the other undervaluing the property. This deliberate understatement of value can make it difficult for the court to accurately calculate the entirety of the marital property. The understated value will also cause your spouse to then counter with a stated value that is well above the actual value. Each side is going to want to represent the numbers in a way that benefits their case.

The penalties for hiding assets can be significant when the attempt to do so is brought out into the open. If found hiding assets, the court may impose sanctions. Since your unethical actions forced a court procedure, you may also find yourself saddled with court costs, including your spouse’s legal fees. If there was an order to turn over the specific asset by a specific time, but you claim that you couldn’t because it no longer existed, when you actually know where it is, you can be subject to contempt of court. Ultimately, when found out, your liability will be far greater than the value of the assets you attempted to hide.

When you work with us as you go through your divorce, we will take a complete look at your assets, property, and income to make sure that everything is being reported in a fair way. We will also, through the process of discovery, look at what your spouse is reporting to ensure that everything seems to be in order. If we see inconsistencies we can bring in experts, such as forensic accountants to see what the numbers are telling us.

Representation of divorce cases in movie and television always come down to a vicious court battle. Screaming attorneys and judges pounding the gavel makes for good drama, but the truth is far different. Judgments are often based on a formula. Also, being a community property state takes a lot of the guesswork and deliberation out of the picture. When it comes to determining the value of marital assets, so much of it is also based on formulas or on current appraisals. Hidden assets cause the basis of almost all financial decisions to be incorrect. This leads to a longer and drawn out process and more legal problems.

As you go through the process of divorce, if you believe your spouse is hiding assets, we will work with you to bring the truth to light.