The Financial Aspects of Your Dissolution

The Financial Aspects of Your Dissolution

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Whether you have children or not, whether you have a large marital estate or a small marital estate, there are certain steps which must be accomplished in every dissolution case. One of the most important steps is the requirement of a complete financial disclosure.

 

In California, the parties to a marriage are said to be fiduciaries to one another, meaning, they are each held to the highest standard and duty of care when dealing with one another regarding their finances. California requires complete and open disclosure of the entire “financial picture” from each party’s perspective.

 

This has been codified in Family Code, §2100, which states:

 

“2100. The Legislature finds and declares the following:

(a) It is the policy of the State of California ….

(b) Sound public policy further favors the reduction of the adversarial nature of marital dissolution and the attendant costs by fostering full disclosure and cooperative discovery.

(c) In order to promote this public policy, a full and accurate disclosure of all assets and liabilities in which one or both parties have or may have an interest must be made in the early stages of a proceeding for dissolution of marriage or legal separation of the parties, regardless of the characterization as community or separate, together with a disclosure of all income and expenses of the parties. Moreover, each party has a continuing duty to immediately, fully, and accurately update and augment that disclosure to the extent there have been any material changes so that at the time the parties enter into an agreement for the resolution of any of these issues, or at the time of trial on these issues, each party will have a full and complete knowledge of the relevant underlying facts.”

 

In practical application, this equates to “full disclosure” means full disclosure. In smaller asset cases, this disclosure may entail nothing more than pay stubs and a few bank statements. In other, higher-asset cases, however, this could require forensic accountants, real estate appraisers and other financial experts to put together a clear picture.

 

Many times a client will ask, “Do I have to tell them about X?”. The answer, in light of the above authority, is a resounding “yes”. If you have something of value, you must declare it. And, pursuant to subsection (c), there is a continuing duty to update the disclosures. That means if an asset materially appreciates or depreciates, the other side has a right to know that as well. The clearest way to explain this is to say, “Would you want to know if this was on the other side?” More often than not, the answer is “yes”, and the client can then see that this is, in essence, nothing more than the Golden Rule.

 

To emphasize the importance of this requirement for disclosure, the case of Marriage of Rossi (also known as “The Lottery Case”) is telling. In this case, Superior Court Judge Richard Denner ordered that Ms. Rossi, who failed to disclose almost $1.5 million in lottery winnings, must disgorge the entire amount to her former husband as a penalty for failing to comply with the disclosure requirements. The ruling was appealed and upheld.

 

Whatever the size of your marital estate (or your separate property holdings, for that matter), it is most important to prepare your disclosures early on in the proceedings. There are forms that are required to provide the basic information, however, corroborating documents must be attached (pay stubs, deeds to real property, car titles, bank statements, etc). We at The Reape-Rickett Law Firm have the expertise and resources available to assist you regardless of whether your estate is modest or extraordinarily high. We have also forged relationships with some of the best appraisers and forensic accountants in the State of California to better serve our clients.