Can Non-Disclosure of Assets Lead to a Lawsuit?

If you are facing a divorce in the near future it is absolutely crucial to understand the value of your honesty in divorce proceedings. Although the thought of splitting your property with your ex may turn your stomach, attempting to hide assets will have much worse consequences. It’s possible that the discovery of previously undisclosed assets could lead to an overturning of a divorce agreement or pay even lead to legal penalties for the spouse who failed to disclose.

Mistakes May Happen

It’s possible that you might discover your spouse did not disclose a particular asset during divorce negotiations, but it was an honest mistake. Most courts will generally uphold that property and assets discovered after a judge has already issued a final judgment for a divorce are community property. However, it is also possible for a judge to review the divorce agreement to determine if an overturning or a new agreement is in order.

Each spouse in a divorce has a fiduciary duty to maintain financial records and provide those records when required. Although some old assets or property may “slip through the cracks,” it’s important to know your options if you discover your ex intentionally hid assets. An injured spouse who discovers non-disclosure can file a civil suit for restitution and may even receive punitive damages as well.

Intentional Non-Disclosure

If one spouse in a divorce negotiation intentionally tries to hide a particular asset during the dissolution process there are several possible consequences. Doing so constitutes a breach of fiduciary duty, and the court will likely investigate the extent of the non-disclosure. Depending on the specifics of such a situation, the court may award 50% of the value of the non-disclosed asset to the other spouse plus additional legal fees as damages. The court may also award 100% of the asset to the injured spouse if the non-disclosure arose from fraud, malice, or oppression.

The spouse who attempted to hide assets during dissolution proceedings may also face fines or other monetary sanctions from the court. The date of separation and the date the court accepted the finalized divorce agreement may also come into play. For example, if the discovery of a hidden asset occurs after a final judgment, the injured spouse may petition the court to overturn the original judgment on the basis of fraud.

It’s also possible for non-disclosure of assets to lead to criminal charges for fraud and/or perjury. When you participate in a divorce negotiation or hearing, you do so under oath and your statements are on the permanent court record. Lying under oath may lead to fines, restitution payments to an injured ex-spouse, or even jail time in some states. Most judges do not look kindly toward individuals who attempt to hide assets or who fail to produce acceptable financial records to prove their fiduciary duties.

Protect Yourself and Prepare

If you are unsure about your fiduciary duty to your soon-to-be ex-spouse then a reliable divorce attorney will be a great asset. Your attorney can help you understand your obligations and the assets you will need to disclose. Some assets may fall under community property if the couple acquired them during the marriage, but separate property each spouse owned prior to the marriage will likely remain separate.

Hiding an asset may seem like a good way to prevent your ex from taking too much in a divorce, but you run a big risk of losing that asset entirely if the court discovers your concealment. Ultimately, honesty is the best policy when it comes to divorce negotiations. No matter what you think your spouse deserves, you cannot breach your fiduciary duty or you run the risk of incurring significant legal penalties.