Frequently Asked Questions for Declarations of Disclosure in California
In every single divorce case in California, with the exception of default cases, both litigants must prepare and serve a set of forms known as Declarations of Disclosure. These forms are the financial statements that set forth a full disclosure for each party of their respective income, expenses, assets and debts. These forms are extremely important because if not done correctly, the party can be subject to severe sanctions in the form of attorney fees or an award of an entire asset to the other party. The forms are signed under penalty of perjury. Given the importance of preparing accurate documents, and the extreme importance of reviewing these documents to determine whether the other party has been truthful. The set of forms includes the following:
- Declaration of Disclosure (form FL-140)
- Income and Expense Declaration (form FL-150)
- Schedule of Assets (form FL-142)
- A proof of service also needs to be filled out and filed with the court (form FL-141)
The Declaration of Disclosure Appears to be a Simple Form – is it as Simple as it Looks?
The Declaration of Disclosure appears to be a simple form; however, it is quite important. The form requires a full financial disclosure of things that may not be included on the Income and Expense Declaration and Schedule of Assets and Debts forms.
First, the party is required to provide the previous two years’ tax returns.
Second, the party completing the form is required to provide a statement regarding all material facts and information concerning the value of all community property. This means that if a party has access to any documents or other information (which may not be in the form of a document), relating to the value of any joint property they must provide all such information to the other party.
Third, the party must provide a statement regarding joint debt. Divorcing parties should make sure to list out all debts as failing to include marital debts is rarely helpful to a party’s case.
Finally, the form requires an “accurate” and “complete” disclosure of all investment opportunities that arose during the marriage. This is an important requirement because it could be broadly construed. For example, if the party was approached during the marriage to invest in a business venture, it must be disclosed.
What happens if one party provides a false Declaration of Disclosure form?
When a party fails to fully and accurately disclose income, expenses, assets or debts, or fails to disclose business opportunities that arose during the marriage of the parties, the ramifications can be quite severe for the non-disclosing party. For example, the judgment of dissolution of marriage can be set aside based on fraud and/or the lack of disclosure. The non-disclosing party can be made to pay attorney fees in the form of sanctions. And most severely, the party failing to disclose may lose the entire asset to the other party.
If you suspect your spouse or ex-spouse did not disclose an asset or business opportunity, it is imperative that you act immediately. You will want to either conduct discovery or file a motion with the court. For a detailed guide about discovery, click here.
What is an Income and Expense Declaration?
The Form FL-150, commonly referred to as an IED, is a form that specifically describes a party’s income and expenses. The form consists of four pages. The first page requires the following important information: employer, job title, tax filing status, estimate of the opposing party’s income, and a signature line under penalty of perjury. The second page requires the party to provide their last several pay stubs, describe their income within the past twelve months and in the last month separately, provide all rental, investment and other income, provide a net value of all their assets combined (excluding retirement assets), self-employment income, and certain deductions like health insurance premiums. The third page sets forth the party’s estimated, actual or proposed expenses, including rent or mortgage, all utilities and installment accounts. The fourth page has a place to include information about the custody schedule and certain other information relating to expenses for children.
How to fill out the Income and Expense Declaration
In order to fill out the Income and Expense Declaration, you should gather the following documents and information:
- Your previous years’ tax return
- Pay stubs for the past two months and the last pay stub for the previous year
- Your credit card statements for the year
- A copy or information about your bills for the year
- A copy of all schedules that were filed with your tax returns
- If you are self-employed:
- A copy of your bookkeeping software
- Profit and loss statement for the current year and previous year
- Balance sheet for the current year and previous year
- Corporate or business tax returns
- Documents regarding your investment accounts and other assets
- If you have rental property, documents showing income and expenses for the year-to-date and previous year.
Fill out the information required on the sheet as best you can. To figure out your monthly income, you will need to figure out your annual income and divide by twelve. Most salaried employees are paid every two weeks, for which there are 26 pay periods per year. Multiply the gross amount you receive every two weeks by 26 and then divide by 12.
Check the box for “estimated” expenses on page 3 of the Income and Expense Declaration. If you wish to have the court review your “proposed” expenses, we typically see those attached as a separate page or at least clearly identified as expenses that are proposed rather than an actual current expense.
What is a Schedule of Assets and Debts?
