What Are Financial Disclosures in a Divorce?
Although the rules vary somewhat from state to state, in a divorce, both spouses must exchange some financial information early on in the process, so that both parties have full knowledge of the other's financial circumstances. This exchange may include important financial documents, such as mortgage statements, bank statements, credit card bills, tax returns, paystubs, and brokerage account statements.
Additionally, many states require you to fill out and exchange official disclosure declarations. In California, for example, divorcing spouses must complete a preliminary and final Declaration of Disclosure, which will include an Income and Expense Declaration and a Schedule of Assets and Debts.
These financial disclosures give judges the information they need to ensure the fair division of the marital estate and the proper amount of child support. Financial disclosures also help to prevent fraud and force each spouse to truthfully represent their complete financial picture.
What If My Spouse and I Don’t Want to Exchange Financial Documents?
There are ways to minimize paperwork in your divorce, but refusing to provide financial documents isn’t one of them. Each spouse’s income, expenses, assets, and debts are highly relevant during a divorce. At trial, a judge needs this information in order to make a fair property division and support award.
Courts require spouses to disclose finances to prevent unfair settlements. Even when spouses reach their own agreement, a court will review child support, alimony, and debt and asset division for basic fairness. To ensure that a settlement is reasonable, a court needs to have a clear picture of each spouse’s finances.
Will a Judge Accept Limited Financial Disclosures?
There’s hope for couples who don’t want sift through mountains of financial paperwork. In some states, when couples are able to reach a settlement, a judge may accept a limited amount of financial information. For example, the spouses may need to submit a few paystubs, tax returns, and possibly bank statements with their settlement agreement and attest that they have a full understanding of the other’s income and assets. To finalize the settlement and enter it as a divorce decree, the court can simply review these items to verify income amounts. In a settlement, spouses bear the burden of making sure they have a complete understanding of each other’s finances. In California, couples can agree to waive the final declaration of disclosure.
Although financial disclosures can be burdensome, they are intended to protect you in a divorce. A judge may waive certain financial disclosure requirements when spouses are able to reach a divorce agreement on their own. Those types of circumstances are limited though. If you're unsure about the disclosure requirements in your particular case, consult a local family law attorney for advice.