What’s the Difference Between a Preliminary and Final Declaration of Disclosure?
When potential clients enter our office they are often unsure of the extent of their marital assets and liabilities, and those of their spouse. They may not understand the earnings of their spouse, especially if they are a business owner or have complicated bonus structures. They often are confused about what assets and debts they need to disclose in their case. How are they supposed to make sense of everything in the midst of what may be a stressful and chaotic time in their lives? It all starts with the duty to disclose.
What is your duty?
California law requires spouses in a contested divorce proceeding to fully and accurately disclose all assets, debts, income, and expenses to their spouse. All assets and debts must be disclosed—meaning it does not matter whether an asset or debt is separate or community property.
When must you disclose?
Disclosures occur twice in a divorce unless the spouses sign a mutual waiver of the final disclosure. Further, each party must update and augment its disclosures with any material changes as they occur.
The clock on your obligation begins as soon as you file the Petition for Dissolution of Marriage (and/or Registered Domestic Partnership) or for Legal Separation or the Response to the Petition. Without a written agreement by the spouses or a court order, this Preliminary Declaration of Disclosure must be served within 60 days of filing the Petition (if you are the Petitioner) or the Response (if you are the Respondent).
Where the Preliminary Declaration of Disclosure is due at the outset of the case to allow both sides to identify all assets, debts, income, and expenses, early on, the Final Declaration of Disclosure is due prior to entering settlement or a specific date prior to trial, if no settlement is reached so that each party has full and complete knowledge of the relevant underlying facts.
Preliminary and Final: What’s the difference?
Other than the passage of time, what is the difference between Preliminary and Final Declaration of Disclosures?
A. Preliminary
The beginning of a divorce or legal separation case requires spouses to do something they may have never done before: create of list of all their assets and liabilities and gather documentation in support of that list, if documentation exists. This can be a quick and simple task for a small estate, or a grand endeavor for large estates. For various reasons, one spouse may not have access to much of the information. The point of the Preliminary stage is to identify all of the assets and liabilities, income, and expenses of the parties, and hopefully, that identification process can be completed with each spouse properly serving their Preliminary Declaration of Disclosure.
B. Final
Once assets and liabilities are identified, the process for characterizing them as “separate” or “community,” for valuing assets, and for determining the amount of all obligations can begin. During this process, each spouse’s claims regarding what they may be entitled to begin to surface, which may include arguments regarding character, value, reimbursements, support, breaches of fiduciary duties, attorney’s fees and costs, and related claims. Again, this can be a fairly quick task for a simple estate, or an extensive process including further discovery of information, hiring of experts, and interim court hearings prior to trial. Once complete, the Final Declaration of Disclosure can be prepared.
Unless the exchange of Final Declarations of Disclosure is mutually waived, they must be served before or at the time of settlement, or before trial. Whereas the main point of the Primary stage is identification, the Final stage requires all material facts and information regarding the assets, debts, income, and expenses of each party.
Why sign a mutual waiver of a Final Declaration of Disclosure?
In many cases, spouses sign a mutual waiver of a Final Declaration of Disclosure when they are ready to enter into a settlement agreement and feel they have all the information they need to reach that agreement. In cases going to trial, parties are less likely to agree to a waiver, but may if they believe they have all the information necessary to successfully move forward. Waivers are conditional on a signature under penalty of perjury, including five specific representations, and therefore cannot be entered into frivolously. The five representations are as follows:
(1) Both parties have complied with California Family Code Section 2104 and the preliminary declarations of the disclosure have been completed and exchanged.
(2) Both parties have completed and exchanged a current income and expense declaration, that includes all material facts and information regarding that party’s earnings, accumulations, and expenses.
(3) Both parties have fully complied with Family Code Section 2102 and have fully augmented the preliminary declarations of disclosure, including disclosure of all material facts and information regarding the characterization of all assets and liabilities, the valuation of all assets that are contended to be community property or in which it is contended the community has an interest, and the amounts of all obligations that are contended to be community obligations or for which it is contended the community has liability.
(4) The waiver is knowingly, intelligently, and voluntarily entered into by each of the parties.
(5) Each party understands that this waiver does not limit the legal disclosure obligations of the parties, but rather is a statement under penalty of perjury that those obligations have been fulfilled. Each party further understands that noncompliance with those obligations will result in the court setting aside the judgment.
It is important to know your rights, responsibilities, and options regarding the dissolution or legal separation process. Your disclosure obligations are among the most important duties you have and must be taken seriously. Our family law team at Naimish & Lewis can advise you on this and other family law matters. To schedule an initial consultation with an attorney at our firm, please contact us.