The Schedule of Assets and Debts is a form that requires a party to write down each and every asset and debt that they own, whether it is community property or separate property. This form is similar to the Property Declaration forms, although those forms are typically used in default cases and are actually filed with the court. The SAD form requires attachments, which means that deeds, account statements and other documents are required to accompany the form. This document is extremely important in all divorce cases, and it is imperative to review these documents with a fine-toothed comb to ensure accuracy. If it is not accurate, it is likely that discovery is needed to gather further information.
How to fill out the Schedule of Assets and Debts
The Schedule of Assets and Debts is one of the most important documents in dissolution of marriage cases. This four-page form requires a complete list of assets and debts. Approximate valuations must be made. Notably, parties filling out the Schedule of Assets and Debts should take time to fill out this documents so it is accurate and complete. The form is signed under penalties of perjury and if not accurate and complete, the party executing the document could face severe penalties.
Before starting to fill out the form, review all four pages. Note that there are attachments that must be provided with the Schedule of Assets and Debts. For example, the following documents are required attachments:
- For real property, you must include a copy of the deed and statements of all mortgages.
- For bank and investment accounts, you must provide the most current account statement.
- For credit cards, you must provide the most current statement.
- If you are owed money, provide a copy of the promissory note or other writing evidencing the debt owed to you.
- For life insurance, you must provide all the pertinent information including cash value, death benefit, beneficiary, etc.
- For vehicles, you must provide a copy of the title.
- For personal property, such as furniture and furnishings and collectibles, you have to create an inventory of items.
- If you own a business, we recommend consulting with an attorney to ensure that the proper information is disclosed. Depending on the type of business, some information may be confidential and not subject to disclosure under federal or state law, or by the corporation’s rules. For example: Suppose you are a doctor and own a small family medicine practice. You are going through a divorce and your spouse wants to know what patients you have seen in the past year. Under federal law, you cannot disclose the names of your patients.
You are also required to provide an approximate valuation of each item that you identify on the form. If you do not know the value of an item, err on the side of approximating a value that is most favorable to you. Keep in mind that your Schedule of Assets and Debts will be scrutinized by the other side and will be used against you if your valuations are grossly off or have been misrepresented.
For vehicles, use the Kelly Blue Book value.
Should you write down the “character” of property as either separate or community?
One of the line items in the Schedule of Assets and Debts requires the party to identify the character of property as either community property or separate property. We caution all of our clients in making an assertion regarding characterization of property. If you are unsure, write down that the character is unknown or err on the side of characterization that is most favorable to you. For example, if you own a home but it is titled in your spouse’s name alone, DO NOT write that the marital residence is your spouse’s separate property just because it is in his or her name alone.
For more information about the characterization of property, including “mixed character” property that is both community and separate property, click here for our property division guide.
Are the Declaration of Disclosure Forms Filed with the Court?
No. The Declaration of Disclosure, Income and Expense Declaration, and Schedule of Assets and Debts are all simply served on the other side. After the documents are provided to the other side by mail or personal service, a form called a Declaration Regarding Service of Declaration of Disclosure is the only document filed to evidence that these documents were given to the other side.
What do I do if the Opposing Party Refuses to Provide their Declaration of Disclosure?
If the opposing party in a case refuses to provide their Declaration of Disclosure, you should “meet and confer” with them by sending a letter requesting that they provide you with their DODs. If they still fail to provide them, you can file a motion with the family law trial court asking the court to “strike” the other party’s petition or response, which will then allow you to “default” them and move forward in the case without the other side’s participation.
What do I do if the Opposing Party’s Declaration of Disclosure is Inaccurate?
There are a number of important steps a litigant can take in a divorce or legal separation action when the opposing party’s disclosures are inaccurate. First, you can demand that the other party fix them. Second, you can commence discovery to obtain information relating to the DODs, including sending a demand for documents, sending out subpoenas to financial institutions, and taking depositions for example. Third, you can do nothing and wait until trial (assuming you are able to obtain accurate information concerning the other party’s financial status), and use the fact that the other party provided false, misleading or inaccurate information against them.
For additional information about Declaration of Disclosure in Orange County, contact our office today. We offer a free, private consultation to discuss what issues you may be faced with in your case. Our office provides free parking in Irvine, and we have many clients living in Newport Beach, Laguna, and Mission Viejo to name several areas. Call us today.