One of the strictest parts of the divorce process is the requirement that both spouses must provide full and fair financial disclosures. The preliminary declaration of disclosure is the core of the financial disclosure process. It requires each spouse to inform the other about every asset they own and debt they owe before they can divide them.

This guide explores where disclosures fit during the divorce process, what you need to disclose, and what happens after disclosure. If you have questions about disclosures or need help with a family law matter, contact the Stratte Firm.

When Is Financial Disclosure Required for Divorce?

Not only is financial disclosure required for divorce, but it is also one of the first things you must do after filing. Even when spouses agree on essential divorce issues like child custody, spousal support, and property division, one spouse typically files the initial divorce paperwork, becoming the “petitioner.” The petitioner must serve the papers on the other spouse, who becomes the “respondent.” The respondent may respond to what the petitioner includes in the initial paperwork by filing a response, or they may waive their right to file a response if they do not want to disagree with the specifics in the initial petition.

Within 60 days of filing the initial divorce petition, the petitioner must provide a full and accurate financial disclosure. California Family Code (FAM) §2104. The respondent must complete a disclosure statement within 60 days of filing a response or waiving their right to file a response. To provide this information, spouses typically use California’s preliminary declaration of disclosure form.

What Is a Preliminary Declaration of Disclosure?

The preliminary declaration of disclosure (PDD) is the form you use to provide an initial disclosure of your assets and debts. Spouses typically disclose assets and debts using the California court form Declaration of Disclosure, FL-140, and attach several other documents.

What Must You Disclose?

In short, you need to disclose and provide a monetary fair market value for your:

  • Income and expenses,
  • Separate property, and
  • Community (marital) property.

California law requires courts to divide community property equally when a couple divorces.  FAM 2550. Community property includes most assets that either spouse acquired while they were married.  In contrast, separate property includes property acquired before marriage or after separation, as well as property obtained through inheritance or gift during the marriage. FAM 770-72.

Some property is “quasi-community,” which means it is located or was obtained outside California’s borders but would be community property otherwise. California treats this property like community property. FAM 125.

What Must You Include?

Each spouse must attach the following to their PDD:

  • Either a Schedule of Assets and Debts (FL-142) or Property Declaration (FL-160);
  • An Income and Expense Declaration (FL-150); and
  • All tax returns from the two years before filing for divorce.

Forms FL-142 and FL-160 are similar, but FL-160 provides space for the spouses to propose their ideal division, while FL-142 does not. Spouses often use two copies of these forms, one for separate property and one for community property.

The spouses must also include information about:

  • The value of all community property the couple shares,
  • Community debts the couple shares, and
  • Any income-producing activities a spouse has pursued since the date of separation that originated from opportunities that arose during the marriage.

If you need more space than the form allows, you may use an extra sheet of paper.

What Do You Do with Your Divorce Financial Disclosure?

You do not file your divorce financial disclosure with the court. You serve the documents on the other spouse.

After you serve your financial disclosure form and attached documents and information on your spouse, you file FL-141, Declaration Regarding Service of Declaration of Disclosure and Income and Expense Declaration. Form FL-141 allows you to assure the court that you made the required disclosures on a specific date.

Special Circumstances Affecting Financial Disclosure in Divorce in California

Exceptional circumstances can change the financial disclosure process. Spouses who seek a summary dissolution and instances in which one spouse fails to respond to divorce filings may follow slightly different procedures.

Summary Dissolution of Marriage

Couples can file for summary dissolution of marriage if the spouses:

  • Have been married five years or less;
  • Have no children, and neither spouse is pregnant;
  • Do not own real property;
  • Do not owe more than $4,000 in community debt, excluding a vehicle loan;
  • Own community property totaling less than $25,000 in value;
  • Waive the right to spousal support; and
  • Provide a written agreement dividing assets and liabilities, and execute it before the court grants the divorce.

FAM 2400.

When spouses seek a summary dissolution, they must complete Form FL-150 (Income and Expense Declaration). Along with the FL-150, they may complete a PDD and attach either FL-142 or FL-160 or, instead, three worksheets in a Summary Dissolution Information booklet that all California family courts make available.

