Financial Disclosure In Mediation: What To Expect.
Divorce can be a challenging and emotional time for all parties involved, especially when it comes to finances. In order to reach a fair and equitable settlement, it's essential that both spouses are transparent about their financial situation. This is where voluntary financial disclosure comes in.
Voluntary financial disclosure is the process of sharing financial information with your spouse and a mediator in a divorce mediation. This information always includes assets and debts, and may include income and expenses (depending if child support is required by law and/or other issues will be requested, such as alimony). By voluntarily disclosing this information, both parties can make informed decisions in the mediation process to settle their divorce issues.
In this article, I explore the importance of voluntary financial disclosure in divorce mediation and provide tips on how to do it effectively, and the likely consequences of hiding or concealing assets or debts.
Voluntary financial disclosure is the process of sharing financial information with your spouse and a mediator in a divorce mediation. This information includes:
- Assets: This includes real property, investments, vehicles, retirement accounts, and other tangible items.
- Debts: This includes any outstanding mortgages, loans, credit card balances, or other financial obligations.
- Income: This includes all sources of income, including employment, investments, and any other sources of revenue.
- Expenses: This includes all living expenses, such as housing costs, utilities, groceries, transportation, and other necessities.
The Distribution Of All Assets & Debts Are Resolved In Mediation!
Voluntary financial disclosure is important for several reasons:
1.) It ensures transparency: By voluntarily disclosing your financial information, you can build trust with your spouse and ensure that both parties are aware of each other's financial situation.
2.) It helps you make informed decisions: By having a clear understanding of your financial situation, you can make informed decisions about property and debt division, spousal support, and/or child support.
3.) It can save time and money: By voluntarily disclosing your financial information, you can avoid costly litigation and reach a settlement more quickly.
4.) After the mediation is over and you file for the divorce with the court, in almost all divorce cases, the court will require that each of you completes and files a Financial Affidavit SWORN TO UNDER THE PENALTY OF PERJURY. In my experience, since it is rare to find a spouse who wants to risk being found criminally liable for perjury upon the court, there is a strong likelihood that each spouse will voluntarily choose to be accurate in the mediation process so that their future financial affidavit submitted to the court upon filing for the divorce matching the issues discussed and resolved in the mediated settlement agreement.
Being Accurate In Your Voluntary Disclosure Minimizes Your Risk Of Perjury
Preparing for voluntary financial disclosure can feel like a daunting task, but it's essential for a successful mediation. Here are some tips on how you may want to prepare:
1.) Gather all financial documents: This includes bank statements, tax returns, investment statements, and any other financial documents that are relevant to your situation.
2.) Review your credit report: Reviewing your credit report can help you identify any outstanding debts or financial obligations that you may have forgotten about.
3.) Complete Eric's easy to complete online Jotforms to document your Assets & Debts (in all cases) and your Income & Payroll-Related Expenses (in cases where there are minor children).
Eric Provides Easy To Complete Online Forms To Document Assets & Debts
Eric's PeacefulSplit Divorce Mediation helps to minimize the consequences of a spouse hiding assets/debts or even wanting to do so. Here are some effective ways Eric helps mitigate the impact of such actions:
1.) Included in Eric's settlement agreements are specific provisions dealing with "Full Disclosure." Included is language that deals with the following:
- Each Party represents that they have made "full and fair disclosure" of assets, debts, and income.
- The Parties acknowledge that if either has "intentionally", "willfully", "recklessly," or "fraudulently" withheld, concealed, or hidden any asset or debt, that such action may be grounds to challenge the settlement.
2.) Eric's agreement contain language that act as "catch-all" to deal with categories of assets and debts, so that if a specific asset or debt is not allocated in the agreement - assuming it was intentionally or unintentionally left out - the overall distribution language contained in the agreement will deal with such "unknown" assets or debts as being owned 50% by Spouse-1 and 50% by Spouse-2.
3.) Most importantly, if either spouses engages in such actions described in #1 above, "such conduct or behavior is sufficient to serve as the basis for filing with the Court to challenge any aspect of this MMSA."
Therefore, not only could a spouse potentially be found guilty of committing perjury upon the court, but if a spouse did hide or conceal assets or debts, such action could potentially serve as the basis to undo or change the settlement agreement.
Be Honest: Hiding Assets Breaks Trust & Will Prevent A Successful Mediation
The short answer is NO!
Since Eric's PeacefulSplit® Divorce Mediation service is voluntarily, neither of you is ever compelled to accept or agree to any division of assets or debts. You are always free to say "yes" or "no" as we discuss every issue.
For most spouses who choose mediation, their main goal is to resolve the divorce issues without expensive and time-consuming litigation. In such litigation, the Court will generally require each spouse to provide mandatory disclosure of financial records (Family Law Rules of Procedure Rule 12.285), such as:
- all tax returns;
- IRS forms W-2, 1099, and K-1 for the past year;
- Pay stubs or other evidence of earned income for the 3 months prior to service of the financial affidavit;
- All loan applications and financial statements prepared or used within the 12 months;
- All deeds within the last 3 years, promissory notes, and leases;
- bank statements for checking, savings, money market, etc. for between 3 - 12 months;
- All brokerage account statements in which either party held within the last 12 months;
- Recent statements for any profit sharing, retirement, deferred compensation, or pension plan (for example, IRA, 401(k), 403(b), SEP, KEOGH, or other similar account) in which the party is a participant;
- Life insurance policy declaration pages;
- Corporate, partnership, and trust tax returns for the last 3 tax years if the party has an ownership or interest in a corporation, partnership, or trust greater than or equal to 30 percent.
Even though neither of you is required to provide the other spouse with these specific documents, if your spouse specifically asks for some records in order to feel comfortable to either participate in the mediation or to agree to the division and distribution of any specific asset or debt, you will need to decide if you want to provide your spouse with such record or refuse to provide it.
Of course, you are not required to provide any these documents to your spouse. However, refusing to provide them may result in your spouse choosing to skip the peaceful mediation process and retain counsel to engage in a long, expensive, time-consuming litigation to resolve the divorce issues. In such scenario, nothing will be voluntary and you each will be subject to court orders, mandatory disclosures, and the likelihood of subpoena being served to produce a myriad of records.
Avoid Expensive Litigation By Voluntarily Disclosing Financial Records