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Financial Discovery in the Divorce Process

Getting the Information You Need to Protect Your Rights and Ensure an Equal Division of the Community Estate

Spouse that donít know the family personal finances-2

Though I cannot speak for every marriage in this country, let alone California marriages, there are many couples who fit into the general category where one spouse runs the financial roost and knows all the in’s and out’s of the community’s estate, and the other spouse, well, doesn’t. Whether that means the uninformed spouse has other responsibilities or aptitudes, it doesn’t matter. The point is, that one party knows everything there is to know about community assets and debts, and the other party is for the most part, in the dark. When such a couple finds themselves facing a pending divorce, it may appear from the get-go that the spouse ‘in the know’ has the upper hand, and the spouse out in the cold faces an uphill battle of insuring an equal division of the pie and just and fair support payments, if appropriate.

I can't say how many times I've sat across the table from a client only to hear them tell the same (or similar) story regarding their lack of knowledge about the community’s finances:

  • “I don’t know where all our accounts are. My husband/wife handles all that.”
  • “My husband/wife is probably hiding money (assets) as we speak, but I really don’t know how to stop him/her.”
  • “I don’t know how much money we owe on the house, my wife/husband takes care of all the finances.”
  • “I really don’t know how many properties we own or how much is owed on them. We may even own properties out of state.”
  • “I don’t know how much my husband’s company is really worth. He deals in a lot of cash.”
  • “I don’t pay the bills, and I don’t know how many credit cards we have. My spouse always takes care of that.”
  • I know my wife/husband get’s bonuses, but how much, he/she never tells me.”
  • I know my spouse makes a lot of money. I just don’t know how much. I just spend what he/she tells me I can spend.

All of these statements are invariably accompanied by a look of fear and deep concern which typically comes from ignorance on matters that are quickly becoming VERY important. Luckily, a lot of these concerns are put to rest at my initial client consultation.

The automatic “FREEZE” which California Law Imposes on divorcing couples

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It is usually during my first consultation with a client where I quickly review a couple of ground rules regarding divorce, the most important being “ATRO” (or Automatic Temporary Restraining Order).  ATRO, as the name implies, is a restraining order which is immediately triggered upon the filing of a dissolution of marriage, nullity of marriage, or legal separation. It is binding on the other party once the documents are served on him/her. If either spouse violates any term of the ATRO, they face legal penalties that can include fines and jail time, and could effect them later during the final judgment stage. Though the general purpose of the ATRO is to prevent either spouse from making changes that interrupt the lives of the children, it also protects against changes or damage to property, including the marital home, and all assets of the spouses.  The intent is to make sure the court has a clear understanding of the situation (at the time of separation) and can make decisions on custody issues and property division that are fair to both spouses.

ATRO prevents both the spouses from:

(1) Making changes to insurance policies including canceling, cashing in, or borrowing against them without getting express consent from the other spouse;

(2) Changing how property is disposed without getting express consent from the other spouse; or

(3) Modifying property ownership including selling, transferring or borrowing against the property without getting express consent from the other spouse.

ATRO also prevents against possible kidnapping, by preventing either party from taking their child to another location or out of state without getting express consent from the other spouse.

With each new client I like to review in detail what the ATRO means and what behavior it proscribes. I also like to emphasize that unless your spouse is a member of organized crime, any violations of ATRO by the opposing party are typically “discoverable” through the typical avenues permitted by the California Family Code and Code of Civil Procedure.

Financial Discovery Following the FREEZE

With the availability of forensic accounting and financial discovery, most everything can be discovered about you and your spouse's financial activities. Once the discovery process begins, each spouse must make expansive disclosures to the other spouse.  Failing to disclose everything, or misrepresenting assets in the discovery process could subject a party to financial or evidentiary sanctions later on.

With complex estates or privately held businesses, it is prudent to use the services of a competent forensic accountant. In cases where information was likely destroyed or is being concealed, there are experts who specialize in digital or electronic discovery or private investigators; both of who will perform a thorough search and discovery of all possible hidden and/or available assets. In short, it’s very very difficult in this day and age to hide anything.

For further questions about financial discovery in a California divorce in Santa Barbara, please call the Law Office of Channe G. Coles today for a free confidential consultation.

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