California divorce case may change rules on financial discovery

CALIFORNIA -- A 2007 appellate divorce case has brought recent light to the subject of full financial disclosure in California divorce law.

In In re Marriage of Feldman, a businessman did not disclose certain assets and financial transactions to his wife, although she repeatedly requested the information. Among the information Feldman wouldn't reveal was the formation of several new companies. Mrs. Feldman had learned about her husband's undisclosed assets before the divorce trial and provided her own investigation into the discovery.

Feldman claimed that his lack of disclosure was not intentional and that the secret assets were of small value compared to the whole of the estate. However, the California Court of Appeals rejected these arguments, stating that a divorcing spouse has a duty to disclose everything, which is mandatory until all assets are divided, and that such refusal to do so is not acceptable. According to the Court, Feldman was obliged to disclose all material information in writing, continue to supplement the discovery, and disclose material info before any new project began.

In the end, even though the hidden assets and transactions had not economically damaged Mrs. Feldman in any way, the trial court decided that Feldman should pay his wife $250,000 in sanctions for his failure to comply with the requested disclosure -- as well as another $140,000 in her attorney fees. The court ordered the sanctions under the sections of the TX Family Law Code related to fiduciary duty.

The moral seems to be that hiding important financial information from your spouse is never a good idea. The consequences of doing so, such as the results of the Feldman case, could be far more costly than simply agreeing to a fair property division.