I often get some push back when I ask for copies of paystubs, pension information, income tax assessments and returns for the past three years, etc. (“financial disclosure”) from couples that are separating. Especially when clients come to me with a written separation agreement that they just want me to review. It doesn’t matter if the separation agreement you bring in was “homemade”, from a template on the internet or prepared by a spouse’s lawyer — there needs to be full financial disclosure every time. So, I am going to tell you why I ask for financial disclosure, but first I am going to tell you what I am not doing.
Lawyers are not asking for financial disclosure so they can rip apart the agreement that you have. We do not want to undo the work that you and your spouse have already put into it. But when you come to see me to get my advice on the agreement and you ask me “whether it is fair” or “is there anything we missed” I need to know the details behind that agreement. I cannot just look at the agreement alone and give you an opinion on whether the agreement is a “good deal” for you.
Some people fear that by giving all their financial information they are handing over ammo that the other side can use against them, or they think that their spouse is going to GO after everything that they have. The law protects from the situation where one person gets everything as most times married spouses divide their assets and debts equally – yes 50/50. So how can I help with that unless I see all the numbers by requiring full disclosure, ONLY then can I advise whether this is a fair agreement.
That is the goal of financial disclosure — to put all the cards on the table so both spouses can see what is up for grabs but then they get to decide how assets and debts will be divided which is specific to their situation. You cannot make a fair agreement until you know what that agreement needs to cover. When you come to a lawyer looking for independent legal advice on an agreement, they need this financial information to give you proper advice on the fairness and adequacy of that agreement according to the law.
Dividing property at the end of a relationship is not a matter of dividing everything right down the middle, and so if there are certain investments that you would like to keep, disclosing the amount of those does not mean that you are automatically going to lose it. With full financial disclosure from both sides there is room for flexibility in the give and take of negotiation. If you want to keep your investments and your spouse wants to keep their pension, then that could balance each other out as part of the division or perhaps both the pension and the investments are divided. That’s a choice you and your spouse must agree on. If you have full disclosure you know what those assets are worth so that you can negotiate how they could be divided. So really financial disclosure makes it easier to come to an agreement. When you cannot divide it out equally, meaning one item is not worth about the same as the other item i.e. the house versus investments or pension then one of the spouses can pay the other spouse an equalization payment to make up the difference.
What you need
So, agreements can be flexible, but disclosure is not. At the end of the day you need to provide and receive full financial disclosure in order to have a lasting agreement. If you do not provide full disclosure when forming a separation agreement, and your spouse finds out, they can go to court to overturn the agreement. Where there was no financial disclosure a judge would likely override the existing agreement and alter it to be fair and equitable taking into consideration ALL the assets and debts.
So, what do you need to for full disclosure? Well it depends on what you have, but essentially you have to give amounts or values of all of your investments, savings, pensions, loans, credit cards, and a valuation of all of the larger assets that you have, such as property and vehicles. Basically, you need to lay out everything that you own, and everything that you owe – and provide proof where you are able, like printing out bank or credit card statements.
We also ask for you and your spouse to provide two consecutive paystubs, income tax returns and notices of assessments (the letter you get from Revenue Canada after you file your tax return) for the last three years. This is necessary to determine whether there is a need or requirement to exchange funds between the spouses to support each other and children living in two separate homes. Do I have to pay child support? Do I have to pay spousal support? We need this kind of financial information to give you that kind of advice.
So, if you are going to be seeing a lawyer about a separation agreement, you can save time and money by coming prepared with all this information on hand. Be proactive and collect this financial disclosure for you and your spouse if you are able. Remember, you cannot and should not have anything to hide. You need full disclosure in every “how” process and what that looks like may differ, but the requirements for disclosure are always the same.