Can Your Spouse Liquidate Assets During Your Divorce?

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Can Your Spouse Liquidate Assets During Your Divorce?

Ending your marriage has significant financial consequences, no matter how long you’ve been married or the state of your bank account. The last thing you want to deal with is further economic disruptions, especially when you’re already trying to deal with asset division. That’s why it can be a serious problem if your spouse decides to try to liquidate assets during your divorce.

Luckily, California has laws intended to protect you from this kind of behavior. There are strict regulations that affect the financial actions you can take during a divorce. Here’s what you need to know about how the Golden State protects spouses from each other’s bad money decisions.

California Community Property Laws Prevent Unfair Losses

The most important California regulation that affects assets in divorce is the community property law. According to the California Family Code § 760 (2022), “Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.”

In other words, all assets couples acquire during their marriages are considered community property. This means that both spouses have joint and equal ownership of them, and they must be divided equally during divorces or separations. This contrasts with “equitable division” states, where joint assets may be divided fairly but not necessarily equally. 

Community property laws have several implications for the divorce process:

  • All property acquired during the marriage, including income, businesses, retirement accounts, investments, and real estate, must be considered during the divorce.
  • Neither spouse may hide joint assets to prevent them from being considered in the divorce.
  • Hiding, selling, giving away, or otherwise attempting to alter the marital estate to reduce the amount given to the other person is considered a type of fraud. 

The last two points are important. Some people become vindictive when their marriages end. They may want to take more than their fair share of the assets or punish the other person. In the first case, your spouse might try to transfer assets out of joint accounts and pretend they were given away or never existed to keep them for themselves. In the second, they may actually give away or sell the property you wanted to keep. 

That’s unfair to you. Luckily, California has implemented specific legal orders, known as ATROS, to instill consequences for this behavior. 

What Are ATROs and How Do They Protect Your Assets?

ATRO stands for “Automatic Temporary Restraining Order.” These orders are not the same as protective orders that might be filed against an abusive partner. They are financial restraining orders, and they affect every California divorce. In fact, an ATRO is included in the summons that must be served to your spouse to begin legal proceedings. 

ATROs restrain the subject from making certain financial changes after they have been issued. These orders are reciprocal, meaning they apply to you and your spouse. From the moment the summons is presented until the moment your divorce is finalized, neither of you may:

  • Take out loans on community property
  • Use joint assets as collateral
  • Drain and close joint accounts
  • Transfer items from safe deposit boxes
  • Sell, dispose, or give away significant assets
  • Cash in, transfer, cancel, or remove your spouse or children from any insurance policies
  • Make any “extraordinary expenditures” above and beyond what’s necessary “in the usual course of business or for the necessities of life.”

In short, as long as an ATRO is in effect, you are not permitted to make significant changes to your joint property. If it is found that your spouse has violated the ATRO, they may face fines and contempt of court charges. In addition, the assets they liquidated may be treated as part of their half of the marital estate. This allows you to receive half of the estate’s original value rather than the reduced value after they liquidated the property. 

How to Tell If Your Spouse May Be Hiding or Liquidating Assets

It is worthwhile to keep an eye out for signs that your spouse may be liquidating or hiding assets, even in an amicable divorce. The combination of money and strong emotions can make even the most level-headed person make bad decisions. Pay attention to your financial accounts and look for warning signs. Some of the most common red flags surrounding community property and divorce include the following:

  • Your spouse is acting secretive or defensive about money.
  • You suddenly lose access to joint accounts.
  • There are significant changes in the balance of joint accounts.
  • New loans or accounts appear on your credit report.
  • Important records or paychecks are supposedly “late” or “lost.”

These issues may indicate that your spouse is attempting to hide funds or financially harm you. If you notice these kinds of behaviors, it’s worth digging a little deeper to get a true understanding of your financial situation.

Consult Expert Divorce Attorneys in the East Bay Area

You shouldn’t have to monitor your spouse’s financial behavior during a divorce, but sometimes it’s necessary. Staying alert can help you cut off problems before they grow and keep your split on track. So can consulting with experts who understand California community property laws and financial restraining orders. That’s where the expert attorneys at CC LawGroup, A Professional Corporation, come in. Our lawyers in the East Bay area have spent decades representing family law clients. We have a comprehensive understanding of ATROs, community property, and all the ways that assets may be unlawfully hidden or liquidated. We are available to provide legal counsel and representation regarding asset division during your divorce. Learn more by scheduling your consultation today.