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Hiding assets in a divorce in California is a bad idea

On Behalf of | Dec 13, 2018 | Firm News, Property Division

When a divorce becomes nasty, one or both parties may use tactics that they would never use in their business or social lives. One of the most common tactics is to hide marital assets from the other spouse. This behavior is usually based on three incorrect assumptions: the other party has no means to search for or find the property; the property is hidden so that it will not be found; and if the property is found, the consequences will be light.

Hidden property is governed by a brief paragraph in the California Family Code that does not spell out the consequences of hiding assets in any detail, but one sentence, however brief, should be a warning to anyone thinking about concealing assets. If assets are discovered after the divorce becomes final, the court will divide the property equally “unless the court finds upon good cause shown that the interests of justice require an unequal division of the asset or liability.” In other words, the court has wide latitude to order an unequal division of the hidden asset, which means that 100 percent of the hidden asset can be given to the other spouse.

California law requires both parties to the divorce to file a complete, accurate and honest disclosure of assets. If one spouse believes that the list from the other spouse is inaccurate or incomplete, that spouse can use the discovery devices in the Code of Civil Procedure. The responding spouse can be required to answer written questions, provide copies of bank records and, if necessary, sit for a deposition and answer questions about assets under oath. Private investigators and financial experts are employed if the worth of the hidden assets is believed to be significant. The existence of the internet and the increasing sophistication of persons who use it provide another avenue for searching for hidden assets.

The court’s power to allocate hidden assets is essential equitable. The court can order whatever relief seems fair in the circumstances, and that may extend well beyond a non-equal allocation of the hidden assets. If the conduct of the spouse who attempted to hide assets is sufficiently egregious, the court may refer the matter to law enforcement authorities for further investigation.