Before signing off on a separation agreement, both parties must exchange sworn financial statements along with full and complete financial disclosure supporting their respective financial positions.
Where there is lack of financial disclosure, a party may petition the court to set aside a separation agreement. There may be significant consequences where a party has failed to disclose an asset, thereby misrepresenting their true net worth. Both parties should be completely aware of their respective net family properties when equalizing or dividing assets.
Cases that are litigated require the production of financial statements. When commencing court proceedings, both parties must serve and file their sworn financial statements, tax returns and notices of assessment for the past three years. At the initial stages of court proceedings, judges at case conferences will immediately order the parties to disclose all relevant financial documentation.
Failure to provide relevant financial information when the agreement is executed is a major criterion which may be used in attempting to set aside an agreement. This arises where one of the parties fails to fully disclose his or her assets.
Although financial statements are time consuming and a burden, they are well worth producing in the early stages of negotiations, rather than risking the possibility of having your agreement declared null and void. The financial statement should also form part of the agreement so as to ensure that the opposing party is fully aware of your financial position.
Where there are issues of child support, the obligation to disclose income information is on-going. Pursuant to section 21 of the Federal Child Support Guidelines, parties must disclose their personal income tax returns, notices of assessment for the past three years, along with a recent statement of earnings.
The bottom line is that it is always best to fully disclose one’s financial position in advance of executing an agreement. Otherwise, there is a risk of a former spouse seeking a share in the division of an asset that was not valued or disclosed upon separation.