Divorce financial disclosure
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In marital dissolution proceedings, couples are required to exchange financial information with each other or obtain it from third parties, a process called financial disclosure. This is important so that both parties can have knowledge of each spouse’s financial circumstances. This can be in the form of exchanging critical financial documents like bank statements, pay stubs, tax returns, insurance policies, mortgage statements, credit card bills, deeds, leases and titles to property, brokerage account statements for both joint and separate accounts, and many more.
Under California laws, divorce financial disclosure takes place before trial. According to Family Code Section 721(b), spouses have an obligation to act in good faith and fair dealing and never take unfair advantage against each other. This means spouses must disclose their financial information to each other in a timely manner.
How to comply with divorce financial disclosure
In California, couples who are divorcing must file ![divorce financial disclosure [object object] Divorce financial disclosure 5cd30c2313b44ea6abc18965ea6a8aaa 1032749598 300x300](https://legaldocsa2z.com/wp-content/uploads/2019/11/5cd30c2313b44ea6abc18965ea6a8aaa_1032749598-300x300.png "5cd30c2313b44ea6abc18965ea6a8aaa_1032749598-300x300 5cd30c2313b44ea6abc18965ea6a8aaa_1032749598-300x300")
a preliminary and final declaration of disclosure. The purpose of completing these declarations is to simplify the settlement negotiations and ensure fair distribution of marital property by reviewing alimony, child support, debts, and asset division. Each party is required to complete the forms correctly. Any party that fills the form incorrectly faces punishment from the court.
The divorce financial disclosure forms are served by one party to another. This can be done through mail or by the help of personal service. Once the documents have been served, the Declaration Regarding Service of Disclosures is filled with the court as evidence, the financial disclosure documents have been served.
(i) Preliminary financial disclosures
Both spouses are required by law to exchange preliminary financial declaration of disclosure. Without exchanging preliminary financial disclosures, a judge cannot grant a ruling for divorce. The preliminary financial disclosures are essential in assisting the court and the two parties in identifying the community finances.
The preliminary divorce financial disclosures are exchanged at the beginning of a case. The law requires the Petitioner to serve these disclosures within 60 days after filing the petition. Below are some of the necessary documents to be filled.
- Declaration of Disclosure
- Declaration regarding service of Declaration of Disclosure
- Income and Expense Declaration
- Schedule of Assets and Debts
Under the preliminary disclosure, the parties are required to disclose all their assets and debts under oath to the spouse. By signing this declaration, the parties confirm that they have disclosed all their finances under penalty of perjury.
It is always the role of the Petitioner to serve this disclosure to the Respondent. The Petitioner can always waive the Respondent’s preliminary disclosure but not the final disclosure.
(ii) Final Disclosure in a Divorce
Before a divorce is finalized, parties are required to exchange a final disclosure. The final divorce financial disclosure is always a more comprehensive disclosure that stipulates in depth the financial disclosures made during the preliminary financial disclosure.
A waiver of the final disclosure can be accepted if the Respondent does not respond to the petition. In this case, it will be considered a default case, and the court may award the Petitioner some assets.
The final disclosure can also be waived if the two parties agree to skip it by signing a marital settlement agreement or if both parties agree that the preliminary divorce financial disclosure was filed accurately and was complete. In such an instance, the parties can waive the final disclosure by submitting the Stipulation and Waiver of Final Disclosure, Form FL-144. This form may, however, vary from one county to another.
In the final disclosure, the parties will be required to update the same documents filed during the preliminary financial disclosures.
Failure to produce a full divorce financial disclosure
If a party does not provide accurate and complete divorce financial disclosure, then that spouse may face penalties, especially if the inaccuracies are made willfully. Some of these penalties include;
- Court sanctions in the form of fines
- Awarding of some assets to other party and
- Paying attorney’s fees for the other party
Continuing from the critical importance of full and accurate financial disclosure in divorce proceedings, it’s essential to understand the consequences and procedures involved when a party fails to comply with these requirements in California.
The obligation to provide a complete and truthful disclosure of financial information is not just a formality; it’s a legal requirement that underpins the fairness and integrity of the divorce settlement process. The consequences of failing to produce a full and accurate disclosure can be severe and long-lasting, affecting the final settlement in ways that might not be immediately apparent.
Strategies to Ensure Compliance
- Legal Representation: Having an experienced family law attorney can help ensure that all financial disclosures are complete and comply with California law. Legal professionals are familiar with the nuances of disclosure requirements and can guide their clients through the process, helping to avoid the pitfalls of incomplete or inaccurate disclosures.
- Open Communication: Although divorce proceedings can be contentious, maintaining open lines of communication about financial matters can reduce misunderstandings and facilitate a smoother disclosure process. This doesn’t mean revealing strategic information but ensuring that both parties are clear about the requirements and deadlines for financial disclosures.
- Document Organization: Organizing financial documents early in the divorce process can help ensure that all necessary information is included in the disclosures. This includes gathering bank statements, tax returns, mortgage documents, insurance policies, and any other documents that reflect the marital and separate assets and debts.
- Third-party Verification: In some cases, it might be advisable to employ a third-party financial expert, such as a forensic accountant, to review the financial disclosures for completeness and accuracy. This can be particularly useful in complex financial situations or when one spouse suspects the other of hiding assets.
Remedies for Failure to Disclose
If a party discovers that their spouse has failed to provide a full and accurate financial disclosure, several remedies are available:
- Motion for Compelling Disclosure: The aggrieved party can file a motion with the court asking the judge to compel the other party to provide the missing information.
- Set Aside the Settlement: If the divorce has already been finalized and it’s later discovered that there was a failure to disclose financial information, the court may set aside the settlement agreement.
- Monetary Sanctions: The court can impose monetary sanctions against the non-compliant party. This can include fines and ordering the non-compliant party to pay the other party’s attorney fees.
Importance of Accuracy and Transparency
The cornerstone of the financial disclosure process is the principle of fairness. The accurate and transparent exchange of financial information ensures that both parties can negotiate a fair settlement that reflects the true nature of their marital estate. It’s also a protective measure that helps prevent future legal disputes over assets that were not properly disclosed or valued.
Final Thoughts
Navigating the divorce financial disclosure process in California requires diligence, honesty, and sometimes strategic legal guidance. By understanding the importance of these disclosures and the consequences of failing to comply, parties can better protect their interests and work towards a fair and equitable divorce settlement. Always remember, the goal of these disclosures is not just to fulfill a legal requirement but to lay the foundation for a future that reflects the true financial situation of both parties.
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