California is a community property state which generally, for purposes of divorce, means that in theory each spouse is entitled to one-half of all property acquired by either spouse during marriage other than those acquired by gift or inheritance or by funds stemming from gifts or inheritance. Unfortunately, it is quite common for one spouse to hide assets from the other spouse in anticipation of divorce. This post shall address what happens if one spouse wrongfully deprives the other of their fair share of the community property because they either hid the asset(s), sold the asset(s), or transferred the asset(s) to a third party.
A person contemplating divorce may be quite tempted to do this due to the effect it would have on the dissolution proceedings. Imagine that when two people get divorced, the judge throws everything each person has acquired (income, property, etc.) during marriage into one big pot to be equally divided. If a person feels that 50% of the pot is more than what the other spouse deserves, he or she might attempt to hide, sell, or transfer some assets prior to the proceedings.
Common Ways Spouses Hide Assets
There are far too many ways a person may go about hiding or “protecting” assets during or in preparation for a divorce to mention, however, the most common way is likely where the individual transfers title to an asset to a third-person who holds it in trust for them. This is even more common in cases of elder-divorce. In an elder-divorce case, it is quite common for one spouse to transfer property to their children. Even if the child who is receiving the gifted property is the progeny of both spouses, the transfer is still invalid if it was done without the written consent of the other spouse and the property is considered to have belonged to the community.
An individual may also transfer the asset into the name of a corporation. Unfortunately, it is rather easy for an individual to set up a corporation of some sort without having the corporation linked to the individual’s name so it would be difficult to trace.
Unilaterally selling a community asset is also common. A spouse can sell a community asset, other than real property which requires written consent, without written consent of the other spouse if it is for valuable consideration and the funds resulting from the sale go back to the community. However, a spouse may not gift or transfer community property without the written consent of the other spouse.
Court’s frown highly upon the hiding or misappropriating of community assets due to the fiduciary duty owed between spouses to act in good faith in regards to the management of community property assets. As a result, the consequences of breaching that fiduciary duty by wrongfully hiding, selling, or transferring a community property asset without the consent of the other spouse can be rather harsh. Family law court is a court of equity which means that the rules and standards related to family law are the ruling thumb, however, a family law court has the power to deviate from the guidelines and make orders that they find to be fair under the circumstances.
In the case of hiding an asset, the Court can order the other spouse’s name be added to title or otherwise alter the rights of ownership. If the Court finds the spouse who wrongfully deprived the other of the property did so with malice, fraud or oppression the Court has the power to order 100% of the community property asset to the victim spouse. Where one spouse has wrongfully gifted or transferred a community property asset the wronged spouse is entitled to either have the gift set aside or recover ½ the interest in the property from the spouse who wrongfully transferred the property. Attorney’s fees related to the hiding or misappropriated assets are typically awarded to the victim spouse as well.
Going through the process of divorce can be extremely overwhelming. Suspecting your spouse of foul play with regards to community property can make the process all the more daunting. If you are facing such issues, please call the Law Offices of Robert J. Nachshin, P.C. at 310-478-4600.