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During A Divorce, Hiding Assets, Transferring Property, Or Cutting Off Access To Joint Accounts May Subject A Spouse To Some Fairly Severe Consequences

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During a divorce, a spouse has to be very careful that he or she does not get in trouble with the judge in handling property and accounts.  Recently, we handled a divorce where the husband and wife purchased numerous movies, television episodes, songs, books, and apps through iTunes (as a couple). During the divorce, the relationship became heated, and, in a fit of rage, our client changed the password to the family iTunes account, locking her husband out of their joint account.  When the husband’s lawyer complained to us that the wife had locked her husband out of the account, we quickly advised our client that she was in jeopardy of violating court orders that take automatic effect in every divorce case.

Standard restraining orders (commonly called “ATROs”) take effect automatically upon filing for divorce. ATROs are set forth on the back of the Family Law Summons (FL-110), which is pictured below.

ATRO

 

MOST COMMONLY VIOLATED ATRO’S ORDERS ARE AS FOLLOWS:

  1. CHILD MOVE-AWAYS: Neither parent can remove his or her children from the state “without the prior written consent of the other party or an order of the court.” Family Code § 2040(a)(1).
  2. PROPERTY TRANSFERS: Both the husband and wife are prohibited from “transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate,” without the other party’s written consent or a court order, “except in the usual course of business or for the necessities of life.”
  3. EXTRAORDINARY EXPENDITURES Both the husband and wife are required to notify the other of any proposed “extraordinary expenditures” at least five business days before incurring those expenditures and to account to the court for all extraordinary expenditures made after service of divorce papers. Family Code § 2040(a)(2).
  4. INSURANCE COVERAGE: Both the husband and wife are prohibited from “cashing, borrowing against, canceling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage, including life, health, automobile, and disability held for the benefit of the parties and their child or children for whom support may be ordered.” Family Code § 2040(a)(3)

EXCEPTIONS:
1. PAYMENT OF REASONABLE ATTORNEY’S FEES:
ATRO does not prevent either party from using community or quasi-community property, or the party’s own separate property, “to pay reasonable attorney’s fees and costs in order to retain legal counsel in the proceeding.” A party who uses community or quasi-community property to pay his or her attorney’s fees and costs retainer must account to the community for use of the property. NOTE: it is important to keep a paper trail documenting the source of all attorney’s fees otherwise you may have to suffer the consequences of violating the TRO if you cannot provide the requisite accounting information to the court.

2. CERTAIN ESTATE PLANNING CHANGES:
The Family Code reserves each spouse’s right unilaterally to make certain estate planning changes after the commencement of a marital status action regardless of the automatic TROs. Specifically, Family Code § 2040 does not restrain: 1) Creation, modification or revocation of a will. 2) Revocation of trusts and other non-probate transfers upon notice: if the instrument is revocable by its terms, it may be revoked provided that notice of the change is filed and served on the other party before it takes effect. 3) Elimination of right of survivorship: i.e., severing joint tenancies with the other spouse or terminating the survivorship feature in community property with right of survivorship (as long as notice of the change is filed and served on the other party before it takes effect). 4) Creation of unfunded revocable or irrevocable trust. AND 5) Disclaimer of beneficial interest. 

POSSIBLE PENALTIES FOR VIOLATING ATRO’S ORDERS:
Violation of the ATROs may subject a spouse to significant penalties. Such penalties can include monetary sanctions (paying money to the other spouse and/or his or her attorney), or being held in contempt of court, which may include actual jail time.

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