Failure to Disclose Assets in a Divorce

Failure to Disclose Assets in a Divorce

What happens if my spouse fails to disclose or tries to hide assets in our divorce?

This is an unsettling question that faces many divorcing or separating couples. The issue was addressed in the recent case of Eberhardt v Eberhardt which reached the Court of Appeals. In this case, the Court of Appeals had to decide whether the trial court was wrong in dividing the husband’s Fidelity Roth IRA. During the initial proceedings, the parties reached a settlement with regards to their marital property and spousal support. The settlement was drafted into a legally binding document approved by the court and contained a clause stating that; “the parties by counsel have reached an agreement with regard to all issues in this matter.” The agreement did not include provision for addressing any omitted or non-disclosed assets.  

Subsequently, the wife requested the court divide the husband’s Fidelity Roth IRA which had been omitted from the parties’ agreement due to the husband’s failure to disclose the asset earlier in the matter. The husband claimed the IRA was not addressed in the parties’ agreement, as it was in his sole name and therefore his sole property. The matter came before the trial court, and the court decided to divide the IRA between the parties. This decision was then appealed by the husband. 

The Court of Appeals referred to a clause in the parties’ agreement which specifically stated that their agreement was, “with regard to all issues in the matter”, and declared that the law of the Commonwealth of Virginia prevented a trial court from distributing an asset which is inconsistent with the parties’ agreement. Further, while the agreement of the parties did not address all of the marital property, the trial court did not have the power to add an asset to the distribution after an agreement had been approved by the court. It was noted by the Court of Appeals that the parties’ agreement failed to include a term addressing any omitted or non-disclosed property. Had it done so, the position would have likely been very different. As a result, the Court of Appeals decided that the trial court should not have divided the said IRA between the parties, and the husband’s appeal prevailed.

This case emphasizes the importance of ensuring careful and thorough drafting of any agreement reached between parties. This is to ensure that all aspects are covered and that any hidden or non-disclosed property is addressed by way of a clause in the agreement. Going to court is often very daunting for divorcing or separating parties, and many couples reach a settlement without having a fully contested hearing. However, and as this case highlights, small omissions can have an enormous effect on the outcome and the advice and representation of counsel specialized in Family Law is vital.

Failure to Disclose Assets in a Divorce
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