What is Financial Disclosure and what does it involve?
One in six couples in the UK keep their finances entirely separate from their spouse or partner. Accordingly, it is not that uncommon for some couples not to have complete knowledge of the other’s financial situation. Financial disclosure in divorce is the process where both parties provide details of their income, assets, liabilities, outgoings, and financial needs following a divorce, dissolution, or separation.
Providing full financial disclosure is one of the fundamental stages of resolving financial matters following a relationship split whether through negotiation between the parties, mediation, discussions between Solicitors or Court proceedings. The obligation to provide full disclosure continues right the way through until matters are concluded.
The usual way to provide financial disclosure in divorce is by completing and exchanging a Financial Statement also known as a Form E. In addition to providing details of assets, income, liabilities, outgoings and financial needs, a party must also provide evidence in support. These include valuations, recent mortgage statement(s), bank statements for the last 12 months, wage slips and P60, pension valuations, details of their regular monthly outgoings and evidence of any loans or liabilities. If they have a business, they should also provide business accounts. Each section of the Form E provides details of what documentation is required and there is also a checklist of documents at the end of the form.
What is the purpose of financial disclosure in divorce?
The purpose of financial disclosure in divorce/dissolution is to know the assets involved and their value. It is important to know this to assist with the fair division of those assets to meet both parties needs. Without going through the process of financial disclosure, it is extremely difficult to know how to distribute assets fairly, advise on settlement options and know whether a financial settlement is fair.
If a couple chooses to agree a financial settlement without first seeking financial disclosure, it subsequently becomes difficult to overturn an unfair financial agreement as they will have voluntarily chosen not to investigate financial matters.
The advantage of seeking financial disclosure is that if either party deliberately misleads the other as to their financial position or does not disclose assets, it may be possible to overturn an agreement reached based on this non-disclosure.
Can I refuse financial disclosure?
It is not mandatory to provide financial disclosure in divorce on a voluntary basis. However, a refusal to voluntarily provide financial disclosure will make any financial negotiations virtually impossible and is likely to increase conflict and costs.
Failure to provide voluntary financial disclosure is also likely to result in the matter proceeding to Court as part of Financial Remedy Proceedings. Once those proceedings are issued both parties will be compelled to provide financial disclosure as part of a strict Court timetable. If either party then fails to comply with the Court Order for financial disclosure, a Court may draw adverse inferences from that non-disclosure and punish the non-disclosing party by ordering them to pay costs. A Court can also set aside an Order it has made if non-disclosure is found.
Can you get a Consent Order without financial disclosure?
If a couple asks a Court to approve a financial agreement, they have reached which has been incorporated into a Consent Order, they will have to provide financial disclosure.
It is important to note that the duty of a Court is the administration of justice. Therefore, the Court will not simply rubber stamp a Consent Order. Its task is to exercise its discretion under section 25 of the Matrimonial Causes Act 1973, and to consider whether the terms of the agreement represent fair and proper financial provision for the parties given the circumstances of the case.
Accordingly, each divorce financial settlement is dealt with on an individual basis according to its facts. A Court can only decide what is fair if they are provided full disclosure of all the parties financial assets, resources, and income. This is done by both parties completing and submitting a Statement of Information form (D81 form). This form is submitted together with the proposed Consent Order and provides summary details of their assets, income, and liabilities. When the Judge considers the proposed divorce financial settlement contained in the draft Consent Order, he/she will also consider the financial disclosure in the D81 form to see how the proposed divorce financial settlement will look following the implementation of the proposed Consent Order.
Although a proposed financial Consent Order is considered by a Judge “on paper” in private, the process for considering whether the divorce financial settlement is fair is the same as if there was a full formal hearing to decide the finances upon divorce or dissolution. The reason for this is that once a Consent Order is approved it becomes legally binding, and unlike other types of Court order, a Consent Order cannot be changed, appealed, or set aside unless in exceptional circumstances.
Other frequently asked questions about financial disclosure in divorce
Can you get divorced without sorting out finances?
Yes, but there are many risks as were discovered in the July 2023 case of Hat v Lat. The facts of the case were as follows:
The parties married in 1984 and separated in 1993, with Decree Absolute (the Final Order) being pronounced on 3 November 1998.
In February 1994, the parties entered into a Separation Agreement. The main terms of the Separation Agreement provided for the husband to pay the wife a lump sum of £702,000, and also provided for a clean break between the parties. In accordance with the terms of the Separation Agreement, the husband paid the lump sum of £702,000 and implemented other, more minor provisions of the Separation Agreement.
