Hoping that your divorce is concluded quickly and painlessly is often the gateway to untangling complex finances. You’d like to believe everyone can be upfront and honest, but that’s often far from the reality.
Approximately one in four people admitted to hiding assets from their ex-partners. In many cases, these assets were never uncovered, meaning a fair financial settlement was never achieved.
We believe that you deserve a fair share after a relationship is dissolved. That’s why in this guide we discuss financial disclosure, how it works, and how to ensure that it happens.
What financial disclosure in a divorce entails
Financial disclosure revolves around what’s known as a ‘full and frank’ disclosure, which is a cornerstone of English law. It means that you're obligated, on an ongoing basis, to be fully and clearly transparent about your finances.
In practice, this revolves around a 30-page Form E document, which serves as the basis for court-mandated hearings and negotiations led by your solicitor. It will outline your:
Income
Liabilities
Future needs
Additionally, you’ll be required to provide official proof for every figure declared in your disclosure. This means recent bank statements, pension valuation documents, payslips, P60, property valuations, mortgage statements etc.
Naturally, which documents you need will depend on the assets you hold. Your solicitor can provide you with more information on which types of documentation you’ll personally need.
Do I have to list non-matrimonial property during my divorce?
Non-matrimonial property, which you don’t expect to be factored into the division of assets, still has to be listed. Even if you’re 100% sure that something does count as non-matrimonial, it must still be disclosed regardless.
Generally, non-matrimonial property will be excluded from the equation, but there are cases where it may be incorporated and divided if it is necessary to meet the needs of the parties or to meet the needs of dependent children.
In short, full financial disclosure means everything you have, including matrimonial and non-matrimonial property and assets.
What happens if I don’t provide full and frank financial disclosure?
If you sign a Form E or a Statement of Information about your finances that you know is untrue then you can be found to be in contempt of court which could result in you being fined or even imprisoned.
You should also know that your duty to provide full and frank disclosure is an ongoing duty which means if your financial situation changes you must disclose any changes. Some divorces can take months to process, so if something changes, you must update your financial disclosure to your solicitor and to the other side and the court if financial proceedings have been issued.
Beyond potential contempt of court charges, any resulting financial settlement could also be overturned; and that can happen years down the line if you have been found to have been untruthful such that it would have affected the settlement.
How to ensure compliant financial disclosure
Divorces handled through mediation fail in roughly 11% of cases due to a lack of full disclosure. You know that you’ve been honest, but if you suspect that your partner hasn’t, it’s your right to act through your legal representative.
If you suspect your partner isn’t being compliant with the financial disclosure requirement, here’s what you can do:
1. Cross-Reference the Evidence – Don’t just look at the numbers on their Form E. Examine the supporting evidence and look for inconsistencies. Compare any mismatches with their lifestyle.
2. Draft a Questionnaire – Have your solicitor draft a questionnaire, or Schedule of Deficiencies. It’s a legal document that lists specific questions your ex-partner is bound to answer by law and seek further evidence.
3. Look to the Courts – If they refuse to answer the questionnaire, or they’re continuing to hide assets, your solicitor can turn to the Family Court. Actions may include third-party disclosure orders, cost orders, or adverse inferences to award you a larger share of visible assets later.
In the event you’re dealing with a complex financial situation, which is more common amongst high-net-worth divorces, you may need to hire a forensic accountant.
Forensic accountants are specialists in tracking hidden cash flow, identifying undervalued interests and uncovering assets held in other countries or in trusts. Your solicitor will be able to support you in enlisting one of these professionals to help you receive what you’re entitled to in your divorce settlement.
When is divorce financial disclosure needed?
Full financial disclosure isn’t an optional extra. Transparency is a legal obligation for all couples going through a divorce and dividing assets. Lying on your Form E, concealing assets, and intentionally undervaluing your assets are all examples of breaking the law.
Even in the cases of divorces that have already happened, if a lack of disclosure is uncovered years later, the Family Court can set aside that settlement and reopen the financial case if the circumstances justify it.
On a side note, even if you’re on relatively good terms with your ex-spouse and manage to agree a financial settlement, you’ll both still need to provide details of your income and assets on a Statement of Information form (D81) if you want the court to approve a financial consent order so that the agreement you have reached is legally binding.
It’s not because a judge wants to interfere in your affairs. Under the law in England and Wales, the Family Court is always required to ensure any proposed settlement is fair as the Court is not just a rubber stamp, they are obliged to check the assets and the needs of the parties and any dependent children before deciding whether to approve a financial consent order.
Does financial disclosure affect the outcome of a divorce settlement?
Your divorce settlement hinges on full and frank financial disclosure. It’s the only way to get a true picture of the assets, income and liabilities of both sides including pensions. You can’t get a fair division under the law if both sides’ situations aren’t fully known.
Remember, the financial disclosure is the baseline for a fair division. It’s necessary to determine the value of the overall matrimonial pot. Without that overview, every calculation regarding marriage length, dependent children, and what each side has brought to the pot is invalid.
It’s why cases involving one or both spouses hiding assets have been reopened years later, after being discovered. It’s why you’ve got consequences like:
Overturned settlements.
Awarding a higher share to the other spouse.
High legal costs.
Fines.
Criminal records and even the risk of imprisonment.
At VM Family Law, we know that you may be concerned about complying with the law or that your partner may be hiding their assets out of spite. We know that confronting these issues can be stressful at an already stressful time.
With the help of our expert divorce solicitors, we can use every legal mechanism available to compel full and frank financial disclosure and prevent assets from being hidden. If you’d like to learn more, schedule your consultation today.