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FAMILY LAW ARTICLES

November 10, 2017
How and why spouses try to hide community property

Hiding assets is not uncommon. It can be done for tax or privacy reasons, but it can also be used as a weapon in divorce. Hiding assets can complicate the process for awarding child support and dividing property, often with disastrous consequences.

The leading factor for the division of assets is the line between what is community and separate property. The law in California is very simple. Community property is everything that spouses or domestic partners own together. Separate property is anything earned prior to the marriage, or inherited or given to just one of the spouses. Assets are hidden when one of the spouses in a marriage takes steps to conceal rightfully earned community property.

The consequences of hiding assets

The concealing of assets is illegal. If there is a suspicion that one of the spouses in a marriage is hiding assets, there are steps to take. Lawyers can bring in forensic accountants and business valuation experts to do a lifestyle analysis of the spouse to see exactly how the math adds up. If it is found that one spouse attempted to hide assets, there can be penalties. Plus, those assets are targeted by lawyers to be turned over in full to the victim.

Underhanded tactics and phony debt

But how exactly does someone try to hide assets? The are many ways. Among the most insidious is the creation of phony debt. It is so technical that it gets right into the weeds of California communal property law. Just as all earnings made in the marriage by either party are owned by both, so too are any debts created by either party. By creating phony debt, perhaps a “loan” taken from a family friend, the person can deduct that amount from the overall value of the total assets. Take it a step further and the victimized spouse would be responsible for half that “debt.”

If you have concerns about your spouse hiding assets or questions regarding community property, contact an experienced family law attorney.

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