How An Experienced Divorce Lawyer Can Help You Divide Concealed or Omitted Assets During Divorce

Edwin J Castellanos

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Divorce / Separation Lawyer

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Posted over 1 year ago. 1 helpful vote

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THE STORY

Imagine – you belong to a lottery pool at work and contribute about $5 per week from your pay to the pool. Suddenly, you get a call from a coworker informing you the group had won the lottery jackpot and the prize was in the amount of $6,680,000. You are elated to find out that your share of the prize money is about $1,336,000.

The problem -- you are unhappily married. You were thinking about divorce, and believed if you told your spouse the truth about the money he would try to take all of the money away from you during the divorce. Because you are seriously considering going forward with divorce, you head over to the lottery office and explain the situation to them. The lottery office suggests you file for divorce before you ever get your first lottery check. Rather than tell your Husband about the lottery money you instead serve him with divorce papers.

To make sure your spouse or partner does not discover your lottery winnings during the divorce, you use your mother’s personal address to receive checks and other information from the California Lottery. This will ensure your spouse would never discover the lottery checks. In fact, your spouse never learns about your good fortune until after the divorce is final. Your spouse is going through hard times, files for bankruptcy and a couple of years after the divorce he inadvertently receives a letter from the California Lottery intended for you. The letter is asking if you would like to receive a lump-sum buyout of your lottery winnings. This is the first time your spouse learns about your 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. Your spouse or domestic partner can file a request with a California court to divide any asset or liability previously omitted in the original judgment under California Family Code Section 2556.

The facts above were partially taken from a prominent case in California where Husband went back to court to divide Wife’s previously undisclosed lottery winnings (Marriage of Rossi (2001), 90 Cal.APP.4th 34). In Marriage of 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.

In Rossi, the court ended up awarding not just half or 50% of the lottery winnings to Husband, but instead awarded 100% of the lottery winnings to Husband because of Wife’s efforts to conceal her lottery winnings to her Husband during the divorce process. Unfortunately, because of Wife’s breach of fiduciary duty she had no recourse under the law and the Court of Appeals affirmed the decision.

FIDUCIARY DUTY

We are commonly asked if it’s necessary to disclose all assets and liabilities 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. Rossi actually shows that in the extreme circumstance of concealment a family law court has continuing jurisdiction to not only hear the issue post-judgment but can impose a harsh remedy.

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.

THE DIVISION OF OMITTED ASSETS DURING DIVORCE

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:

  1. 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.

What happens if you suspect there is an asset that was intentionally omitted by your spouse/partner?

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. A divorce lawyer has several powerful tools to help uncover omitted assets such as using one of the following:

  1. The Discover 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 TODAY

If you need help with your divorce, legal separation or annulment, 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!

Additional Resources

Castellanos & Associates, APLC

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