Hiding Assets in Divorce: Legal Consequences Under California Family Code

Divorcing couples have several obligations towards one another, including the duty to abide by the full disclosure requirements outlined in the Family Code. Both husband and wife must disclose all material facts and information regarding the existence, characterization, and valuation of all assets and debts.

California courts were recently called upon to address the issue of a spouse’s failure to disclose, in the case of Marriage of Feldman (2007) 153 Cal.App.4th 1470. The court was asked to review Elena Feldman’s request for attorney fees and sanctions against her husband Aaron Feldman, because Aaron had failed to disclose several financial transactions during their divorce proceedings, including the purchase of a home and $1 million bond, and the existence of a 401(k) and several other investments.

There are several Family Code sections setting forth each spouse’s disclosure requirements. They include section 721(b), which imposes upon each spouse the duty to fully disclose all assets and debts, as well as imposes an obligation to “provide equal access to all information, records, and books that pertain to the value and character of those assets and debts…”

These duties and obligations exist between spouses while they are married and continue until the date on which all assets or liabilities are distributed. Under Family Code section 2102, each spouse has a spontaneous and voluntary duty to provide to the other spouse information and documents relating to “all activities that affect the assets and liabilities of the other party.”

Remedies for failure to abide by the disclosure requirements include an award of fees, as well as an award to the other spouse of 50 percent of any asset that is undisclosed.

These duties obligate both spouses to provide information even if the other spouse does not ask for it. In Feldman, Aaron provided answers to discovery and even completed a Schedule of Assets and Debts listing most of the assets, but he left out a few, and the trial court found his conduct frustrated the policy of law, which promotes settlement. The trial court awarded Elena $140,000 in fees and ordered sanctions for $250,000. Aaron, of course, did not like the trial court’s decision and appealed.

California’s Fiduciary Duty in Divorce: More Than Just Disclosure

In California, the marital relationship carries fiduciary duties akin to those found in business partnerships. These include the obligation to act with the utmost good faith, fair dealing, and honesty. One of the most important elements of this duty is financial transparency, not merely in response to formal discovery requests, but proactively.

Each spouse is expected to voluntarily and without delay inform the other of:

• The nature, extent, and value of any real or personal property they own
• Any debts or liabilities accrued before or during the marriage
• Any recent transactions involving marital property, such as the sale of a business, creation of a trust, or gift transfers

The failure to fulfill these duties, whether intentional or negligent, can result in significant legal and financial consequences.

Expanding the Legal Foundation: Key Statutes and Their Implications

To understand the full scope of disclosure requirements, it’s important to consider multiple provisions of the California Family Code:

Family Code §721(b)

This statute governs fiduciary duties between spouses during marriage and separation. It emphasizes that each spouse must provide the other with access to all books, records, and information concerning shared assets or debts.

Family Code §2100–2107

These sections regulate the procedural aspects of disclosure. They require:

• A Preliminary Declaration of Disclosure at the beginning of the divorce
• A Final Declaration of Disclosure before settlement or trial
• Full transparency regarding income, expenses, assets, and debts

Family Code §1100(e)

This provision addresses community property management and mandates that neither spouse shall make decisions regarding shared property without the consent of the other when it materially affects their interest.

These laws form the basis of financial fairness in divorce and set a high bar for mutual accountability.

What Needs to Be Disclosed?

The duty to disclose applies to both tangible and intangible assets and covers all financial activities that could influence the outcome of the divorce. This includes:

• Retirement accounts such as 401(k), pensions, IRAs
• Stocks, bonds, real estate, businesses, and intellectual property
• Personal loans made to others, joint bank accounts, or cryptocurrency holdings
• Debts, including mortgages, credit card balances, and personal loans
• Any change in asset value during the separation period

Even if a spouse believes the other already knows about an asset, the law requires it to be disclosed formally and with documentation.

Behavioral Cues Courts Watch For: Beyond the Paper Trail

In evaluating whether a spouse has met their legal obligations, courts often look at conduct. Delayed responses, evasive answers, or partial disclosures, even if unintentional, can be seen as tactics to frustrate the divorce process.

The court may consider:

• Whether the omissions were deliberate or negligent
• Whether the non-disclosing party stood to benefit unfairly
• The extent to which disclosure failures affected the other spouse’s decision-making
• Whether the failure to disclose was corrected before or after being discovered

The law treats silence and omission with the same seriousness as active concealment.

Legal Remedies for Breach of Disclosure Duties

If a party fails to meet their fiduciary obligations, California courts may impose several remedies, including:

1. Awarding Attorney Fees and Costs: This compensates the injured spouse for the effort and resources spent uncovering hidden information.
2. Asset Redistribution: The court can award the injured party up to 100% of the hidden asset’s value. This was famously enforced in the Marriage of Rossi, where a wife won the lottery and tried to hide it.
3. Civil Sanctions: Courts can issue monetary fines to deter future non-disclosure.
4. Post-Judgment Revisions: Even after a divorce is finalized, previously undisclosed assets can reopen the case and result in modified settlements.

Case Law Spotlight: Marriage of Feldman (2007)

In the Marriage of Feldman, the husband’s failure to disclose key financial holdings during the divorce proceedings led to a massive financial penalty. Despite having filed a Schedule of Assets and Debts, Aaron Feldman did not disclose several high-value transactions, including a million-dollar bond and a retirement account.

The court found that Aaron’s behavior thwarted the spirit of mutual transparency and accountability. The result:

• $140,000 in attorney fees awarded to Elena
• $250,000 in sanctions imposed on Aaron
• A clear warning from the appellate court that disclosure is not optional

This case is now widely cited in California family law as a benchmark for enforcing fiduciary standards.

Common Mistakes That Lead to Penalties

Even honest spouses can run afoul of the law by making one or more of these common errors:

• Assuming verbal disclosure is enough without documentation
• Believing certain assets (like inheritances) don’t require disclosure
• Failing to report fluctuations in asset value during separation
• Not updating the disclosure form when circumstances change
• Transferring funds to family or friends, thinking it avoids detection

Each of these can trigger scrutiny and result in legal complications that prolong the divorce and increase costs.

Frequently Asked Questions

What if my spouse doesn’t ask about certain assets? Am I still required to disclose?

Yes. California law requires proactive disclosure. Waiting to be asked is not a defense.

Can I update disclosures after filing?

Yes. You are legally required to amend your Preliminary or Final Declaration if your financial situation changes.

What happens if a hidden asset is discovered after the divorce is final?

The court may reopen the case and revise the property division. Penalties, including awarding 100% of the asset to the other spouse, are possible.

How does Reape Rickett help uncover hidden assets?

Our legal team uses subpoenas, forensic accountants, and formal discovery tools to track down financial discrepancies and ensure full compliance.

From Legal Strategy to Financial Fairness: Reape Rickett Is Your Trusted Partner

At Reape Rickett, we don’t just handle divorce; we engineer legal strategies grounded in truth, transparency, and results. We understand that disclosure isn’t just about forms, it’s about fairness.

Our attorneys specialize in:

• High-net-worth divorce and asset tracing
• Identifying and proving non-disclosure or misrepresentation
• Preparing ironclad disclosures to prevent future litigation
• Leveraging legal remedies when your rights are violated

If you’re concerned about financial transparency in your divorce, don’t wait until it’s too late.

Schedule a confidential consultation with Reape Rickett today.

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