If you and your spouse are either moving in the direction of a divorce or are already going through a divorce, I want to ask you a question: what do you know about your spouse’s financial situation. Do you and your spouse share bank accounts, login/passwords and do you have full knowledge of their investments and money habits? Or, do you and your spouse maintain different bank accounts and keep a separate life from one another when it comes to finances?
If I had to take a guess, I would go with the former rather than the later. The reason why I would guess this way is that money fights and money problems are a leading cause of divorce in our country. A symptom of not being on the same page when it comes to money is a certain level of distrust of one another. Even if your spouse is not hiding anything from you it can feel that way due to that lack of knowledge. If you don’t know what is going on with your spouse’s finances before the divorce it will become an imperative that you learn what is going on during the divorce.
That is what I would like to talk with you all about today. Financial questions are a huge part of any divorce. How you obtain information about each other’s finances is a crucial part of your case as well. The statements that you disclose to one another can be key parts to understanding one another and negotiating settlements within your divorce.
Disclose what you must, but be wary
It is reasonable for you and your spouse to want to get a full picture of your spouse’s financial world in conjunction with your divorce. After all, one of you may be asking for spousal maintenance, child support or other financial concessions that are only attainable in the event that one of you has the resources to back up those sort of requests. If you contend that you lack the wherewithal to pay your spouse support after the marriage, yet your financial disclosures show that your income is triple what you have alleged it to be there is good reason to believe you may be on the hook to pay that support after all.
In order so that each of you may have a good idea where the other one stands financially; it will become imperative that you make honest and complete disclosures regarding your assets and debts. The basics of these disclosures first comes in an Inventory and Appraisement that your attorney will likely ask for you to complete at the outset of your case.
Next, if you own real estate, vehicles or other high value pieces of property you will need to dig out the title to the property in order to show whether the property belongs to the community or is one of your separate properties.
The reason why a full and complete disclosure of this type of information is necessary is because you cannot engage in honest, detailed settlement negotiations until that information becomes available. Both sides to a negotiation will ideally be operating off of the same baseline of information. If you possess knowledge that your spouse does not, or vice versa, that unequal amount of knowledge will be the basis for your inability to see eye to eye on particular issues. If you have ever debated or argued a point with a person who had more information that you did then you know exactly what I’m talking about. As soon as you learn the additional information you like thought, “No wonder she thought .”
Property and debt information needs to be disclosed. Even if you took out a credit card without your spouse knowing, now is the time to make that information known to your spouse. Your spouse deserves to know- especially if you applied for a credit card in their name or used their credit history to take out a loan or other line of credit. These things will affect your spouse after your divorce- no matter how you decide to divide up the debt.
Do not agree to any settlement until you have exchanged financials with your spouse
I have represented clients before who were head over heels excited to settle their divorce from the moment that person signed up with our office. Usually the reason for this is that he or she will have worked out a tentative settlement with their spouse that involves them getting something shiny and exciting out the case. It could be money or some stock ownership or the ability to live in the house after the divorce. However, what I have learned is that if something seems too good to be true it probably is.
Be wary when your spouse extends seemingly favorable settlement proposals your way without much moving in their direction. Most spouses are not that generous. The much more likely scenario is that your spouse is holding back on information that he or she has not disclosed to you. For instance, if you know that your spouse owns a business but you have never worked on it, that alone should give you reason for skepticism that their settlement offer is being made in good faith.
Again, you need to know if that business is operating at a profit, how much debt it has, if your name appears on any of the debt and what its overall liabilities are. One good thing you can do without having to consult with your spouse is to pull a copy of your credit report. There you can see if any accounts have been opened in your name without your permission. That is a good starting point to begin negotiations with your spouse. Anything you don’t recognize should be sent to your spouse and their attorney for an explanation as it what it is and why your name appears on a loan.
