There are individuals that believe that being underhanded, dishonest, and non-compliant during a divorce is the better approach. This is far from true and can potentially make their case much worse. A good family law attorney will attempt to prevent such actions by their clients but it can also be said that attorneys can only advise against such malfeasance and can not control the actions of their clients. The Family Courts also do not look kindly on and can punish a party that is involved in what would be considered sanctionable behavior. The parties should be mindful of their fiduciary duties during divorce.
In other areas of law, questionable legal tactics, trickery, and “hiding the ball” are more common. However, the approach to handling a divorce case is considerably different. Both spouses have fiduciary duties during divorce owed to each other. Family Code section 721(b) in part states that spouses are required to have the, “. . . highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other.” This includes disclosing all the important information regarding the parties’ assets and debts. It clearly indicative that it is unacceptable to “hide the ball” or play games regarding community assets and debts.
Family Code section 1100(e) in part states, “This duty includes the obligation to make full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest and debts for which the community is or may be liable, and to provide equal access to all information, records, and books that pertain to the value and character of those assets and debts, upon request.”
These duties and obligations that are owed to and between spouses are described in multiple areas of the Family Code. Beyond the duty of spouses to disclose information, the spouses are also required to reasonably manage the portions of the community estate under their control. This includes disputed separate property items that could arguably be considered community property. The size, nature and value of parts of the community property estate also directly impacts the extent that a spouse may have to disclose information. The extent of disclosure would be less for a basic savings account with a value of a few hundred dollars in comparison to an active investment account with a multi-million dollar balance. Another example would be a party trading in a broken down car for a new car in comparison to exchanging real property (1031 exchange).
The failure of a party to disclose a particular asset or debt may result in an incomplete final judgment. It is recommended that both parties fully disclose their community and separate property interests to each other on the required Declarations of Disclosure. The Declarations of Disclosure are essentially an outline for the division of the assets and debts of the parties. If a party fails to disclose an asset or debt, it is likely to not be included in a final divorce judgment. The undisclosed asset or debt that is not address in a final judgment is considered to be unadjudicated.
The other party can then go back to court and request that particular community property asset(s) and/or debt(s) be divided. An unadjudicated item is considered an “omitted asset” and if the court finds fraud in a party’s failure to disclose that item, the Court can award the entire value of the asset to the other party. Furthermore, the Court can award the entire value of asset to the other party at the highest value until the asset is properly adjudicated. Therefore, it is better to avoid the potential risk and disclose as much as possible in the beginning to avoid the potential problems and legal costs in the future.
If you have questions about the fiduciary duties during divorce, addressing the disclosure of assets and debts, or need help in a divorce proceeding, please contact our office to schedule a consultation.