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What Happens When a Spouse Hides Assets During a Divorce in California?

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Divorce is rarely a simple process, and it can become even more complicated when one spouse hides assets in an attempt to reduce their financial obligations. In California, which follows community property laws, each spouse is entitled to an equal share of the marital assets. When one party conceals assets, it can disrupt the equitable division and cause serious legal and financial ramifications. At Foster Hsu, LLP, we frequently assist clients in uncovering hidden assets and ensuring they receive their community property share during the divorce process.

Identifying Hidden Assets in a California Divorce

A common tactic used by spouses seeking to avoid fair distribution of marital property is hiding or underreporting assets. This can include transferring assets to third parties, underreporting income, creating secret bank accounts, or undervaluing business interests. Whether intentional or not, failing to disclose assets violates California law and the fiduciary duty each spouse owes the other during the divorce process.

Fortunately, California’s Family Code Section 2100 imposes stringent disclosure requirements on both parties. Each spouse must provide a complete and accurate list of all assets, income, debts, and liabilities. If a spouse suspects their partner is hiding assets, there are several legal remedies available to uncover the truth.

Legal Remedies for Uncovering Hidden Assets

When one spouse suspects the other of concealing assets, there are several investigative steps that can be taken. We often recommend the following actions:

  1. Discovery Process: During the discovery phase of the divorce, both parties are required to exchange financial information. This process can involve requests for documents, interrogatories (written questions), and depositions (oral testimony under oath). If one spouse refuses to comply with discovery requests, the court can compel them to provide the necessary information.
  2. Forensic Accountants: In complex financial situations, such as when one spouse owns a business or has substantial investments, a forensic accountant may be hired to trace hidden assets. Forensic accountants are skilled at analyzing financial records, uncovering discrepancies, and identifying hidden accounts, fraudulent transfers, or undervalued assets.
  3. Subpoenas: A subpoena can be issued to banks, employers, and other institutions to obtain financial records. This allows the court to gather information directly from third parties, bypassing any efforts by a spouse to withhold or manipulate financial data.
  4. Court Orders and Penalties: If a spouse is caught hiding assets, the court can impose significant penalties. Under California law, the non-disclosing spouse may be ordered to pay the other spouse’s legal fees, and the court can also award the full value of the hidden asset to the wronged party. In extreme cases, the spouse hiding assets may face contempt of court charges or other sanctions.

Fraudulent Concealment and Its Consequences

When a spouse deliberately conceals assets, it is considered fraudulent concealment. California courts take this issue seriously, as it undermines the integrity of the legal process. If fraud is discovered after the divorce has been finalized, the court may reopen the case and alter the division of property. Additionally, the spouse who committed fraud may be subject to additional penalties, including the forfeiture of their share of the hidden asset.

Protecting Your Rights in Divorce

Our experienced San Jose Asset and Debt Division Attorneys can guide you through the legal process, help uncover hidden assets, and ensure you receive your rightful share of marital property. Contact Foster Hsu, LLP today for a consultation to discuss your case and protect your financial future.

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