Yes, the California Courts require full financial disclosure of all income, assets, and expenses. Honestly, I think this is an important requirement even though it can be difficult. It is unfortunate that many of us do not know much about our finances. That can be for many reasons, but truthfully, managing money is not usually something we look forward to doing as a “fun” joint activity with our spouse. And if money is tight, or even if it isn’t, it can be a significant source of conflict. So like typical human beings, we take the easy way out and one person takes a primary role of managing the finances.
So in divorce we typically set up two different households, and each person in the couple will now be handling their own income, expenses, bank accounts, and investments. For the person who has been doing this all along, it is generally not a big deal. Yet, for the person who has not been involved much in the past, taking on money management can be a big change. Don’t worry if that is you, I can absolutely tell you that this is very common, and there is no shame in it. Look at it as an opportunity.
Back to the financial disclosures…
It is time to divide all the income, assets, and expenses you previously had together. I have yet to see one household magically divided into two with the same income without significant spending changes.
The process of developing a good budget provides great insight into what you have actually been making and spending. While it is much easier to just spend, I find that many people can easily adjust some of their spending habits by just looking at where the money is actually going. Understanding where the money goes also supports making purchasing decisions based more on your goals for your future than on your current emotional state.
An inventory of your assets: house, cars, savings, retirement funds, investments, art, jewelry, and toys along with any debt you might have is important to making decisions about how to divide your property when you divorce. Even if you are congenially working together, making separate lists increases the likelihood of including everything on the list. And yes, everything includes assets you had before the marriage, or received as a gift or inheritance during the marriage. In California, it is not typically required to divide separate property, but you must include it on your disclosures. If you end up in court, judges do not look kindly on hidden assets.
The disclosure of assets to the courts requires that you list them and value them. Sometimes it is not completely obvious how to value items like pensions, antiques, or tools and equipment. Divorce professionals help people do this all the time, and if they don’t know how to do it, most likely they know someone who does.
So, completing financial disclosures is certainly not something anyone gets excited about, but it is critical information to smooth the divorce process and ensure you know how to provide for your future.