Concealed or Hidden Assets in a California Divorce

Concealed or Hidden Assets in a California Divorce

Show Me the Money! How a Los Angeles Divorce Lawyer Can Help You Divide Concealed, Hidden or Omitted Assets During Your California Divorce

Post-Judgement Motions Under California Family code Section 2556

The Story:

Wife belongs to a lottery pool at work and contributes about $5 per week to the pool. Suddenly, Wife gets a phone call from a coworker informing her the group won the lottery and the prize was in the amount of $6,680,000. Wife is elated at the news…especially when she learns her share of the prize money is about $1,336,000.

The problem – Wife is unhappily married. She was thinking about divorce, and believed if she told her Husband the truth about the money he would try to take all of the money away from her during the divorce. Wife heads over to the lottery office to explain her situation to them. The lottery office suggests Wife should file for divorce before she ever receives her first lottery check. Rather than tell Husband about the lottery money, Wife serves Husband with divorce papers.

To make sure her Husband does not discover the lottery winnings during divorce, Wife uses her mother’s personal address to receive checks and other information from the California Lottery. This will ensure Husband would never discover the lottery checks. In fact, Husband never learns about Wife’s good fortune during the divorce. Shortly after the divorce, Husband begins to experience some financial difficulty and files for bankruptcy. A couple of years after the divorce Husband inadvertently receives a letter from the California Lottery intended for Wife. The letter is asking Wife if she would like to receive a lump-sum buyout of her lottery winnings. This is the first time Husband learns about Wife’s lottery winnings.

Can Husband take any action in family court to force Wife to divide the previously concealed lottery winnings?

The Lesson:

“Show Me The Money!” Yes. Husband did in fact ask a California court to divide lottery winnings that were concealed from him during his divorce from Wife, which was subsequently omitted from the judgment. ( Marriage of Rossi (2001), 90 Cal.APP.4 th 34).

In Rossi, a California trial court held that Wife’s failure to disclose the existence of her lottery winnings amounted to fraud and was a breach of her fiduciary and statutory duty to disclose the existence of all property, community and separate, to her spouse at the time of the divorce. The court in Rossi awarded not just half or 50% of the lottery winnings to Husband, but 100% of the lottery winnings to Husband because of Wife’s concealment of the money during their divorce. The Court of Appeals affirmed the decision.

Fiduciary Duty:

We are commonly asked if it’s necessary to disclose all assets and debts of a marriage during divorce. The result in Rossi is probably one of the best examples of why you should be truthful about the assets and liabilities of a marriage when getting a divorce in California.

Rossi highlights the importance of the fiduciary obligation between spouses under California law, and shows that in the case of concealment a family law court can impose a harsh remedy and you will put your share of the asset at risk.

California requires full disclosure of all assets and liabilities in a marital dissolution (divorce), legal separation or nullity of marriage proceeding. The legislature laid out the state’s policy to preserve and protect community and quasi-community assets and liabilities in Family Code Section 2100. You can find reference to fiduciary obligations owed between spouses among various sections in the California Family Code such as Section(s) 721(b), 1101(e), 2100, 2102, and 2103-2107.

Consider Filing a Post-Judgement Motion to Adjudicate any Concealed or Omitted Assets Under Section 2556

California permits the filing of a post-judgment motion to divide an omitted asset under California Family Code Section 2556. There can be various types of assets omitted in divorce. For example, omitted assets can include real or personal property, bank accounts, certificates of deposit, money market accounts, individual retirement accounts, stock options, 401K, KEOGH and vehicles.

If you believe there were assets omitted in your original divorce judgment, California Family Code Section 2556 gives the family law court continuing jurisdiction to divide any assets or liabilities that were not disclosed or dealt with originally.

California Family Code Section 2556 states as follows:

“2556. In a proceeding for dissolution of marriage, for nullity of marriage, or for legal separation of the parties, the court has continuing jurisdiction to award community estate assets or community estate liabilities to the parties that have not been previously adjudicated by a judgment in the proceeding. A party may file a post-judgment motion or order to show cause in the proceeding in order to obtain adjudication of any community estate asset or liability omitted or not adjudicated by the judgment. In these cases, the court shall equally divide the omitted community estate asset or liability, unless the court finds upon good cause shown that the interests of justice require an unequal division of the asset or liability.”

If you or your spouse fails to include the asset or liability during your divorce, a former spouse/partner is entitled to file a post-judgment request to adjudicate the asset or liability. The court in California has authority to divide the asset equally, unless there is a showing of “good cause” for the court to do otherwise.

Tools of a Divorce Lawyer: Uncovering Intentional conduct or Concealment of an Asset

An experienced Los Angeles divorce lawyer from Castellanos & Associates, APLC will use several powerful tools to help you uncover any hidden or omitted assets during the marriage:

  1. The Discovery Process
  2. Subpoenas
  3. Depositions
  4. Private Investigator
  5. Financial Advisors, including a Forensic Accountant

Declaration of Disclosure

As we saw in Rossi, when you fail to disclose an asset during the divorce process, you risk loosing the entire asset. In order for the court to enter a final judgment in any dissolution, legal separation or annulment case in California, you and your spouse/partner will be required to disclose the nature and extent of all of your marital/partnership assets and debts. This is accomplished when you complete and serve certain mandatory forms such as the Declaration of Disclosure, Schedule of Assets and Debts and Income and Expense Declaration on your spouse/partner. Once the other spouse/partner is served, you must then make sure you prove to the court that you in fact served the other party and complied with this requirement by filing a Declaration Regarding Service of Declaration of Disclosure with the court.

Preparing these forms are a part of the divorce process in California and both you and your spouse/partner must comply by completing your own forms and serving the other party. A preliminary and final Declaration of Disclosure must be served on the other party with certain exceptions.

At Castellanos & Associates, APLC, we routinely ask our clients to complete the Declaration of Disclosure, including the Schedule of Assets and Debts form on which you are required to list all marital assets and obligations. We will also ask you to complete the Income and Expense Declaration form. Both forms can be downloaded from our website.

Contact a Los Angeles Divorce Lawyer for a FREE Consultation Today!

We can help you with your

or if you would like to discuss the filing of a post-judgment motion under Family Code Section 2556, request a FREE consultation today from a Los Angeles Divorce Lawyer at Castellanos & Associates, APLC at (323) 655-2105. We look forward to helping you move on with confidence and peace of mind!