Financial disclosure is a fundamental part of divorce proceedings in England and Wales. Both parties have a legal obligation to provide full and frank disclosure of their financial circumstances to ensure a fair settlement can be reached. This guide explains the process, requirements, and implications of financial disclosure during divorce.
What is Financial Disclosure?
Financial disclosure involves providing a complete picture of your financial situation to your spouse and the court. This is typically done through a Form E – a comprehensive financial statement that forms the backbone of financial proceedings in divorce cases.
What Must Be Disclosed?
Assets and Property
- All properties owned, including the family home, holiday homes, and investment properties. This includes any property you own outright, jointly, or through a trust structure, whether in the UK or abroad.
- Current market valuations which should be professional valuations rather than estimates and ideally the valuations for properties jointly owned by the spouses should be obtained jointly.
- Details of any property held through companies or trusts. This includes beneficial interests in property-holding structures and any rights to occupy properties owned by family members.
- The amount outstanding on any mortgages whether residential or commercial, with current balances and payment terms, preferably obtain a redemption statement which will also show any early repayment and exit charges.
Financial Accounts
- Bank accounts, building society accounts, and savings. This covers all accounts in your name, including dormant accounts and those with minimal balances.
- Investment accounts and share portfolios. You must disclose all investments, including ISAs, bonds, and directly held shares, along with their current market value.
- Cryptocurrencies and digital assets. This emerging asset class must be fully disclosed, including all wallet addresses and trading accounts.
- Premium bonds and other financial products. Include any financial products that could be converted to cash, including insurance policies with surrender values.
- Details of accounts closed in the last 12 months. This is crucial as the court needs to understand recent financial movements and ensure no dissipation of assets.
Income
- Employment income and benefits. This includes your basic salary, overtime, commission, and any benefits such as company cars, health insurance, or share options.
- Self-employed earnings and business accounts. Provide details of your business income, including drawings, dividends, and benefits-in-kind.
- All income from investments, including rental income, dividends, and interest payments.
- Rental income. Detail all income from property lettings, including holiday rentals and informal arrangements.
- Regular bonuses and commission. Provide historical data and future projections of variable income.
- Expected future changes to income. Disclose any anticipated promotions, redundancies, or career changes and anything that could affect your income.
Pensions
- All pension schemes, including private, workplace, and state pensions. Every pension must be disclosed, even those from brief periods of employment.
- Current valuations from your pension provider (Cash Equivalent Transfer Value). These must be recent valuations, typically within the last 12 months.
- Whether a pension is in payment and whether funds have been withdrawn from a pension e.g. 25% tax free lump sum.
- Details of any pension sharing from previous relationships. Include any existing pension sharing orders and their impact on your current pension rights.
Debts and Liabilities
- Credit card debts. Provide statements showing current balances and minimum payments for all cards.
- Personal loans. Detail all loans, including their purpose, outstanding balances, and repayment terms.
- Tax liabilities. Disclose any outstanding tax, including income tax, capital gains tax, and anticipated future liabilities.
- Other significant financial commitments. This includes guarantees, maintenance payments, and any other regular financial obligations.
Business Interests
- Share ownership in companies. Provide details of all shareholdings, including minority interests and nominee arrangements.
- Partnership interests. Disclose your share in any partnership, including professional practices and trading businesses.
- Director’s loans. Detail any loans between you and your companies, including repayment terms.
- Business valuations. Provide professional valuations where appropriate, including methodology and assumptions used.
- Future order books and contracts. Disclose information about secured future income and potential major contracts.
- A set of company accounts for the last two years readily available from Companies House.
The Disclosure Process
- Form E – detailed 28-page financial statement that must be completed accurately and honestly. Must be completed within set timeframes, typically within 6 weeks of the first appointment (first hearing). Requires supporting documentation for all entries, including 12 months of bank statements. This Form is also useful for couples who have no intention of going to court but who want a convenient template to use for providing disclosure, because it helps to ensure that all relevant points are covered.
