The obligation to disclose assets and income to one’s spouse during a New Mexico divorce is fundamental to the ability of a family law judge to devise an equal division of community property and debts. This obligation extends beyond the community assets that are acquired during the marriage. Both parties must even disclose assets that were clearly acquired prior to marriage and that both parties would concede constitute separate property. When a party hides such assets or income, it can have serious repercussions. A recent news report about a divorce in which the wife failed to disclose her investment in Twitter before the company’s IPO provides an interesting case in point.
When the couple divorced, the husband made $43,000 per year with part of this income going toward child support. The lawsuit filed against the man’s ex-wife contends that she flew to San Francisco while the couple were still married and arranged with her ex-husband from a prior divorce to become a first round investor in Twitter. While the husband was at home watching the couple’s children, the lawsuit alleges that the wife invested $10,000 and $50,000 in a company that made many investors millionaires after going public.
If the court finds that the funds invested were community funds, the husband will be entitled to his half of the principal and return on investment at the very least. Sometimes courts will punish a party for non-disclosure in such a situation by making an unequal division favoring the husband to punish the wife for violation of her fiduciary duty of disclosure during the divorce. The judge also might award the husband reimbursement of the attorney fees and court costs associated with the legal proceedings to obtain his share of the community property investment.
While the husband may not have any right to a share of the invested funds or appreciation of the Twitter investment if the entire amount of the investment was from his ex-wife’s separate property, the litigation over this issue demonstrates that there is little upside to trying to hide assets from a spouse during a divorce. There is a high probability that the hidden property or funds will be discovered during or after the divorce. When the judge discovers such a violation, there is a strong likelihood that the judge will impose some form of sanctions to penalize the offending spouse.
In a famous example of such a situation, a woman who purchased a lottery ticket failed to disclose that she had won $1.3 million in the lottery less than two weeks before she filed for divorce. While the husband would have been entitled to half the winnings because this case occurred in a community property state like New Mexico, the court awarded the husband the entire amount of the lottery winnings as punishment for the wife’s violation of her duty of disclosure.
The above information is designed solely to illustrate general principles of law, and does not constitute a specific legal opinion on individual cases. We suggest that you contact experienced legal counsel for a specific opinion tailored to your individual circumstances.
If you have questions about property division during divorce, Jay Goodman & Associates offers a free consultation in our centrally located offices in Santa Fe and Albuquerque during which we discuss your situation and answer your questions. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights and options.