What is Fiduciary Duty During Michigan Divorce Proceedings?
While we primarily think of marriage as an arrangement involving romantic partnership and familial obligations, marriage also entails legally recognized financial commitments between the individuals who are involved. This financial element can make the process of divorce additionally complex, because the financial obligations continue until the process of the divorce is completed.
The fiduciary duty of one spouse to the other are binding until the divorce is final and all assets from the estate have been apportioned by the court or mediator. One of the primary elements of spouses’ fiduciary duty during divorce proceedings is honest and full financial disclosure.
Declarations of Disclosure
During the divorce proceedings, each spouse must provide documentation that accounts for all of their assets, as well as any debts or liabilities. This document is known as a Declaration of Disclosure. In order to be in full compliance with the laws of Michigan, each party must provide a full and honest description of their assets and liabilities.
In the Declaration of Disclosure, individuals must be sure to document even those assets that may not immediately come to mind, beyond common effects like cars, properties, and non-liquid holdings. Full disclosure must also account for items such as collections of valuable material objects, deferred payments, and capital gains.
Accidental omissions in the Declaration of Disclosure sometimes happen, but these mistakes can still subject that particular spouse to penalties and fines. So, ensuring comprehensive disclosure is a key element of fiduciary duty that will move the divorce process along in the most efficient and cost-effective way possible.
Fraud and Hiding Assets
Intentional failure to fully disclose money, properties, or other assets to the detriment of the other party is illegal and can result in charges of fraud, along with other severe penalties. However, even in the face of legal ramifications, many divorce proceedings can be contentious. This sometimes can lead spouses to attempt to hide resources from the other, in violation of their fiduciary duty.
Some of the illegal forms of asset hiding include the following:
- Concealing documentation that details stocks, bonds, or other non-liquid assets
- Laundering capital through a business owned by a family member or friend
- Converting capital into possessions, such as works of art or materials related to a hobby
- Conspiring with a third party to pay a falsified debt to avoid disclosure
Such instances of fraud are very serious and can result in the courts awarding all hidden assets to the spouse who has been defrauded, forcing the fraudulent spouse to pay attorney and court fees, or holding the fraudulent party in contempt of court.
Discovery – Finding Hidden Assets
When one spouse has reason to believe that the other is hiding assets, their attorney may engage in various discovery strategies bring those assets to light. These strategies can involve everything from sending informal requests for additional information, to formal legal discovery processes (such as, depositions or filing subpoenas), to hiring experts to find evidence of hidden assets, value those assets, and testify.
These various discovery approaches can incur a range of costs and present differing levels of effectiveness. However, discovery processes are a common approach when there is reason to think that one party is in violation of the Michigan laws surrounding fiduciary duty during the process of divorce.
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