If you and your spouse are in the process of separating or getting a divorce, you can imagine that the most painful part of the process will center on money. In order to make the right financial decisions for yourselves and your children, it is crucial for each party to have an accurate picture of the other’s finances and to in turn disclose their own.
In May 2005, the Ontario Family Law rules were updated to include additional requirements for financial disclosure. The law has one simple stipulation: Full and complete financial disclosure is required by both spouses.
Furthermore, the Family Law Act allows the Court to “set aside” (meaning ‘not enforce’) any separation agreement that does not include a full financial disclosure. So why incur further costs and waste more time and money if you don’t have to, just do it right the first time.
The purpose of the financial disclosure is to make sure that the Net Family Property is properly equalized.
Pursuant to the Ontario Family Law Act, when two people enter into a marriage, each person becomes entitled to an equal share of the profit of that marriage. So, when a marriage ends, the law stipulates that the value of any kind of property that was acquired by a spouse during marriage and still exists at time of separation must be equally divided between the spouses. Please note that the law also provides that any increase in value of any property owned by one of the spouses prior to the marriage has to be shared. The payment that may be owed to one spouse is what we call “Equalization payment”.
In order to equalize their Net Family Property, both parties have to show the value of all their assets and liabilities at the date of their separation (Valuation date) but also at the date of their marriage. Therefore, it is essential that each spouse provide a complete list of all their financial records for these two dates.
There are exceptions which are called “Excluded property” such as gift and inheritance. Parties will also need to provide proof of when those were received and where those amounts went. (see excluded Property article)
What kind of financial documents am I expected to provide?
Generally speaking your mediator or lawyer will ask you to provide the following documents:
– Bank accounts (Chequing, Savings)
– Investment: Profit Sharing Shares, Non-Registered Cash, RRSPs, Cash value life insurance, Bonds,
GICs, TFSAs, Mutual Funds.
– Pension Valuations*, LIRAs
– Tax returns, Notice of assessments (NOAs), T4s for the last 3 years or 5 years for self-employed.
– Paystubs or other proof of income for the last 6-12 months.
– Statements of all debts you have an interest in such as but not limited to personal loans (Family
or business), Car loans, Mortgages, Line of Credits, Student loans, Income tax owing, Utility or
property tax owing, etc.
– List of all your property you own or have an interest in, such as but not limited to, your home,
your cottage, vacation home, time shares.
– Evaluations or appraisals of the properties mentioned above.
– Financial Statement regarding any business you may have interests in or business you may own.
– List of property you owned prior to marriage, such as but not limited to, jewelry, antiques, tools,
artwork.
– All other document that may be relevant to your financial situation.
All the statements you provide must have the name of the institution, account or policy number as well as amounts or balances.
It is important to also understand that Child Support is determined solely based on the payor’s income and number of children; here, financial disclosure as to annual income is essential. Any Spousal Support obligations will also be based on income.
What happens if I don’t provide full financial disclosure?
If you negotiate a separation agreement with your spouse, but that agreement does not reflect your true financial situation, your spouse can later apply to court to have your agreement set aside as a result of your non-disclosure. The money you saved going through mediation will be spent threefold on lawyer’s fees and court fees and to top it all off, you may end up with costs award against you.
Financial disclosure provides parties a real and accurate picture of their respective financial situation enabling both parties to then make the best-informed decisions about their future for themselves and for their children.
