Managing Financial Disclosure In Divorce
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| Managing Financial Disclosure In Divorce | |
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Making the decision to get divorced, painful as it is, is just the beginning of the many decisions that you will make through the process of separating. Regardless of your situation, there will always be financial issues that need to be addressed.
Financial decisions potentially have far-reaching effects on your and your family’s future. So, we asked Mark Chapman, Partner, at the Stowe office in Reading to join us on the blog with advice on how to best manage financial disclosure in divorce.
Getting the right divorce lawyer
The first thing to do to secure a fair financial settlement in your divorce is to choose the right divorce lawyer for you. (We recently shared our top seven tips to help with this on the blog. You can watch our short video here)
With the right divorce lawyer by your side, there are a number of ways a fair settlement can be reached and in light of your circumstances, what is the right avenue for you to go down.
Now, this article is not about the different approaches to divorce settlements but, in short, they are, your solicitor dealing with the cases and leading negotiations for you, dealing with matters collaboratively, mediating, arbitration, the use of private judicial hearings for a neutral evaluation of your case and lastly, court hearings.
Plenty of options to consider, however, they all have the same conclusion: to come away with a legally binding financial settlement, set down in a document called a Consent Order. Or if reached by agreement or following arbitration or in the case of a Court imposed decision, a Court Order. Both will confirm how matrimonial finances are to be dealt with.
A fair settlement
The concept of fairness can be difficult to quantify however in a legal sense, it is what is reasonable and equitable considering the financial circumstances of both parties in the marriage. To establish this, there needs to be a detailed understanding of what is in the ‘matrimonial pot.’ You cannot fairly split the assets until you know what they are.
Most financial settlements will consider capital, income and pension. Often it is the house which is the most valuable asset but if it is burdened with a large mortgage there may be limited capital. It may be your pension which has the greater value, but you may not be able to access it for many years due to your age. It may be a business which has provided the family with an income, but it may also have a capital value which needs to be considered.
All such assets need to be dealt with. In some of my cases, there has not been enough sufficient income to warrant an award for spousal maintenance. In other cases, pensions have been non-existent or of such a low value that they had no impact on the settlement. Often the equity in the house, when combined with other savings, is insufficient to buy both parties houses without relying on mortgage borrowing. In those instances, one party may “need” more money than the other, often because they have a lower earning potential.
The form E
Before one gets to answer these questions however, a full and frank financial disclosure will be facilitated by both parties using the standard Form E. You can get advice on how to fill in Form E here. You will need to provide information on any mortgages, bank accounts, debts, pension, tax etc.
Whilst it is an onerous form to complete it is thorough. The risk of just providing disclosure without completing this form is that something maybe omitted either accidentally or deliberately. However, if the financial resources are simple, sometimes the parties choose to avoid completing the form E but be aware of the risk of trying to cut corners.
Once completed the financial information is exchanged with the other party and this should take place at the same time. Once you have the other party’s detailed financial information, you can then start to consider what a fair financial agreement may look like.
Hidden assets?
When reviewing the details, I always advise my clients to not take the information at face value. Use your instincts and if there are any gaps you have the right to ask the other party to clarify those issues, before entering negotiations. You need a clear understanding to ensure that the final settlement reflects yours, and possibly your children’s needs, whilst also not ignoring the needs of the other party.
In many commercial transactions e.g. before a business is purchased you would expect there to be a process of “due diligence” to ensure that you have a full understanding of what there is. When you buy a house, you undertake a proper survey, when you have a medical procedure this is often preceded by an X-ray. The reason is that you don’t want to be making important decisions without full knowledge. It is very difficult to undo mistakes made in haste, desperate to reach a quick settlement or to save costs. When the mistake is realised later, it can be too late
If someone is not willing to provide full and frank financial disclosure, then it may be necessary to issue court proceedings and place the division of the matrimonial finances in the hands of the court. As lawyers, we cannot force someone to deal with matters on a voluntary basis, but a Judge has various powers at their disposal to ensure that the correct procedures are adhered to so that matters can be resolved.
We also have an in-house team of forensic accountants who can help. Highly experienced accountants they can advise on valuations, businesses, tax, trust and pensions. The team is also highly experienced in uncovering hidden assets. You can read more reasons why you may need to use them here on the blog. To close, the key to achieving a fair settlement in your divorce is to have a clear picture of both parties’ financial circumstances, backed up with the appropriate evidence. Once this is in place, we can make sure an offer is made and the best settlement achieved for you.
This article originally appeared on the Stowe Family Law Blog. Please click here to visit the website.
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