Declaration of Disclosure: Failure to disclose properly

Declaration of Disclosure: What if I fail to disclose properly?

Posted February 13, 2023

In prior articles, we’ve discussed generally the duty to disclose and some of the main documents that make up the Preliminary and Final Declarations of Disclosure. Despite this duty, the reality is that some people inevitably do not want to disclose all of their assets and earnings. Sometimes their reasoning is that “this is mine, so why does it matter?” Other times, they are seeking to gain an advantage by their nondisclosure, or they do not want to do all of the work to disclose because it can feel burdensome (especially when they are a spouse that does not want the divorce). Many reasons exist for why someone will not want to disclose, but they all result in the same consequences.

Recall your duty to disclose

California law requires spouses in a contested divorce proceeding to fully and accurately disclose all assets, debts, income, and expenses to their spouse. All assets and debts must be disclosed—meaning it does not matter whether an asset or debt is separate or community property.

Why must you disclose?

The punishment for failing to properly disclose is tied directly to each spouse’s fiduciary duties toward the other spouse.

Until the assets and debts of the parties have been formally divided, each spouse, in managing and controlling community assets and liabilities, is bound by the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. They have the duty of the highest good faith and fair dealing and shall never take unfair advantage of the other spouse.

What acts are punishable?

Any action a married person takes in breach of their fiduciary duty that results in impairment or detrimental impact to the other spouse’s interest in the community estate can result in the Court punishing the bad-acting spouse—and the fiduciary duty includes disclosure.

Specifically, the duty includes the full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest and debts for which the community is or may be liable, and to provide equal access to all information, records, and books that pertain to the value and character of those assets and debts, upon request.

Further Reading » Estate Planning with Uncle Sam

What’s the punishment?

The punishment for failing to meet your duty to disclose may vary depending on the extent of the failure to disclose, the stage of the case, and how egregious a spouse’s conduct is.

While the case is ongoing and has not yet reached a judgment, and a party fails to properly disclose, the court will, at minimum, impose monetary sanctions against the noncomplying party. The purpose of the sanctions is to deter repetition of the conduct or comparable conduct and must include reasonable attorney’s fees and costs incurred to compel the party to disclose.

Following the judgment, the Court can make an order setting aside a judgment for either spouse failing to comply with the requirements for Preliminary and Final Declarations of Disclosure. The Court can decide to set aside a judgment in whole, or the court may limit the set aside to those portions of the judgment materially affected by the nondisclosure.

Most egregiously, if a spouse is found to have not disclosed assets after serving Declarations of Disclosure, which are signed under penalty of perjury, the failure to properly disclose is punishable, at minimum, by an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and court costs. That award can increase to 100 percent of the undisclosed assets if proven by clear and convincing evidence that a spouse is guilty of oppression, fraud, or malice.

What to do?

Disclose everything! When in doubt, disclose (and also consult with an attorney). The law is extremely clear and the risk is not worth the reward.

It is important to know your rights, responsibilities, and options regarding the dissolution or legal separation process. Your disclosure obligations are the amount the most important duties you have and must be taken seriously. Our family law team at Naimish & Lewis can advise you on this and other family law matters. To schedule an initial consultation with an attorney at our firm, please contact us.

Declaration of Disclosure, Divorce, Estate Planning

Robert J. Allison, Esq.

Mr. Allison is a resolution-oriented associate attorney in our Family Law Practice. Even-keeled and fact focused, he is able to assist our clients understand their rights and obligations through the stress and smoke and mirrors presented in their divorce, custody, and domestic violence matters. During the initial consultation, and again once facts and evidence have been collected, Mr. Allison provides various strategies to help clients present their cases, considering cost, time, and client needs. He prides himself in not making false promises to his clients and is unafraid to speak the raw and sometimes harsh reality of how a Court will decide a matter given a specific set of facts and circumstances, both to his clients and to opposing parties. Many potential clients share that they are unhappy with their previous attorneys because they felt a lack of communication, an uncertainty about the family law process and timeline, and they do not understand the strategy in their case or the invoices they receive. While the legal process is complex, Mr. Allison attempts to reduce the confusion through a reasonable case management process involving client participation, because a family law case is often the most difficult period of time in a client’s life.