California's Approach to Handling Hidden Assets in Divorce.

Understanding California's Stance on Hidden Assets in Divorce Proceedings

In the midst of a divorce, the division of assets can become a contentious and complex process. The state of California, which operates under community property laws, mandates that all marital assets be divided equally between both parties. However, this process can be muddled when one spouse attempts to conceal assets to skew the division in their favor. California has developed a robust legal framework to address such issues and ensure an equitable distribution of property.

Hidden assets in divorce refer to any unreported or undervalued assets that one spouse fails to disclose intentionally. These can range from offshore bank accounts and real estate to stocks and business interests. Uncovering these assets is critical as it directly impacts spousal support, child support, and the equitable division of property.

California courts require both parties to complete and exchange preliminary and final declarations of disclosure, which are sworn statements listing all known assets and debts. Failure to disclose can lead to severe consequences including monetary sanctions, a contempt of court citation, or even charges of perjury.

To detect hidden assets, forensic accountants are often employed. They scrutinize tax returns, bank statements, and other financial records for discrepancies. For instance, if a spouse owns a business, it's not uncommon for them to underreport income or overstate expenses to reduce the apparent value of the business. In 2015, in In re Marriage of Rossi, a California court awarded 100% of lottery winnings to one spouse after the other attempted to conceal the windfall received during their marriage.

The discovery process in California also allows attorneys to use subpoenas, depositions, and interrogatories to unearth hidden assets. For example, if there is suspicion that a spouse transferred property to a third party or relative to avoid its disclosure, these legal tools can be instrumental in tracing the transaction.

Moreover, upon finding that a spouse has hidden assets, California courts have broad discretion in penalizing the offending party. They may order an uneven distribution of the concealed assets or require the guilty party to pay the other's attorney fees. The case of In re Marriage of Feldman (2007) set a precedent when the court imposed sanctions on a husband for nondisclosure of assets during divorce proceedings.

It is imperative for those going through a divorce in California to understand their rights and obligations regarding asset disclosure. With the state's rigorous legal procedures and potential penalties for noncompliance, hiding assets can result in significantly more financial loss than what might have been incurred through honest disclosure.