Why Do We Need to Complete Financial Disclosures if we are not Going to court?
Perhaps you are wondering why you must gather all of your financial information and fill out disclosure forms even though you have decided to mediate. Under California Family Law Codes, complete and transparent financial disclosure is not just a formality but a legal requirement and a practical safeguard that protects you and your spouse. In addition, a complete and transparent exchange of financial information builds trust and promotes collaboration, the foundation of an informed, efficient, and fair mediation process.
FULL AND COMPLETE DISCLOSURE PROMOTES TRANSPARENCY AND LEADS TO FAIR NEGOTIATIONS
Divorce involves a division of assets. To divide property, you and your spouse must know what property you have. Full disclosure ensures that you and your spouse understand what property you have so that negotiations can be fair. Transparency allows you and your spouse to focus on creative and collaborative problem-solving, rather than on suspicion or trying to figure out if your spouse is hiding something.
Mediation is a voluntary good-faith process. Transparency about finances demonstrates your willingness to be honest, thorough and fair. When you and your spouse come to mediation with openness and an interest in fairness, it sets the tone for a smoother mediation process.
FINANCIAL DISCLOSURE IS REQUIRED BY CALIFORNIA LAW
The California Family Code requires both spouses to complete and exchange a Preliminary Declaration of Disclosure (FL-142) and an Income and Expense Declaration (FL-150) before a judgment can be finalized by the court - even if you are resolving your divorce issues using mediation. While these forms may never be filed with the court, the duty to disclose financial information using these forms applies to every divorce, whether contested or mediated.
MEDIATION IS A PART OF THE LEGAL DIVORCE PROCESS
Even though mediation occurs out of court, mediation is a legal process. The ultimate goal of mediation is a Judgment of Dissolution of Marriage that the court approves and enters. Before signing off on a Judgment of Dissolution of Marriage, the court must ensure that you and your spouse completed and exchanged your financial disclosures.
FINANCIAL DISCLOSURES CLARIFY THE FINANCIAL LANDSCAPE
Mediation is about making decisions and coming to an agreement. Complete and accurate completion of financial disclosures reveals your whole financial landscape, which offers you and your spouse the opportunity to make informed decisions about:
Division of property
Parenting plans
Child support
Spousal support
Both you and your spouse need to have a complete understanding of your financial picture before making these important decisions.
FULL DISCLOSURE PROTECTS THE VALIDITY OF YOUR AGREEMENT
Couples signing a Marital Settlement Agreement must be informed and sign the agreement knowingly and voluntarily. While skipping full disclosure might seem convenient, it is risky. California law allows the court to reopen a divorce case if an undisclosed asset surfaces post-judgment. The court may impose severe penalties for failure to disclose or even set aside the judgment fully.
Complete disclosure is like an insurance policy protecting the agreement from future disputes. When couples exchange fully complete financial disclosures, they ensure that their agreement is final, binding and fair.
THE BOTTOM LINE
California Family Law requires complete financial transparency, even if you never enter a courtroom. The exchange of financial information is not just a requirement, but also the foundation for a fair, legal and binding agreement. The more thorough your disclosures, the more confident you can be that your mediated settlement will stand the test of time.
If you or someone you know is considering divorce and has questions about flat-fee divorce mediation, please call PXP Mediation today at (310) 486-8842.