Family Code section 2556 - "Dividing Omitted Assets"

DIVORCE TIPS FOR OMITTED ASSETS

FAMILY CODE SECTION 2556

This is a critical statute to invoke where you learn, after the fact, that an asset or obligation that existed when the case was filed, settled, or tried to a judge was somehow forgotten, ignored, or omitted from the equal division that is required by Family Code section 2550. The first place you want to look if you believe that the existence of an asset was not fairly disclosed to you is the Preliminary Declaration of Disclosure and, where the parties' haven't waived it (always a bad idea), the Final Declaration of Disclosure. This is one reason why it is so darn important that you ensure that you give complete disclosures in your PDD or FDD, including supporting documents (called "MFI's" for "material facts and information" that is mentioned in Family Code section 2105(b)(1). Failure to cover your fanny by full disclosure not merely exposes you to set aside motions possibly years later, it could amount to a breach of fiduciary duty claim that carries dire consequences (see FC section 1101(g) and (h).

You frequently see this section referenced in Marital Settlement Agreements and Stipulated Judgments, expressly reserving those rights - which is a good provision to include. However, even where the MSA or Judgment is silent about omitted assets, you still have a statutory right to seek to claim them upon discovery. This is particularly true where the other party concealed the asset or otherwise failed to disclose it, so that it is sometimes combined with a claim for breach of fiduciary duty damages under Family Code section 1101, et seq. The penalty for concealing a community property asset may be an award of 100% of its value, but at least 50%, plus attorney fees. There likely will be no penalty for failing to disclose a truly separate property asset, although their can certainly be consequences during the proceedings for failing to do so - particularly when the other party is crying "poor" in opposition to support or attorney fee claims.

A community asset is likely to be considered omitted if (1) it is not expressly or generally disposed of in the Judgment or (2) where it was not listed in the Preliminary or Final Declaration of Dislcosure.


CALIFORNIA FAMILY CODE

DIVISION OF PROPERTY

Family Code Section 2556

In a proceeding for dissolution of marriage, for nullity of marriage, or for legal separation of the parties, the court has continuing jurisdiction to award community estate assets or community estate liabilities to the parties that have not been previously adjudicated by a judgment in the proceeding. A party may file a postjudgment motion or order to show cause in the proceeding in order to obtain adjudication of any community estate asset or liability omitted or not adjudicated by the judgment. In these cases, the court shall equally divide the omitted or unadjudicated community estate asset or liability, unless the court finds upon good cause shown that the interests of justice require an unequal division of the asset or liability.


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