Financial Disclosures

What is a financial disclosure?

California law requires both parties in a divorce to complete financial disclosures. This involves filling out and exchanging forms that detail each party’s financial situation, including assets, debts, income, and expenses. These disclosures are crucial for ensuring fair and informed decisions regarding division of assets, spousal support, and other financial matters.

A financial disclosure in a divorce involves completing four key forms: FL-140, FL-141, FL-142 (or FL-160), and FL-150. This process meticulously details all assets, debts, incomes, and expenses. It requires you to specify ownership and indebtedness for each asset or debt, the acquisition date, and an estimated value for each item. This detailed accounting is crucial as it underpins the equitable division of property and the determination of financial support during the divorce process. It is essential for both spouses to have a clear understanding of their collective and individual financial landscapes.

Compiling a financial disclosure can be a complex and time-consuming task. You are required to gather a significant volume of documentation, which includes, but is not limited to:

• Paycheck stubs
• Federal and state income tax returns
• Mortgage statements
• Vehicle titles (pink slips)
• Property deeds
• Bank account statements
• Retirement account statements
• Credit card statements
• Life insurance policy statements

These documents must be organized and presented in a specific format. You are then obligated to share all of these financial disclosures with the opposing party. However, only FL-141 and FL-150 forms need to be officially filed with the court.

During the divorce proceedings, two separate sets of financial disclosures are mandated. The initial set is known as the preliminary declaration of disclosure, and the subsequent one is termed the final declaration of disclosure. Although many choose to waive the final declaration, the preliminary declaration is compulsory and cannot be waived.

Why do I have to do a financial disclosure?

California law mandates that both you and your spouse owe each other a fiduciary duty, which is essentially a very high level of financial loyalty. This duty compels complete transparency between spouses, requiring you to fully disclose all financial information and assets to your spouse, including those owned before the marriage. This openness ensures that both parties are privy to the complete financial picture, fostering fairness and trust.

Financial disclosures play a pivotal role in divorce proceedings for several key reasons. In California, a community property state, all assets and debts accrued during the marriage are considered jointly owned by both spouses and must be divided equally upon divorce. Accurate and comprehensive financial disclosures are vital to accurately identify what is deemed community property, ensuring an equitable division.

Additionally, these disclosures are critical for calculating appropriate spousal and child support. These calculations require precise and detailed information about each spouse’s income, living expenses, and financial commitments, making it essential that all financial data is thoroughly documented and disclosed.

Moreover, the integrity of the legal and procedural aspects of the divorce process relies on fairness and due process. Comprehensive financial disclosures ensure that all decisions in the divorce proceedings are based on a complete understanding of the financial situation of both parties. This level of transparency is crucial in preventing any concealment of assets or manipulation of financial outcomes, thereby safeguarding the legal rights of both spouses.

When do I have to file my financial disclosure?

According to the law, each party is required to submit their financial disclosure within 60 days of filing their initial divorce documents. Specifically, the petitioner needs to file their disclosure within 60 days from the date the petition is filed, and the respondent must do the same within 60 days of filing their response. 

Additionally, the final financial disclosures must be submitted at least 45 days before the trial begins. The purpose of submitting these financial disclosures early in the process is to ensure that all proceedings are conducted with a clear and transparent understanding of each party’s financial situation.

Is there any way I can get out of doing a financial disclosure?

No, there are no exceptions to the requirement for financial disclosures in divorce, regardless of individual circumstances or agreements between spouses. 

Many people mistakenly believe their situation might warrant an exemption, citing reasons such as having a full agreement in place, both parties preferring not to disclose, owning no valuable assets, having kept all assets and debts separate, etc. However, regardless of the scenario, the law is clear: completing a financial disclosure is mandatory before you can proceed with your divorce.

What happens if I don’t do my financial disclosure?

Without completing your financial disclosures, you will be unable to finalize your divorce. Additionally, you may face sanctions, including fines, and risk losing any assets that you fail to disclose.

What happens if my spouse refuses to do his or her financial disclosure?

Unfortunately, The “no-fault” nature of divorce in California does not eliminate the requirement for financial disclosures during the divorce process. Therefore, assuming your spouse is participating in the case, you will not be able to obtain a divorce until your spouse completes his or her financial disclosure. You can ask the court to order your spouse to complete a financial disclosure, and in extreme situations, a judge may allow you to waive your right to your spouse’s financial disclosures in order to move forward with your case. The court can sanction (fine) your spouse and prohibit your spouse from producing evidence about his or her assets and debts if a financial disclosure has not been provided.

