The relationship of husband and wife imposes significant fiduciary duties on the spouses. Under California law, the fiduciary duties spouses owe to each other include mandatory, full disclosure of all assets, liabilities, income and expenses. These disclosures stem from equitable principles of fairness, and are intended to make settlement negotiations more transparent and efficient between the parties. This disclosure of financial information can be a time-consuming and complex process, but must be taken seriously given the potential pitfalls arising from noncompliance with the rules. Here’s what you need to know.
What Financial Disclosures Are Required?
Under Family Code section 2105, the following information must be disclosed in a final declaration of disclosure:
(1) All material facts and information regarding the characterization of all assets and liabilities.
(2) All material facts and information regarding the valuation of all assets that are contended to be community property or in which it is contended the community has an interest.
(3) All material facts and information regarding the amounts of all obligations that are contended to be community obligations or for which it is contended the community has liability, and
(4) All material facts and information regarding the earnings, accumulations, and expenses of each party that have been set forth in the income and expense declaration.
When Must Final Declarations of Disclosure Be Made?
The law requires the spouses to exchange this final declaration of disclosure no later than 45 days before the first assigned trial date.
Can The Parties Waive The Right To Receive Final Declarations of Disclosure?
Spouses may waive the exchange of a final declaration of disclosure. The waiver of a final declaration of disclosure requires certain representations by each spouse. Under California Family Code 2105(d), the waiver must include all of the following representations:
(1) Both parties have complied with Section 2104’s provisions regarding preliminary declarations of disclosure, which must have been completed and exchanged between the parties;
(2) Both parties have completed and exchanged a current income and expense declaration, that includes all material facts and information regarding that party’s earnings, accumulations, and expenses;
(3) Both parties have fully augmented the preliminary declarations of disclosure;
(4) The waiver is knowingly, intelligently, and voluntarily entered into by each of the parties.
What Are The Consequences of Failing To Comply With Financial Disclosure Obligations?
Family Code section 2107 authorizes courts to award monetary sanctions for failing to comply with any of the disclosure obligations. It is often used in conjunction with a request for attorney fee sanctions under Family Code section 271. Also, failure to comply with the rules is a basis for mandatory set aside of any settlement agreement or judgment – even a judgment after a litigated trial.
Thus, those who fail to complete disclosures as required by law or who provide incomplete or incorrect information risk significant adverse consequences. Clearly, the days of hide-the-ball divorce litigation are a thing of the past. Now, each spouse must actively engage in complete and ongoing disclosures at all times.
Preparing financial disclosures in a California divorce can present a challenge for those unfamiliar with the process. If you need help preparing financial disclosure forms or other legal documents in a California divorce, please contact Lynx Legal Service at 888-441-2355 or firstname.lastname@example.org. Our experienced professionals are standing by to answer any questions you may have.