Friday, December 13, 2013

Duty to Disclose

Stuart Strumwasser and Jennifer Johnson got a divorce in New York in 2007. Shortly before filing for divorce, Johnson told Strumwasser that she was going to San Francisco to visit her brother. While in San Francisco, Johnson purchased stock in Twitter. She filed for divorce six months later. The stock was never disclosed or addressed in the divorce settlement. Strumwasser discovered the stock well after the divorce was finalized. As part of the divorce settlement, Johnson was ordered to pay $2,465 per month in child support although he was making a modest income because Johnson demanded he pay support based on income substantially higher than his actual income.

That Twitter stock is now valued at between $10 and $50 million. Strumwasser is requesting $120,000 plus 30% of her Twitter shares.

In California, if a spouse fails to disclose an asset, it is considered an omitted asset. The court reserves jurisdiction (the power to resolve the issue) over the disposition of omitted assets even after a judgment is entered. If the court finds that the omission was intentional or fraudulent, then there are consequences to the party who fails to disclose. Such consequences  can include assigning the entire asset or the entire value of the asset to the other spouse regardless of whether that asset would have been considered community or separate property. Since the penalties can be this severe, it’s important to always disclose everything during a dissolution. In California, spouses not only have a duty to disclose everything (assets and debts) to the other party, they have a duty to update any financial information if it changes during the case. 

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