California: A Community Property State
California follows the legal concept known as community property. This means that all property a couple acquires during marriage belongs to both partners unless there is a valid prenuptial agreement. Spouses are considered a single "community" under these circumstances; thus, property is owned equally by both spouses regardless of whether one spouse is unaware of an asset. If one spouse acquires money or property and hides it from the other, the asset is still jointly owned. Courts almost always divide community assets equally during divorce proceedings.
Hiding Assets During Divorce Proceedings
Divorcing couples in California are required to file a Petition for Dissolution of Marriage, Form FL-100, which requires the spouses to declare all property owned, both separately and together. If more space is needed, spouses may disclose this information on an additional property declaration form, Form FL160. Any false, incomplete or inaccurate information on these forms could be considered an attempt to hide assets and is a serious offense. For example, if your spouse was thinking about divorce months before filing and transferred marital funds into an account without your knowledge, she must disclose this account on the declaration forms. Or, if your spouse uses marital funds to buy an asset, like a car or house, without your knowledge, the property must still be declared as it is a community asset.
Devaluing Assets During Divorce Proceedings
Sometimes an asset's value is not obvious. If couples own real property, like a home or rental property, an honest appraisal of the property is required during divorce proceedings. Deliberately understating the value of an asset can also be a way of hiding assets since it prevents the court from knowing the full and accurate value of all marital property. Artificially reducing or destroying the value of an asset may also be considered fraudulent. For example, when a spouse allows a rental property to deteriorate or remain vacant during a divorce to artificially lower its value.
Income and Expenses
Income is also considered an asset in California. Thus, understating income can be a way of hiding assets. Overestimating expenses can also be an attempt to hide assets since expenses are part of the financial formula the court uses to calculate the total value of marital property.
Discovering Hidden Assets
If you suspect your spouse of hiding assets during your divorce, consult with an experienced lawyer or forensic accountant who can help you spot red flags in the financial picture. Red flags can include purchases that seem odd or suspicious to you, missing financial documents or incomplete records.
Penalties For Hiding Assets
The penalties for hiding assets during a divorce vary widely depending on the type of deception and your specific circumstances. Judges have broad discretion in deciding penalties, which commonly include a greater distribution of property to the innocent spouse and payment of her attorney's fees. Lying spouses may also face charges of contempt and perjury.