Financial Disclosure in the Context of Family Law
Are you thinking of getting married? Or moving in together? Are you in the midst of a separation? Or a divorce? If you answered yes to any of these questions then you may have come across the concept of financial disclosure. Whether you are negotiating a marriage contract or a separation agreement, financial disclosure is key.
Parties are free to create agreements to suit their specific circumstances and the courts will generally uphold them. However, to ensure that the agreement is respected by the courts, financial disclosure is crucial. While the extent of the financial disclosure may vary depending on the type of agreement, it will usually include giving the other party information about your assets, debts and liabilities.
Separation & Divorce
Financial disclosure is particularly important on the breakdown of a marriage since most parties will enter into a separation agreement. And one of the main issues likely to be dealt with in the agreement is the division of property. The courts will generally respect a separation agreement. However, there will be instances where they may choose to exercise their discretion and set the agreement aside if one party has failed to disclose to the other significant assets, or significant debts or other liabilities.
If the parties are unable to resolve the property issues, then one or both can make an application to the court to the have issues determined. If litigation ensues, the law is very specific about the type of disclosure that must be made. Parties must provide financial statements that included information regarding:
o property, debts and other liabilities
– as of the date of the marriage,
– as of the valuation date, and
– as of the date of the financial statement;
o the deductions that the party claims under the definition of net family property1;
o the exclusions that the party claims under the definition of net family property1;
o all property that the party disposed of during the two years immediately preceding the making of the statement, or during the marriage, whichever period is shorter.
Child Support and Spousal Support
Financial disclosure will also be required where there has been a request for child support and/or spousal support. The type of financial disclosure necessary in these instances includes information about the parties’ income and expenses. In addition, parties are required to provide proof of their income including copies of their last three income tax returns and notices of assessment.
Marriage Contracts & Cohabitation Agreements
Under Ontario’s Family Law Act, couples who move in together can decide to enter into a cohabitation agreement or if they are marrying they can enter into a marriage contract. The main purpose of these agreements is to set up the rules that will govern in the event that the relationship ends, in particular with respect to financial matters.
Although there are specific requirements for financial disclosure with respect to divorce and child support, the only legislative requirement when negotiating marriage contracts and cohabitation agreements is that significant assets, or significant debts or other liabilities, existing when the domestic contract was made, be disclosed. However, over the last few years some courts have indicated that the extent of the financial disclosure may in fact be as great as for separation agreements.
At the very least, assets, particularly major assets, should not be concealed. Financial facts that may influence the other person’s decision about entering into the agreement should be disclosed. While it remains unclear whether you must provide formal valuations, a general worth of the various assets is not a bad idea. And do not be afraid to ask for particulars of the other person, including the value and location of his or her assets.
It is a good idea to get legal advice if you are thinking of entering into any of the arrangements discussed in this article. Nicola Savin and Terry Macli both practice in the area of family law. Please visit our specialized family law website www.familylawtoronto.ca.Share