Hidden Assets – Disappearing Assets
Hidden Assets fall into the category of Division of Property. The general rule in California is that property accumulated during the marriage is to be divided equally as community property. The question then becomes what if anything can be done if an asset has been hidden or perhaps it has disappeared. The key issue here when we talk about hidden assets or disappearing assets are the fiduciary duties that a husband and wife have to each other and it is the duty of disclosure. The idea is that you owe a fiduciary duty to disclose all assets, liabilities, income and expenses to your spouse as you go through a California Divorce. During the marriage you’re responsible also to comply with those fiduciary duties for openly communicating your actions and dealing fairly with your spouse. What the law does then is by providing for these duties it also provides for remedies in the event someone breaches them. The law places steep monetary sanctions or penalties on a spouse who hides assets.
What if anything can you do if you believe that an asset is disappeared or if you believe that an asset has been hidden?
We often engage in Discovery which is a process by which we send out subpoenas, depositions, ask for production of records and more to uncover the truth in assets and uncover hidden or disappearing assets. By combining our skillset with that of a Forensic Accountant we will work to trace and identify which assets are community and which are separate property.
That investigation by the forensic accountant in our office can also determine the location and the value of hidden assets. Also in tracing assets these forensic accountants, whom we can call investigators in essence, help with our assistance to evaluate bank accounts, retirement benefits, real estate, stocks, bonds, business revenue, foreign bank account overseas, all of which may be hidden or all of which may not have been disclosed.
Basically, combining the discovery process with the knowledge of the attorney and the assistance of a forensic accountant is the solution often for exploring and determining whether assets have disappeared or whether they’ve been hidden.
Once you prove for instance that someone did not disclose an asset, what is your remedy?
If it is community property at the very least you will receive 50% back. If you can prove that the other spouse intentionally chose to not disclose it you can get up to 100% back. In fact it could be the other spouse’s separate property, it could be a house that this person owned before they got married to you and it’s entirely their separate property, but you’re able to prove that they chose intentionally not to put that on the disclosure, you can still get up to 100% of the other side separate property.
Also a remedy of breach of fiduciary duties includes the imposition of monetary sanctions so there would be some form of monetary sanction and a payment of attorneys’ fees imposed.
Also, what if you’re able to identify that someone has breached their fiduciary duty, say the spouse transferred it over to Jordan or to Iran or to a place where you don’t have access to it. You can prove they have breached their duty, you can prove the move of those funds was done in violation of the fiduciary duties, but you cannot get your hands on the asset or the money, what do you do? Well you’re left with unequally dividing the assets that you do know about. For example husband has been proven to have breached his fiduciary duties by falsifying his wife’s signature on a loan during the marriage. Husband withdraws $100,000 from the equity in their marital home and transfers the money to his brother in a country where the US court has no jurisdiction. Let’s say we have been able to successfully trace the monies back to the line of credit on the home and going to Jordan. The wife can now prove this but she has no power to take an action in Jordan. What can we do? Let’s assume for a moment that there is also a home in Newport Beach, California with $200,000 of equity which is community property. The home could be awarded to wife entirely. Now had the husband not breached his fiduciary duties then he would have received $100,000 out of the marital home because there’s $200,000 in equity. Wife would get either $150,000 of equity or $200,000 of equity. She is for sure going to get the $50,000 back because out of the $100,000 the husband transferred $50,000 was hers. So in essence he only owes her one half of the $100,000 he gave to his brother. To remedy the breach of fiduciary duties the court can compensate wife for at least $50,000 which represents half of the amount he transferred to his brother, but remember if wife can prove that has chosen intentionally to hide the asset the court can give her up to 100% of his share. So rather than her getting only $50,000, she could get $100,000. Hence the court can “un-equally” divide marital assets to make up for a breach of fiduciary duty.
If however one spouse has completed depleted the marital assets and we cannot find out where they are hidden, or rather we know where but we cannot get our hands on it, then the other spouse gets a judgement and all she can hope for is that at some point in time she will be able to force the judgement.
Our office has dealt with complex family law litigation and complex property issues, we tend to have a very good understanding of how to uncover these dissipating or disappearing assets and try to get the appropriate remedy for our clients.