Crucially to the case, the terms of the Separation Agreement were never converted into a draft consent order.
The husband continued to provide voluntary financial assistance to his ex-wife for nearly two decades despite having no legal obligation to do so under the terms of the Separation Agreement. In March 2022, the husband informed his ex-wife that he would be ceasing all financial assistance. This resulted in the ex-wife making an application to the Court in May 2023 for full financial provision claiming her financial claims had not been dealt with at the time of their separation. The ex-husband’s case was that financial matters had already been dealt with.
In hearing the case Mr Justice Peel concluded that the absence of a Consent Order, and a delay in bringing a claim for financial remedies (even after 29 years) was not by itself a jurisdictional or procedural bar to making a claim. He therefore allowed the wife’s full financial claim to go to trial.
The moral of the story is: always resolve financial matters following divorce or dissolution, even if only to seek the dismissal of financial claims.
Is full financial disclosure necessary?
If a couple wishes to settle and finalise financial matters arising from a divorce, dissolution, or separation, at some stage it will be necessary for them to provide full financial disclosure in divorce.
The only exception to this is if the couple both agree that they do not want to make any legally binding financial arrangements between themselves. This is however very risky for both as they run the risk of future claims should their circumstances change such as receipt of an inheritance or a lottery win. As the above case of Hat v Lat demonstrates without having a clean break Consent Order, financial claims remain live may years after a relationship ends.
Can you get divorced without financial disclosure?
It is possible for a couple to divorce without financial disclosure, but it is not advised. If a couple chooses to agree a financial settlement without first seeking financial disclosure, it subsequently becomes difficult to overturn an unfair financial agreement as they will have voluntarily chosen not to investigate financial matters.
I have a small pension/bank accounts with minimal monies in – do I need to declare this?
Both parties are required to provide details of all assets, income, liabilities, and outgoings no matter how small or insignificant they may consider them to be.
Without full disclosure, any agreement reached could be challenged at any point in the future due to non-disclosure.
What happens after financial disclosure in divorce?
Once a Form E has been finalised and signed, the Form E and supporting documentation is exchanged with the other party for them to consider and raise any questions they may have.
What do you have to provide for financial disclosure in divorce?
Both parties should provide details of all their assets, income, liabilities, outgoings, and financial needs, together with evidence in support. Documentary evidence includes:
- Mortgage statements
- Valuations of properties
- Wage slips/tax returns
- Bank statements (both personal and business)
- Pension valuations
- Records of any savings or investments (e.g., ISAs)
- Insurance policies
- Evidence of inheritance (both previous and pending)
- Details of any outstanding unsecured debts or tax liabilities.
- 2 or 3 years of accounts if self-employed
Do you have to show bank statements in divorce?
It is usual to provide 12 months of bank statements for all active bank or building society current and saving accounts.
Does my ex see my financial disclosure?
Yes, an ex-spouse or partner will see the financial disclosure and documents in support. This could be by way of Form E and supporting documents, or by way of a completed D81 form.
What happens if someone lies on their Form E?
At the end of the Form E there is a Statement of Truth which should be signed. The statement confirms that the party has provided full, frank, clear and accurate financial disclosure. If it transpires that a party has failed to provide full, frank, clear and accurate financial disclosure, the non-disclosing party may be found to be in contempt of Court, and this can result in them being fined or imprisoned.
If an agreement was reached by way of a Consent Order approved by the Court, and the non-disclosure took place in the D81 form, the Court can set aside the Consent Order if a party did not fully disclose their financial position. This could include ‘hidden’ savings or significant assets, or not disclosing a pay rise or new job offer. There needs to be a ‘material’ misrepresentation (i.e., not simply getting a salary slightly wrong).
When does the duty to provide disclosure end?
The duty to provide full disclosure continues until matters are concluded by either a Consent Order or a Judge imposed Order. This means that both parties are required to ensure that their disclosure is up to date.
If there are any material changes in the parties’ circumstances after the initial disclosure stage, the financial or personal changes must be immediately disclosed. This includes details of any financial changes such as increase in salary, receipt of bonus or shares or changes in their personal circumstances such as an intention to cohabit or negotiating a new contract of employment.
If you are going through a divorce, dissolution or separation and would like to seek expert legal advice and assistance regarding the division of assets or financial disclosure in divorce, please visit our services pages for details of how we can help you.