Spouses owe each other certain duties, including “fiduciary duties,” which means effectively, the financial duty of the highest good faith and fair dealing. You and your spouse must disclose all of your assets and ensure that the community estate (all the property and money you got during the marriage, except through inheritances or gifts) remains intact. If your spouse hides money or moves money or gives away money without your consent, they have breached their fiduciary duties to you. The breach of fiduciary duties is the surest way to get in trouble with the judge. And by get in trouble, I mean, you can lose the entire hidden asset and pay your spouse’s attorneys’ fees (or they yours). But it gets worse than that, because the unwritten rule is that judges will start to punish the offending spouse across all areas of the case, including custody and visitation and child and spousal support. The costs of being found to have breached a fiduciary duty can be astronomical.

The kicker is that a breach of fiduciary duty does not even require a “bad act.” It can be done accidentally. Just a failure to disclose an asset or the right value of an asset can lead down a dark path. Let me give an example from real life: a firefighter and his wife divorced. The firefighter listed the value of his CalPERS on his financial disclosures as its face value, the value of his contribution to the plan, exactly as it showed up on his plan statement. He and his wife divorced, using a legal self-help company operating in the area, and his wife got an asset worth about the same value as the face value of the CalPERS. Two years later, the wife hired a lawyer who alleged that husband had failed to disclose the true value of his CalPERS, which is MUCH higher than face value – the value of the CalPERS is roughly the value of the monthly payment from the age of retirement to the expected age of death. So, if you are going to get $4,000 per month from age 55 and are expected to live to 85, that is 360 payments * $4,000 = $1,440,000! (this is not exact, because the actuary who determines the value will apply a discount to take into account that you get the payments over 30 years, so it’s value is lower than the $1.4 million, but it’s still well over $1 million). The lawyer argued that the husband had breached his fiduciary duty to the wife. She did not get 100% of his pension, but she got 50% of his pension and he had to pay her attorney’s fees and get called a “liar” in open court.

The point is that Act II can be devastating if you do it wrong. And, because family law is a complex animal, it is easy to do it wrong. Use an online real estate website to determine the value of your house? Potential breach of your fiduciary duty. Fail to list unvested stock options in your job at SpaceX? Potential breach of fiduciary duty. Borrow against your 401(k) to buy a condo after you separate from your spouse? Potential breach of fiduciary duty.

In short, even though I just said a few paragraphs ago that you have to have counsel in Act I, having counsel for Act II is crucial if you have assets (real estate, investments, brokerage accounts, crypto accounts, precious metals or anything of value), debts, retirements or inheritances. You have to have counsel for Act I if that is all you can afford, but Act II is where you can really get hurt financially. If you don’t have a lot of assets (or debts), you may be able to get away with counsel for Act I alone, but if you have virtually any assets at all, counsel for Act II is where the rubber meets the road in your divorce.

True, experienced, wise counsel is key. You need someone who understands the law and how to work with it. The speak softly and carry a big stick negotiators rule the roost in Act II. They have to know that you will take them to trial and beat them with that stick (metaphorically of course) for them to negotiate with you on your terms. This is where you will make up all of the ground in your divorce. The action is in the financials. The financials are Act II.