What is Disclosure?
If you get divorced in California you have to Disclose… period, end of story. What does that mean and is anything different in a Collaborative Divorce?
“Disclosure” refers to financial disclosures. What do we have, own, owe and make. It’s an inventory of everything you own (assets), everything you owe (debts), and all of the income for both spouses. After everything is inventoried, the items on the list are characterized as either community property, separate property or both. This means you disclose everything; his, hers, and ours.
Why Do We Have to Disclose?
The purpose of disclosure is to make sure both clients have a clear understanding of their financial situation before they start making decisions. Legally, your agreements are not worth anything if there has been no disclosure. The court wants you to make informed decisions.
Disclosure sounds like a daunting task, and most clients procrastinate over doing it. However, it must be done. In a litigated case, the lawyers take care of it. They issue subpoenas for bank records, investment accounts, mortgage statements, cancelled checks, check registers, book keeping records, business ledgers, tax returns, and credit card statements. They “propound discovery” making demands for production of documents going back 5 years, 7 years or more. They issue Form Interrogatories. All of this takes time, and costs a lot of money, and unfortunately, some of it is unnecessary.
Do We Still Disclose In a Collaborative Divorce?
In a Collaborative Divorce, the parties sign an agreement that states they will voluntarily provide these statements and documents to the team. The clients usually work with the Financial Neutral to complete the disclosure forms and to compile all of the supporting documents. The good news is, the Financial Neutral is usually less expensive than the lawyers, more efficient than the lawyers and since there is only one of them, they will have everything in one place. The team and the clients work together to come up with a disclosure plan. They agree on just what needs to be gathered and how far back the clients need to go. This limits the time and cost to what’s necessary. The disclosure plan can be modified if it becomes obvious that more information is needed.
What if My Spouse Won’t Disclose Everything?
Some client’s worry that their spouse has more financial information and may not share all of it. In all family law cases, there is an affirmative duty to disclose. That means each client has a legal duty or obligation to disclose financial information. The penalties for failing to disclose are quite severe. In a Collaborative Case, the attorneys will explain this to their clients. The attorneys and clients are also obligated under the Collaborative Agreement to voluntarily disclose, correct any errors or omissions, and to update disclosures if there are any significant changes. If an attorney thinks their client isn’t being forthcoming, the attorney has a duty to withdraw from the case.
A Collaborative Divorce does not eliminate the need for disclosure. Disclosure is still required. However, in a Collaborative Divorce the disclosure or discovery process, is more transparent, efficient and cooperative. It is limited and targeted to what is really necessary for each individual case. This gives both clients the information they need to make good decisions without an expensive shotgun approach to discovery.