There Are No Secrets in Divorce: the Duty to Disclose

The decision to end a marriage can be one that is both deeply personal and highly complex. However, deciding to commence the divorce as a formal legal proceeding, also known as a dissolution of marriage proceeding, is often a process full of unknown steps and sometimes, unexpected surprises for many people. One of the biggest surprises is the duty to disclose.

It is the public policy of California to ensure an equitable division of community assets and liabilities for the two parties in a dissolution of marriage. Thus, from the commencement of the proceeding, until the final distribution of property, the parties have an ongoing duty to disclose.  Disclosure includes disclosing all assets and liabilities, investment opportunities,  and income and expenses.

Hard Lesson

In 2001, Denise Rossi learned the hard way about California’s public policy regarding disclosure requirements. After winning the lottery with coworkers in 1996 – a jackpot of more than $6 million – Denise concealed her lottery winnings from her husband, Thomas. Denise, at the time, was contemplating divorcing Thomas.

In fact, Denise went so far as to ask the Lottery Commission how she could hide her winnings from Thomas, as she was afraid Thomas would take her money. After filing for divorce from Thomas in 1997, Denise continued to hide her lottery winnings from her husband throughout the divorce proceeding, and used her mother’s address to collect the checks.

After settling the dissolution action, Thomas found out about Denise’s lottery winnings and moved to set aside the dissolution of marriage, charging Denise with fraud, breach of fiduciary duty and failure to disclose. Thomas ultimately won, and the trial court awarded Thomas one hundred percent of the lottery winnings.

Uncomfortable Task

The Court’s extreme action of awarding Thomas all of the lottery winnings illustrates that the full disclosure of marital assets, including debts, is an absolutely essential component in a divorce proceeding. This is because it is crucial for the court to properly determine the resolution of property and support issues.

The duty to disclose is mandatory, albeit a burdensome and uncomfortable task for many people. Some people are unsettled, and surprised, about just how transparent and candid the disclosure process must be; is it not just the community assets and debts that must be disclosed, but also one’s separate property assets and debts. In fact, prior to deciding  support or attorney’s fees issues, whether through settlement or litigation, the court will require each participant in a marriage dissolution to disclose all of their assets and debts; income and expenses, to their soon-to-be former spouse, and, if necessary, to the court, too.

Severe Consequences

Failure to comply with the duty to disclose can result in severe consequences, as Denise Rossi experienced. Other consequences of not complying with the legally imposed disclosure requirements can involve monetary sanctions, including payment of the other party’s attorney’s fees. The court can also prevent the offending spouse from presenting his or her case in court, set aside an earlier court order or judgment, or as in Denise Rossi’s case, award an entire asset to the non-offending spouse.

Understanding the legal procedures and requirements of the divorce process and how they impact one’s own expectations of the divorce process is essential to successfully navigating through a divorce. The bottom line is that the days of hide and seek when it comes to finances are over (and have been for some time), and the court will come down hard on a party that deceives and misleads their spouse during a divorce.