California law requires both spouses to exchange detailed financial information before a divorce is finalized. These disclosures give each person a complete picture of the family’s income, expenses, assets, and debts, helping ensure that property division and support decisions are based on accurate information.
Why Financial Disclosure Matters
One of the most important steps in a California divorce is completing the required financial disclosures. The purpose is simple: each spouse should have a clear understanding of the family’s financial situation before reaching agreements about property, support, or settlement.
The required disclosure package is known as the Declaration of Disclosure and generally consists of four separate forms. Together, these documents create a snapshot of your financial circumstances at the time they are completed.
Income and Expense Declaration
The first document is the Income and Expense Declaration. This four-page form provides an overview of your financial situation, including:
- Employment information
- Income from all sources
- Monthly living expenses
- Health insurance and medical expenses
- Childcare and educational expenses
You must also attach supporting documentation. Most people provide their last 2 months’ pay stubs. If you are self-employed, you must provide a year-to-date profit and loss statement instead of pay stubs. The goal is to show the income coming into your household and the expenses being paid.
Schedule of Assets and Debts
The second required form is the Schedule of Assets and Debts. This document lists everything you own and everything you owe, regardless of whether you believe an item is community property or separate property.
The disclosure includes assets such as:
- Real estate
- Vehicles
- Bank accounts
- Investment accounts
- Retirement accounts
- Businesses and partnerships
- Personal property and collectibles
It also includes debts such as mortgages, vehicle loans, credit cards, taxes, student loans, and other financial obligations.
Supporting documents must accompany these disclosures, including deeds, mortgage statements, bank statements, retirement account statements, vehicle titles, credit card statements, and loan information. These records help verify the information provided on the forms.
Tax Returns and Additional Financial Information
The third document, the Disclosure Declaration confirms that you completed the required financial forms and requires you to provide your income tax returns for the last two years, including all schedules and business returns when applicable.
This form also asks whether you possess information that could affect the value of an asset or a debt that may not be readily apparent, or whether you have been offered any new business opportunities that should be disclosed.
The purpose is to ensure that neither spouse is making important financial decisions without complete information.
Filing Proof That Disclosures Were Completed
The fourth document is the Declaration Regarding Service of Declaration of Disclosure.
Rather than filing all your financial records with the court, this document confirms, under penalty of perjury, that you completed the required disclosures and properly provided them to your spouse. In many non-litigated divorces, this is the only disclosure document filed with the court.
A judge will not approve a final divorce judgment until this declaration has been filed.
Preliminary and Final Disclosures
California law requires both a preliminary and a final Declaration of Disclosure. However, you and your spouse are permitted to waive one, usually the final, disclosure by agreement.
Even when the final disclosure is waived, significant financial changes must still be disclosed so that you both have accurate financial information throughout the divorce process.
Working Together During the Disclosure Process
In Mediation and Collaborative Divorce, you and your spouse can gather your financial information together, particularly when preparing the Schedule of Assets and Debts.
A financial neutral or Certified Divorce Financial Analyst can help to organize financial records into spreadsheets that accompany the required forms. Income and expense declarations reflect each person’s individual earnings and personal expenses, and are signed individually. The financial neutral can help each of you with gathering and organizing your individual income and expense information.
What Happens If Something Is Left Out of the Disclosures?
California law takes financial disclosure requirements very seriously.
If an asset or debt is accidentally omitted, the court can reopen the property division so that the omitted item is properly addressed. If someone intentionally hides assets or fails to disclose required information, the consequences can become much more serious. The court has authority to set aside portions of the judgment, award a larger share, or even all, of the undisclosed asset to the other spouse, and require the offending spouse to pay attorney’s fees and costs.
When preparing your financial disclosures, the safest rule is simple: if you are wondering whether something should be disclosed, disclose it.
California’s financial disclosure requirements are designed to give both spouses a complete and accurate picture of their financial circumstances before a divorce is finalized. Complete, honest disclosures help promote fair settlements and reduce the risk of future legal disputes.
Frequently Asked Questions
What documents are included in a California Declaration of Disclosure?
The disclosure package includes the Income and Expense Declaration, the Schedule of Assets and Debts, the Declaration of Disclosure, and the Declaration Regarding Service of Declaration of Disclosure.
Do I have to disclose separate property?
Yes. California requires disclosure of both community property and separate property so that all financial information is available during the divorce process.
What happens if I fail to disclose an asset?
If an asset is accidentally omitted, the court may reopen the property division. If an asset is intentionally hidden, the court may impose significant penalties, including awarding more or all of the asset to the other spouse and ordering payment of attorney’s fees.
Lisa R. Murray is a family law attorney focusing on the Collaborative Divorce and Mediation Processes. She can help you determine your goals in separation or divorce.
Ms. Murray has been practicing family law since 1989 and is an owner of Chase, Berenstein and Murray Counselors at Law in Burlingame, CA. She is recognized by Super Lawyers (https://www.superlawyers.com), an elite group of 5% of top lawyers, for 15 consecutive years.
She can be reached at 650-642-3897 or visit https://www.chaseberensteinandmurray.com