August 2013 Bar Bulletin
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August 2013 Bar Bulletin

Can You Take It with You? Divorce and Voluntary Disclosure

By Bo Weintraub


In dissolutions, especially highly contested ones, it is often a mental and emotional struggle for the divorcing party to disclose all property, so that it may be divided and parceled into smaller bits for transfer and consumption to the other party as they see fit.

It is a bitter pill to swallow for many. For some, it is too much, too soon. Some clients live in alternate legal universes, where each divorcing spouse keeps the income they made ... because they made it. Similarly, the debt goes to the spouse who incurred it. It's just common sense, they assert.

Alternatively, they will understand the principle of community property, and accept a 50/50 division, but only for certain assets, e.g., yes for small cash accounts, but retirement is not included (unless the accounts are large and retirement small, then vice versa).

Then there are clients with severely impaired memory when it comes to recalling assets. Ironically, many have no such difficulty reciting their spouse's assets in excruciating detail. For these reasons, and numerous others, some clients fail to disclose all their assets.

Case law explicitly provides that at the time of dissolution all property is brought before the court for a "just and equitable distribution."1 It does not matter if the parties have settled amicably and agree that disclosing most assets is enough. A court cannot determine a "just and equitable" distribution without full disclosure of all the property.

If the property rights of the parties are not brought before the court in some appropriate manner, such rights are not, and cannot, be affected by the decree.2 There must be sufficient specificity in decrees of dissolution to identify the assets and their disposition; the requisite specificity is not present if an asset is not even mentioned.3

A decree entered without full disclosure is subject to an action to vacate. Community property not awarded in the decree due to fraud, "misrepresentation or other misconduct" may be recovered by a CR 60(b)(4) action to vacate the decree.4 All this presents troubling ethical issues for attorneys dealing with a client's mental/psychological "asset block."

The Rules of Professional Conduct, however, are explicit; in particular, RCP 3.3, Candor Toward the Tribunal. RPC 3.3(a)(1) and (a)(2) state that a lawyer "shall not knowingly make a false statement of fact to a tribunal or fail to correct a false statement of material fact previously made, nor knowingly fail to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client unless prohibited by Rule 1.6." Note in the context of RPC 3.3, the permissive disclosure exceptions to RPC 1.6 become mandatory.

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