- Questionnaires – opportunity to request clarification or additional information about any aspects of disclosure. Must be relevant and proportionate to avoid unnecessary costs and delays.
- Ongoing Duty – obligation to update disclosure if circumstances change, such as job changes or asset disposals. Continues until settlement is reached and court order is made.
Common Issues and Challenges
Non-Disclosure Concerns
- Hidden assets or income. This might include undisclosed bank accounts, cash savings, or income streams.
- Understated business valuations. Common in owner-managed businesses where value can be manipulated.
- Transferred assets to third parties. Assets moved to friends, family, or offshore structures to hide their existence.
- Undeclared cryptocurrency holdings. Digital assets can be particularly difficult to trace without proper disclosure.
- Offshore accounts and investments. International assets that may require additional investigation and expertise.
Enforcement and Penalties
The courts take non-disclosure seriously and have various powers to address it:
- Drawing adverse inferences about undisclosed assets. Courts can assume the worst about hidden assets and make orders accordingly.
- Making costs orders against the non-disclosing party. The court can require the non-disclosing party to pay legal costs.
- Setting aside financial orders based on incomplete disclosure. Previous settlements can be reopened if non-disclosure is proven.
- Potential committal proceedings for contempt of court. This can result in fines or imprisonment in serious cases.
- Criminal proceedings in cases of fraud. Deliberate non-disclosure can lead to criminal charges in extreme cases.
Strategic Considerations
For the disclosing Party
- Maintain detailed records and documentation. Keep organised files of all financial documents and correspondence.
- Seek professional valuations where needed. Use qualified experts for complex assets like businesses or unusual investments.
- Be proactive in updating information. Promptly notify the court and other party of any significant changes.
- Consider timing of disclosure for complex assets. Plan ahead for assets that require detailed valuation or investigation.
- Document methodology for business valuations. Ensure transparency in how values are calculated and justified.
When Suspecting Non-Disclosure
- Gather evidence systematically. Keep detailed records of any suspicious financial activity for example transferring a property to a sibling.
- Consider forensic accounting investigations. Professional expertise may be needed for complex cases.
- Use court orders for third-party disclosure. Banks and other institutions can be compelled to provide information.
- Monitor unusual financial patterns. Watch for unexpected changes in spending or lifestyle.
- Document suspicious transactions. Keep records of any unusual financial movements or unexplained wealth.
Getting Help
Financial disclosure can be complex and time-consuming. Our experienced family law team can:
- Guide you through the disclosure process. We’ll explain each step and help you prepare thoroughly.
- Help prepare your Form E. We’ll ensure your disclosure is complete and accurate.
- Review your spouse’s disclosure. We’ll identify any areas requiring further investigation and draft a Questionnaire
- Advise on complex asset structures. We have expertise in handling complicated financial arrangements.
- We will take action if there is non-disclosure such as obtaining a freezing injunction, a third party disclosure order, a reversal of a property transfer, ask the court to ‘add back’ dissipated assets which will then form part of your spouse’s share of matrimonial assets.
- Protect your interests throughout. We’ll ensure your rights are protected at every stage.
- Advise you on making a proposal to settle matters, review and advise on any proposals made by your spouse
Our Aim
Providing that your spouse’s disclosure is complete: to advise you on fair and reasoned proposals to settle at an early stage to avoid lengthy and costly court proceedings.
In circumstances where your spouse has not been truthful with their disclosure: to advise and discuss with you options to deal with this, obtain the missing information, make any necessary applications to the court, obtain reports as appropriate.
Caroline Ford is a divorce lawyer at Branch Austin McCormick. She has over twenty years of experience in advising clients in relation to divorce and matrimonial financial disputes. Contact Caroline or any of our family law team for expert advice on financial disclosure in divorce proceedings, We offer initial consultations to discuss your situation and explain how we can help you throughout the divorce process.
