Division of Property and Debt Continued

If there is a dispute regarding the date of separation, however, the decision by one spouse to end the marriage, must be accompanied by some outside evidence or act that demonstrates the marriage is over, such as a physical separation of the parties, whether to separate residences or to separate ends of the house. There is a famous appellate case where a wealthy dentist moved onto his yacht with his dental assistant, and for five years continued to go home every weekend to have his wife do his laundry, spend time with his children, go to social functions with her, etc. When he finally filed his divorce petition he listed the date he moved to the yacht as his date of separation. His wife disputed the separation date, and won on the appellate court level because her husband’s actions were more in line with someone intending to remain married. As a result, his wife enjoyed a much larger settlement because her husband made and invested a great deal of money in that five year period.

Certain types of property and debt are considered “separate” property. Property or debt acquired before the date of marriage or after the date of separation, belongs to the spouse who acquired it. Some types of property and debt, however, are still considered separate property even when acquired during the marriage. These include money or property which is inherited, or given to one spouse as a gift; student loan debt of one spouse, since the benefits of the purchased education usually long out-last the marriage; and personal injury settlements or judgments, other than any amounts attributed to the uninjured spouse’s “loss of consortium” of the injured spouse (i.e., loss of the enjoyment of a healthy, happy spouse). Other typical types of separate property include gifts from one spouse to the other (including engagement and wedding rings), and personal effects, such as clothing, jewelry, etc.

Because California is a “no-fault” state (i.e., the court does not care why the marriage is over, including if one spouse cheated on the other), there is no penalty against the party who is perceived to have caused the break-up of the marriage, and no financial benefit to the spouse who is not at fault. There is one exception, however, if one spouse can prove that the other committed a “breach of fiduciary duty” against him or her. Spouses are like partners in a business. Business partners have a fiduciary duty to each other to be fair, honest, and open about their business dealings, otherwise, one partner can sue the other for monetary damages for “breaching” their contract to conduct business together. Appellate courts have ruled that marital partners hold the highest fiduciary duty to each other, a duty even higher than that of ordinary business partners. When California became a no-fault state, the law was changed to state that whatever either spouse did during the marriage, the other spouse is presumed to have been aware of it, and to have consented to it. Both spouses in a marriage are presumed to have equal access and control over their financial dealings. Often, of course, this is not the case, even today. If there is trust and respect between spouses that might not be a problem if they don’t always inform each other. However, if one spouse conceals certain things from the other during the marriage, at trial that spouse may get a lesser portion of the community assets, or a greater portion of the community debts as a result of his or her breach of fiduciary duty. Examples include one spouse hiding assets from the other and failing to disclose those assets during the divorce, or running up gambling debts on credit cards and attempting to hide the fact while trying to make the other spouse share in the debt. Illegal drug abuse and prostitution may also be considered breaches of fiduciary duty if they impact the overall community finances.

This fiduciary duty extends to how parties conduct their divorce proceedings. When the divorce petition is filed, it is also accompanied by a “Summons” which is a two page document explaining to the spouse being served with the divorce papers, that he or she is being “sued,” giving “notice” of that fact. On the second page of the Summons are several paragraphs explaining that neither party is allowed to change certain things until the divorce is final. These include that they may not move or change the nature of assets, except in the usual course of business, or for the necessities of life, they may not remove children from the state, they may not cancel or change any life, health automobile or other insurance policies, currently being paid, etc. During the divorce, the fiduciary duty continues, in that both spouses must serve paperwork on each other disclosing all their assets and debts, and income and expenses, whether community or separate. This paperwork is called a “Declaration of Disclosure” and comes in two forms, a Preliminary and a Final Declaration of Disclosure. The Final Declaration of Disclosure may be waived if the case is settled, but the Preliminary Declaration of Disclosure must be served by the parties on each other, and may not be waived. It is not filed with the court, but a proof of service form, showing that it has been served must be filed with the court for the divorce to be completed. The Declaration of Disclosure is a one page form, to which two other forms are filled out and attached, one being the “Schedule of Assets and Debts” the other being the “Income and Expense Declaration.”

If a divorce judgment is granted, and it is later discovered by one ex-spouse that the other did not fully disclose all the assets in his or her Declaration of Disclosure, the other ex-spouse may request that the court “set-aside” the judgment, and reopen the case. The ex-spouse who failed to fully disclose, may be sanctioned by the court and have to pay the other’s attorney fees. Usually when a divorce judgment is set-aside, it is only those particular issues which are reopened, and the marital “status” of the parties remains dissolved.

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