Why the Divorce Can’t Proceed Without Disclosures

If one spouse refuses to provide the required financial disclosures:

• The Court Cannot Make Informed Decisions: The court lacks the necessary information to make equitable decisions regarding property division, support, and other financial matters.
• Delays in Proceedings: The divorce process may be delayed as the court cannot finalize the divorce without ensuring all financial aspects are transparently and fairly addressed.
• Legal Remedies and Enforcement: The court can enforce compliance through various means, including orders to comply, sanctions, and other penalties to ensure that the necessary financial information is provided.

What happens if my spouse’s disclosure is inaccurate?

If you find inaccuracies or omissions in your spouse’s financial disclosure, the first step is to pinpoint the specific areas where the information is lacking or incorrect. You should then request that your spouse provide the necessary corrections or additions to the disclosure. Should your spouse continue to fail in providing accurate and complete information, you have several alternatives available, such as initiating formal discovery procedures or petitioning the court for orders to compel compliance.

How do I waive the final financial disclosure?

In rare and extreme cases, a judge may allow a party to waive the right to the other spouse’s financial disclosures. This typically happens when continued non-compliance significantly delays the proceedings, and it becomes necessary to move the case forward to avoid undue prejudice to one party. However, waiving financial disclosures can significantly impact the fairness and outcome of the asset division and must be considered very carefully.

if a judge allows a party to waive their rights to financial disclosures in a California divorce, they would typically need to fill out and file a “Stipulation and Waiver of Final Declaration of Disclosure (Form FL-144).” This form is used specifically to waive the final declaration of disclosure requirements, which are ordinarily mandatory under California law.

Here’s how the process works:

Purpose of FL-144

The “Stipulation and Waiver of Final Declaration of Disclosure” form is used when both parties agree to waive the requirement for the final declaration of disclosure. This typically includes:

• A detailed accounting of assets, debts, and expenses.
• A schedule of assets and debts.
• An income and expense declaration.

The waiver of these disclosures can expedite the divorce process but comes with the risk of waiving rights to a potentially unequal or uninformed division of property. Therefore, both parties must fully understand the implications of signing this waiver.

Conditions for the Waiver

1. Mutual Agreement: Both parties must agree to waive these disclosures. This agreement must be informed and voluntary.
2. Initial Disclosures Completed: California courts generally require that the preliminary declarations of disclosure have been exchanged unless waived right from the outset. The waiver generally applies to the final declarations.
3. Court Approval: Even with the agreement between the parties, the waiver of the final disclosure must be approved by the court. The judge must ensure that the waiver does not contravene legal standards and that both parties understand the consequences.

Implications of Waiving Financial Disclosures

Waiving the right to a final declaration of disclosure carries significant risks, including the risk of making uninformed decisions. Without complete information about the other party’s assets, liabilities, income, and expenses, a party may make decisions without a full understanding of the financial facts, potentially leading to unfair or imbalanced settlements. 

Additionally, if a party later finds out that assets were hidden or undervalued and they had waived their right to disclosure, it could be more difficult to contest the division of assets or debts. While there are legal remedies for addressing fraud and deception discovered after a divorce settlement, pursuing these remedies can be legally complex and costly. 

Moreover, once a waiver is approved and incorporated into a court order, it becomes part of the final divorce decree. This decree is legally binding, and any changes to it post-facto require reopening the divorce case under specific circumstances, such as proof of fraud, duress, or a significant mistake.

Given the potential complications and long-term consequences of waiving financial disclosures in a divorce, obtaining competent legal advice is crucial. An experienced family law attorney can:

• Review the Financial Situation: Ensure that you have a clear understanding of both your and your spouse’s financial situations.
• Evaluate the Agreement: Assess any proposed settlement agreements to ensure they are fair and equitable based on the available financial information.
• Advise on Legal Rights: Inform you of your legal rights and the potential consequences of waiving financial disclosures.
• Negotiate on Your Behalf: If necessary, negotiate more favorable terms before agreeing to waive disclosures.

Financial Disclosures in Divorce are essential for facilitating fair and well-informed decisions related to asset division, spousal support, and other financial aspects of the divorce.

Waiving financial disclosures, especially in a community property state like California, should be considered carefully. It is typically not advisable, especially  in complex cases or where there is a lack of trust or transparency between the parties.