The law requires that in all divorce, legal separation and nullity cases, both parties must disclose to each other information about their income, assets, debts, and any investment opportunity available since the date of separation. This is required even if neither party is asking the court for orders about property.
The parties comply with disclosure requirements by completing a preliminary “Declaration of Disclosure” and serving it on the other party, at the same time or within 60 days of filing the Petition or the Response. In some cases, the parties must also complete and serve a final declaration of disclosure before the court will enter a judgment for the division or property.
The declaration of disclosure is a term used to describe several forms and attachments that must be exchanged. The forms include a cover sheet called a Declaration of Disclosure, a Schedule of Assets and Debts (or a Property Declaration), an Income and Expense Declaration, copies of statements from financial institutions listed in these forms, and copies of all tax returns filed by the party in the last two years.
Because these disclosure documents contain personal financial information, they are not filed with the court. Instead, after exchanging the disclosure documents with each other, the parties file with the court clerk proof that the disclosures were served.
The disclosure requirements are intended to help spouses and domestic partners comply with their statutory fiduciary duties to fully disclosure their assets and debts to each other. If a spouse serves a declaration of disclosure but fails to disclose the existence of certain assets, he or she has violated that duty.
There are penalties if a spouse or domestic partner intentionally hides assets. The penalties can include changing the divorce judgment and awarding the other spouse or partner more than her community property share of the concealed asset. The court could also award 100% of the hidden asset to the other party.
The most famous example of this is a Los Angeles family law case in which a wife won $1.3 million dollars in the lottery and filed for divorce 11 days later. She hid all information about her winnings throughout the divorce case. The ex-husband’s attorney eventually learned about the winnings and informed the court. In this case, the court found that the wife had violated her duty to disclose. As a penalty, the court awarded the ex-husband every penny of the lottery winnings.
The moral of this story is that it pays to be honest from the beginning.
So, take your disclosure obligations seriously.
If you later realized that you missed adding a particular asset, debt, or investment opportunity, you should amend your disclosure documents right away. The same applies if you acquire new assets or debts after you have served the declaration of disclosure.