If you are going through a divorce, separation or attending mediation, there is a duty of full and frank financial disclosure. This means that it is necessary for you and your spouse/partner to completely and honestly disclose your true financial positions. The obligation is a continuing obligation throughout the proceedings so you may have to update your financial disclosure.
There is often a fear from some client’s that upon a breakdown of a marriage, the other spouse will not be honest about their financial disclosure or that they will refuse to provide evidence of their financial disclosure altogether. There are many reasons for why spouses do not feel the need to disclose evidence of their assets, from thinking that their pension or business is theirs and that the other spouse should not be entitled to a share of that asset or that they have savings in their sole name. Another reason could be that they both know what the other spouse has in terms of assets and that they do not want to ask or do not feel the need to provide the evidence.
Before any financial settlement can be reached, it is essential that parties disclose to each other their full financial disclosure. There are a few very good reasons for providing financial disclosure; the first reason is to enable your lawyer to provide you with sound legal advice as to what would be a fair and reasonable settlement. Another reason is to make sure that there are no obvious hidden assets or anomalies, an experienced family lawyer will help to uncover any possible hidden assets. Sometimes there is a genuine mistake for non-disclosure of an asset but there are times when a party is trying to deliberately hide or undervalue assets.
There are various ways to provide financial disclosure, this can be done voluntary via solicitors and a settlement can be negotiated or alternatively financial disclosure can be provided during mediation. If a party refuses to provide financial disclosure, then a court can force that party to cooperate or they will be faced with financial sanctions. Most commonly parties are asked to complete a Form E or Financial Statement, they are almost identical forms but are named slightly differently.
They types of documents you will be expected to submit are as follows:-
- Property valuation – if you own a property or properties, then you will be required to provide a valuation which must be no older than 6 months and must include all properties you have a beneficial interest in. Property valuations can be by estate agent market appraisals so that an average value can be agreed. However, if the property is very old or situated on acres of land, sometimes an expert valuer will be asked to provide a more accurate value of the property and/or land.
- Mortgage statement – this is to work out what the most recent redemption figure is regarding your mortgage and whether there are any early redemption penalties which would be applicable in the event the property is sold.
- Bank Accounts and Investments – you will need to provide 12 months bank statements of accounts which you hold individually or jointly with another person or an account held for your benefit. In addition to this, you will have to produce evidence of ISA accounts, PEP’s, National Savings Investments, Stocks, Shares or other realisable assets you have an interest in.
- Business Assets – if you have an interest in a business whether as a sole trader, partner or director, you have to provide documentary evidence. Evidence can include company accounts for the last 2 years and evidence to support what you believe the value of your business is such as a letter from your accountant.
- Pension Values – you will need to provide a recent statement showing what the Cash Equivalent Value is (CEV) and these can be obtained by writing off to the pension company/trustee’s. You should also obtain a value of your state pension which can now be applied for online. Some pension providers such as the Armed Forces can take up to 3 months to produce a CEV therefore make sure your CEV is applied for in plenty of time.
- Income – evidence in support of your income can include your P60 and wage slips if you are PAYE or if you are self employed, a copy of the last 2 years tax returns. However, if you are also a director of a company, the company accounts will provide evidence of dividend payments. You will also be asked to provide evidence of benefits in kind which is shown on Form P11D. Other income could include income from investments, rental income or income from benefits or state pensions.
Sometimes lawyers suggest instructing a third party to assist the parties, if for instance, there is a valuable pension fund and the parties have been married for a long time, we may have to involve either an independent financial adviser or a pension actuary so that we can provide a client with specialist expert advice. The same can be said with businesses, if a business is valuable sometimes an independent business valuer will need to be jointly instructed by the parties to assess the realistic value of the business.
The court will not approve a financial court order upon divorce unless there has been financial disclosure. Even if parties instruct their lawyers that they do not want to provide evidence of their financial assets for whatever reason, the court will expect the parties to provide basic financial disclosure with the parties completing a Statement of Information for a Consent Order form. This form sets out the bare minimum of what a court will expect from the parties, such as the figure in relation to the parties equity within a property, evidence of capital (savings/investments), evidence of liabilities (excluding the mortgage), and evidence of pensions (Cash Equivalent Value).
If full and frank disclosure is not forthcoming then it is open to the spouse whose position has been prejudiced, to apply to a court re-open the matter at some future date, which may lead to there being a penalty in costs for the non-disclosing party. However, if parties have chosen to go against their lawyers advice by not producing any disclosure, then it is highly unlikely a court will allow a matter to be re-opened. Re-opening a case due to dishonesty will be covered in a separate article as it is not open to everyone to re-open a case.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. For advice regarding property purchases, please contact Paul Davies on 01329 232314 or by email firstname.lastname@example.org