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The Role of Financial Disclosure in Divorce  

Aside from the care and custody of any minor children you may share with your (soon to be ex) spouse, the main focus of any divorce proceeding is money. Whether your divorce is resolved via settlement or trial, it is imperative for both parties to a divorce, as well as the judge, to have a complete and accurate understanding of each other’s finances. This information is necessary to determine how to divide the parties’ assets, how much financial support the parties need to provide each other, and even whether either party should be paying for the legal costs of the other.

When two spouses make the difficult decision to separate, the first step is often to see whether all the relevant issues can be agreed upon – whether with attorneys or a mediator to help negotiate, or simply between the two of them. Although it may be tempting (and, ultimately, appropriate!) to say, “you keep yours, I keep mine, we split ours down the middle,” it’s important to first establish what, exactly, is “yours, mine, and ours.”

For example, maybe both you and your spouse each have your own pensions, and your gut instinct may be to waive your right to the other’s pension – but do you really know what you’re waiving?

Knowing the exact value of an asset is even more important if you intend on waiving some assets in exchange for others. For example, it might seem like a good deal to keep your home and not have to buy out your spouse in exchange for not receiving child support, but keep in mind: has your home been recently appraised? Do you know the mortgage balance and how much equity is in the home? Are there any additional loans/HELOCs on the home, and what were those loans used for? How much income does your spouse make, exactly – which would determine the amount of child support owed? Does your spouse have access to any other sources of income or financial resources which would possibly justify a court granting you more than the basic guideline amount of child support?

A common marital dynamic is one in which one spouse acts as the main “financial planner” of the family – they handle the bills, assets, insurance policies, income streams, loans, etc. While this arrangement may work just fine for the happy years of a marriage, once divorce is on the table this dynamic can create a very uneven power dynamic. It can even lead to suspicion and paranoia that one spouse is hiding assets that the other would be entitled to (true or not), which would naturally make it extremely difficult to reach a resolution.

To counteract this risk and to make sure that the resolution of a divorce is “equitable” to both parties, if your divorce reaches the stage where the court becomes involved, both parties need to complete a Statement of Net Worth. This detailed document delves into all aspects of a person’s financials: their assets, their liabilities, their income, their regular monthly expenses. This document may seem unduly burdensome (why, you may ask, does anyone really need to know how much you spend on dry cleaning each month?), but it is important for the judge, the attorneys, and most importantly the parties themselves to know the full financial picture of their marriage. Thus, we often ask our clients to complete a Statement of Net Worth even before the court is involved, while we attempt to negotiate an amicable resolution; this way we can both justify our position and do our best to ensure our client is getting a fair, equitable deal.

This is not to be considered legal advice.  Please reach out to an attorney for information regarding your specific situation.

Rebecca C. Johnson is an Associate concentrating in matrimonial and family law.
She can be reached by phone at 845-764-9656 and by email.

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