The Importance of Financial Disclosure
Sorting out finances at the end of a relationship is rarely easy. As couples find themselves having to deal with so many different things at once, it can be very tempting to put any discussions regarding finances ‘on the back burner’, or ignore them altogether. However understandable, Family Law Specialist Karen Andrews explains why this is a very unwise course of inaction.
No separated couple will ever be able to move forward with their lives unless they have resolved their finances. It may not be obvious at the time, but unless financial affairs are clearly dealt with, an individual could remain financially tied to their ex-spouse or civil partner long after the Court has legally ended their marriage or civil partnership. To avoid leaving parties vulnerable, and to obtain closure, a Financial Order is required to record the terms of settlement.
Most cases are dealt with by agreement where parties avoid contested court proceedings and, instead, resolve matters via negotiations, with terms then recorded in a binding ‘Consent Order’.
Often lawyers such as myself are consulted by clients who have already spoken directly to their spouse/civil partner, and present us with informal proposals or possibly a draft Consent Order, that has been sent to them for consideration by the other side.
In an attempt to avoid delay or to minimise their legal costs (or sometimes simply because they are unaware of the procedure) those clients may have by-passed a very important stage of the negotiations and subsequently have no real idea what assets and figures should be ‘in the pot’ for distribution. Alternatively, they may have an idea of what is involved, but have seen no documents proving that the information they are relying on is accurate and up to date.
The important stage that is missing in these scenarios is known as ‘Financial Disclosure’, and requires both parties to be transparent and honest in sharing details and evidence of their financial circumstances with each other prior to negotiations.
If a client asks us to comment on proposed terms in the absence of acceptable Financial Disclosure, then the advice we can give is likely to be limited. We will be able to advise on legal procedure, the various types of orders that a Court can make, and the options available to secure any missing information, but we will advise clients to think very carefully about their situation, explaining any concerns we have.
If we are asked to continue or legal support, but instructed to proceed contrary to our advice, then we will require that client to sign a full and clear disclaimer.
I more preferable scenario is when a client comes to us at a much earlier stage to obtain advice at the outset. We can then answer any questions they might have and guide them through the process of disclosure and negotiation.
Our aim to help avoid settlements based on erroneous or assumed information, or any situation where a client feels under pressure to agree terms owing to their circumstances at the time. Seeking advice at a late stage is rarely the best option and can often prove more expensive (with a less favourable outcome).
Any Financial Order is subject to the approval of the Court. The Court will need to be satisfied that the proposed terms are fair and the way to achieve this is (you guessed it) by obtaining Financial Disclosure before you start negotiations.
When the Order is eventually submitted to the Court it must be accompanied by a form providing a financial summary of each party’s finances and the net effect of the proposed order. This all means that disclosure really is unavoidable. Failing to obtain this is very risky and may ultimately result in the Court refusing to consider the proposed order.