Don’t let your spouse tell you that their business debt is related only to the business and not to him/you. Unless your spouse runs a huge business that has a close relationship to a bank, your spouse has likely taken out any loans in his or both of your names. Lenders do not lend large sums of money to a small business. Your spouse is personally liable under those loans. He or she may have engaged in bad behavior and even applied for loans with your name and information without ever having sought your permission.
Discovery is something you will become familiar with
What is discovery in the context of a family law case? In short, discovery is the exchange of information and documents. This can be achieved informally, or more frequently via a formal discovery request. Informal discovery requests occur when you and your spouse voluntarily exchange basic financial information. This occurs most frequently in cases where the parties are on good terms and/or do not have much in the way of property. This method saves time and money for both of you.
However, most of the time I would not recommend informal discovery. It all works fine until one of you decide you do not want to comply with the discovery request and then delay the process until formal discovery requests have to be sent out. Rather than needlessly delay the case in hopes that both of you will play nice in the sandbox, I recommend sending a formal discovery request to your spouse early in the case. This saves time, rather than sitting around for a month and hoping that your spouse honors their word and sends you the financials you need. A party has thirty days to respond to formal discovery requests or risks sanctions from the judge.
Tax returns, paystubs, bank account statements, title documents to any property owned, retirement account statements, debt accounts, mortgage information for the house, etc. are all examples of financial documents that should be requested in either informal or formal discovery requests. As I touched on earlier in today’s blog post, if you or your spouse own a business then any financial documents related to that business need to be exchanged as well. These documents will likely be turned over to a person who can evaluate and determine the value of your business.
What happens if one of you does not comply with a formal discovery request?
It happens more frequently than you may think that one spouse or the other refuses to comply with basic discovery requests. Yes, these requests can be tedious, but they are usually necessary to provide the other side with information about your financial habits. Not answer reasonable discovery requests is usually a sign that the other party has something to hide. Settlement negotiations almost certainly cannot endure a lack of information from one side. Why would you ever want to negotiate a divorce with an opposing party who is not sharing information with you?
For example, a request for production does exactly what you would think that it would: it is a request from you to your spouse that he or she produce certain documents that have some merit in your divorce. We have already gone through the sort of documents that may be requested via a request for production. This can be the tedious part of your case. Thankfully, with the advent of technology you can send scanned files over to your opponent rather than having to submit reams of paper-evidence.
Interrogatories are another form of discovery in Texas. You can ask your spouse to answer a list of questions that will help you to learn more about his or her financial state. These interrogatory of yes and no type questions that do not require wordy or verbose answers.
Finally, depositions are a valid, albeit seldomly used, method of requesting discovery from your spouse. Written questions can be submitted which force your spouse to sign an oath as if his written statements are being given under oath. If found to have been untruthful in his responses your spouse can face penalties as assessed by the judge.
Depositions occur in person, as well. Your spouse can be called on to answer questions as submitted by your attorney regarding their financial life. A court reporter will be present in the deposition taking a record of what is said by attorneys and the deponent (person answering questions).
Trust, but verify
I will always counsel clients on assuming the best of their spouse at the beginning of a divorce. The reason for this is that if you assume that your spouse has bad intentions it will impact how you approach your case from that time forward. I find that when spouses generally trust each other and are willing to put their children in front of themselves that their case can be resolved much quicker.
If you can control yourself then the chances of your case settling rather than proceeding to a contested trial are dramatically increased. If you cannot get the responses from your spouse that you need, fear not. There are built in mechanisms to keep your case on track that you can and should utilize to your defense. Work with your attorney to do your part to answer discovery requests and hopefully your spouse will do the same. With any luck your responses will satisfy your spouse and your case will be fast-tracked towards a settlement.
Questions about the family home? Stay tuned tomorrow to read more
If you have any questions about the material that we covered in today’s blog post please join us again tomorrow. We will discuss this topic in greater detail. In the meantime, if you have any questions about family law in Texas, please consider contacting the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations that allow you to ask questions and receive personalized feedback about your specific circumstances. Thank you for your time and consideration today, and we hope you will join us again tomorrow here on our blog.