Default Divorce

If one spouse fails to participate in the divorce process or cannot be found, the court can issue a default divorce decree. Usually, the petitioner must still complete the preliminary divorce disclosure and serve the paperwork on the other spouse. If the petitioner could not locate the spouse to serve divorce papers on them, however, they do not need to serve a PDD on their missing spouse. FAM 2110.

What Is a Final Financial Disclosure?

A final financial disclosure is a second round of disclosure using the same basic process and forms. However, the final disclosure updates any changed information, such as differences in the spouse’s income or assets since the couple separated.

The spouses can jointly agree to waive the requirement to file final disclosures.

What Happens After Financial Disclosure in Divorce?

What happens after financial disclosure in divorce depends on the couple. If the spouses have already agreed on all the terms of their divorce, they can submit a separation agreement with their jointly proposed divorce terms.

Otherwise, the spouses work on resolving the other aspects of their divorce. Often, that means attending mediation or, if the spouses cannot resolve their issues outside of the court, going to trial. In the case of trial, the court next determines which assets are community, which are separate, and what each is worth. Then, the court divides them equally.

Regardless of whether the spouses require the court to resolve any divorce issues, they are subject to California’s divorce waiting period. California courts cannot grant a divorce until six months after the petitioner serves divorce papers on the respondent. FAM 2339.

What Happens If a Spouse Omits Items?

Financial disclosures, like child support, are not optional. Each spouse must fully and accurately disclose their financial information. If either does not live up to that obligation, the court can impose consequences. What the court might do depends on whether the spouse purposefully omitted items and where in the divorce process the spouses are when they discover the omission. FAM 2556.

Potential Consequences

If a spouse omits one or more assets, the court may respond by sanctioning the spouse who failed to fully and completely disclose their property. The court can order a monetary penalty to deter future omissions and may require that the spouse cover some or all of the other spouse’s reasonable attorney fees.

A spouse who purposefully omits one or more assets commits perjury. Entire industries exist to help spouses track down concealed assets during the divorce process.

But what if you serve your financial disclosures and realize later that you omitted something? In general, overdisclosure is better than underdisclosure. The court can still order sanctions based on accidental omissions. Once you recognize the mistake, communicate it to your spouse immediately. Your attorney can help you ensure you provide the information in the appropriate format.

Time of Discovery

Generally, if you discover accidentally or purposefully omitted assets before a court has issued a final divorce decree, you can still readjust your property division before the court issues a final divorce decree.

California courts have the authority to divide community property even after issuing a final divorce decree. A spouse who discovers or realizes that the property division in their final divorce decree excludes some items can petition the court to reopen the divorce. The court can then divide all community property it has not yet divided.

Courts generally divide after-disclosed property equally unless good cause justifies an unequal distribution. FAM 2556. Good cause to unequally distribute assets may not include an accidental exclusion. Yet, purposeful omissions may be a good cause, making it more likely that the court will award a lesser share of the community estate to a spouse who tried to hide assets and order that spouse to pay the other’s attorney fees.

A Full and Accurate Financial Disclosure

Financial disclosures are one of the most strictly regulated parts of divorce. A complete and accurate preliminary divorce disclosure is essential to ensure you and your spouse fairly divide assets. If you need help meeting or understanding your disclosure requirements, contact the Stratte Firm.

Resources:

California Family Code § 125, link.

California Family Code § 760, link.

California Family Code § 770, link.

California Family Code § 771, link.

California Family Code § 772, link.

California Family Code § 2104, link.

California Family Code § 2110, link.

California Family Code § 2339, link.

California Family Code § 2400,  link.

California Family Code § 2556, link.

Judicial Branch of California, Declaration of Disclosure (FL-140), link.

Judicial Branch of California, Declaration Regarding Service of Declaration of Disclosure and Income and Expense Declaration (FL-141), link.

Judicial Branch of California, Schedule of Assets and Debts (FL-142), link.

Judicial Branch of California, Income and Expense Declaration (FL-150), link.

Judicial Branch of California, Property Declaration (FL-160), link.