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Friday, March 20, 2015

What is Non Disclosure and Can I Get Into Trouble for It?

The simple answer is Yes, one can get into big legal issues,  because "non disclosure" is a huge litigation topic in divorces.

When one spouse (usually the high wage earner) tries to or has already hidden a lot of the financial transactions that have occurred so  the other spouse has no idea that it happened; if one does not know about it, one normally does not try to "divide" it because one doesn't know anything about its existence.

If the spouse that never divulged the asset never lists the asset or assets, and the other spouse finds out afterward, the Family Law Code has specific laws for how long a person has to try and fix the error.  Waiting too long may possibly cause a complete loss.  This is why it is important to understand one's rights in divorce, and attorney has seen many litigants try to save $1,000 in fees by not using any discovery,  but end up losing far more than that when it was too late to fix or change what happened.

Many of the forms used in divorces are set up so that the disclosure of financial related items are set forth for division. for example, Judicial Council Form FL-140 [declaration of disclosure]           
and then FL-145 [form interrogatories].....http://www.courts.ca.gov/documents/fl145.pdf

These  basic inquiries and answers may lead to the discovery of assets that one spouse knows nothing about at all.  While this will not happen in all cases, it has become fairly common for attorney to see pro se litigants who are unaware that the pensions (which may be split in divorce) are not set up in the same format, and may depend upon the employer, longevity, type of plan and much more....in some cases, an actuarial accounting should be performed. Pension plans may need to be joined. There can be quite a bit of variance in exactly what needs to be done, as it depends on the plan and how it is set up.

...and: http://www.divorceandfinance.org/article/349-techniques-discovering-hidden-assets-and-unreported-income-during-divorce-process

Methods of concealing assets are as varied as the personalities of the individuals involved. In their attempts to veil assets, spouses may often involve relatives or acquaintances who may or may not be aware of their complicity in the diversion of personal assets. It is not unusual to discover the placing of personal possessions or investment certificates into safety deposit boxes in the name of a family member or friend.
Paying down mortgages and credit card balances is yet another method of hiding funds in plain sight. Repayments of phony debts to friends or relatives can appear to be legitimate use of resources. Expenses for paramours such as gifts, travel, rent or tuition for college or classes may be disguised as valid outlays of funds. Assets may be transferred into the name of another family member, friend or corporate entity.
Custodial accounts established under a child's social security number as well as transfer of assets into pension, profit-sharing, 401(k), and Keogh plans are all strategies for cloaking liquid assets from the opposing party's view. Employees can work in collusion with their employers to delay business contracts, raises or bonuses until after the divorce.
The transfer of large sums of money to trusts is one way individuals may attempt to disguise assets. Another is to gift money to individuals with the anticipation of having the money returned at a later date. These patently deceptive strategies may be fraudulent as well.
Spouses who own businesses may use the corporate entity to conceal assets. Skimming cash from the business, paying salary to nonexistent employees and then voiding the checks after the divorce, and paying salaries or fees to relatives or close friends for services that may never have actually been rendered then receiving the money back after the divorce is final are all strategies used by business owners to veil cash.
The value of a business prior to a divorce can be lowered artificially by delaying the signing of lucrative long-term business contracts until after a divorce settlement is reached. Unreported income on tax returns and financial statements can reduce the perceived value of a business to the detriment of the other party in the divorce.

Attorney has also seen cases where spouses believed that they had funds set aside for themselves and found out later that the other spouse had liquidated their accounts without them knowing it. Also in bankruptcy, various plans/pensions can be treated differently depending on the type and category and if there are no exemptions for it, one's funds can be at risk of loss. Filing bankruptcy usually requires pre-planning so that no errant steps are taken, but legal choices can help avoid loss without being illegal. Tax refunds are often lost due to no knowledge of exemptions/or timing issues.

When non disclosure takes place, and the spouse who was unaware of it discovers it, this can create additional litigation because it often takes litigation in order to have the spouse (who didn't know about the assets)-- rectify the situation. For divorces that involve higher stakes, such as valuation of a professional business, or a large business which the other spouse knows very little about-- these can be problematic due to the nature of business records.

Or, it is possible that one spouse is consistently hiding income and cash and claiming only 1/10th of what is really coming in.  These are difficult situations but not impossible. Diligence, time and dedication to uncovering the facts is required and when facts are shown proving that one spouse has used fabrication, the court can punish the offending party. Especially in spousal support, most courts heavily frown on fabrication of income, and in bankruptcy, legal fees used to obtain spousal support are not dischargeable, and child support is usually never dischargeable.

If you have a divorce case and believe that the other spouse has hidden assets or misrepresented where the money actually went, you should consult several attorneys. There may be a difference of opinion on how to approach the issues.