Financial Disclosure in a Separation: What You Need to Know
Making the decision to go through a separation with your spouse is not an easy one. Besides the emotional toll, there are also logistics that you need to figure out to divide your assets and ensure a fair deal is reached by both parties. No matter what route you choose to try to resolve issues arising from your separation, one of the first major tasks you and your lawyer or mediator will work through is financial disclosure.
If you are legally married, you will be working with your lawyer to determine the division of matrimonial property. The first step is usually for each side to complete a Financial Statement that discloses that party’s income, expenses, assets, and debts. The law requires full and frank financial disclosure, including supporting statements for all entries on the Financial Statement. This is the basis of how we as legal professionals determine any equalization payment owing, and so the disclosure needs to be complete and accurate right from the beginning.
If you have children or there is a potential spousal support issue arising from your separation, you also have an obligation to disclose the necessary income information as required by sections 21 – 25 of the Federal Child Support Guidelines. This disclosure will include your last three income tax returns and notices of assessment or re-assessment, your most recent pay stub, or equivalent disclosure about your current income if you are self-employed.
Disclosure can be extensive in some cases: if a party is self-employed, or has an interest in a privately held corporation, substantial supporting documents may be requested, or if the matter is in court they may be ordered disclosed. If there is a concern about a party’s forthrightness with respect to the disclosure or concern that, for example, a party is underreporting his or her income, the court has the jurisdiction to order bank statements, credit card statements, or other documents that can help shed light on the matter. These additional obligations can be significant, and they can be time-consuming to meet.
If disclosure requests are relevant and reasonable, a lawyer will advise his or her client to provide the requested information. Doing so demonstrates good faith in the context of a negotiation, and indicates to the court that the party has nothing to hide. However, there are circumstances where a lawyer might argue against providing requested disclosure, particularly if there would be a significant cost incurred in obtaining the disclosure, or if the relevance of the disclosure is questionable.
Any party’s approach should be to understand that disclosure is essential and to assume that it must be made in full. Taking this approach puts parties in a favourable light with counsel, with mediators, and with the court. It also avoids potentially costly arguments about whether particular items of financial disclosure should be provided.
As part of the preparation for an initial meeting with a lawyer or mediator, you should do your best to gather up your last three income tax returns, notices of assessment, a recent pay stub, as well as bank and credit card statements that confirm the balances on the date of separation. Your lawyer can work with you to confirm everything you need, and to address any potential disclosure requests that may require extra time, or result in additional cost.
If you require services of a lawyer or mediator to guide you through the financial disclosure process during a separation, please contact us at Mann Lawyers.