THERE is a natural tendency among divorcing parties to hide their assets from their spouse and understate income. This is a common problem that I have observed from practicing law for many years. A common question I hear from clients is “my spouse doesn’t know I have an account in this bank, do I have to let him/ her know of this account?”
Parties to a divorce proceeding have a duty to disclose financial information to each other. This duty arose based on California’s policy (1) to marshal, preserve, and protect community and quasi-community assets and liabilities that exist at the date of separation so as to avoid dissipation of the community estate before distribution, (2) to ensure fair and sufficient child and spousal support awards, and (3) to achieve a division of community and quasi-community assets and liabilities on the dissolution or nullity of marriage or legal separation of the parties as provided under California law. To promote the above public policy, the family code requires a full and accurate disclosure of all assets and liabilities in which the parties have or may have an interest be made in a divorce or a legal separation, regardless of the alleged characterization of the property as either community or separate. Parties are also required to disclose all income and expenses of the parties.
The parties also have a continuing duty to update and augment that disclosure to the extent that there has been a material change to their financial position. The purpose of the duty to augment and update the disclosures is so that at the time the parties enter into a settlement agreement, stipulated divorce judgment, or trial, each party will do so with full and complete knowledge of all relevant underlying facts of the case.
The disclosures are made by the parties by serving each other with a preliminary declaration of disclosure and a final declaration of disclosure. The preliminary declaration of disclosure should be served within 60 days of serving the divorce, separation, or nullity petition. The commission of perjury on the preliminary declaration of disclosure may be grounds for setting aside the judgment in addition to other remedies available under the law. The preliminary declaration of disclosure is not filed with the court but only exchanged by each party. The preliminary declaration of disclosure shall set forth 1) the identity of all assets and liabilities which the declarant may have an interest regardless of the characterization of community, quasi-community, or separate property; 2)The declarant’s percentage in the asset or liability; 3) the declarant’s characterization of the asset or liability. In addition, the declarant shall also provide the other party with a completed income and expense declaration. The declarations may be amended without permission from the court.
The parties shall serve each other with a final declaration of disclosure at the time the parties enter into a settlement agreement, stipulated divorce judgment, or if the case goes to trial, at least 45 days prior to the first assigned trial date. The final declaration of disclosure shall include (1) All material facts and information regarding the characterization of all assets and liabilities(2) All material facts and information regarding the valuation of all assets that are contended to be community property or in which it is contended the community has an interest. (3) All material facts and information regarding the amounts of all obligations that are contended to be community obligations or for which it is contended the community has liability.(4) All material facts and information regarding the earnings, accumulations, and expenses of each party that have been set forth in the income and expense declaration. The parties may agree to mutually waive the final declaration of disclosure requirement but not the preliminary declaration of disclosure.
A party who fails to comply with the disclosure requirements under the family code may be held in breach of the party’s fiduciary obligation to the other spouse under family code section 721, 1100, and Marriage of Feldman. The party that failed to disclose material assets, income, facts, and information may be sanctioned by the court by awarding attorney’s fees and sanctions to the other spouse under family code section 271. When hiring an attorney to represent you in a high asset divorce case with complex property issues, it is important to hire an attorney that understands the disclosure obligation under the family code.
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Please note that this article is not legal advice and is not intended as legal advice. The article is intended to provide only general, non-specific legal information. This article is not intended to cover all the issues related to the topic discussed. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. This article does create any attorney client relationship between you and the Law Offices of Kenneth U. Reyes, P.C. This article is not a solicitation.
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Attorney Kenneth Ursua Reyes is a Certified Family Law Specialist. He was President of the Philippine American Bar Association. He is a member of both the Family law section and Immigration law section of the Los Angeles County Bar Association. He has extensive CPA experience prior to law practice. LAW OFFICES OF KENNETH REYES, P.C. is located at 3699 Wilshire Blvd., Suite 747, Los Angeles, CA, 90010. Tel. (213) 388-1611 or e-mail [email protected] or visit our website at Kenreyeslaw.com.