Why do I have to give my financial documents to my spouse?

The key basis of starting negotiations with your spouse - giving them your financial details, but why?

You have decided to separate. You have talked to your spouse, a bit difficult as emotions are high, however, you have started on the road towards some terms of agreement.

You’d like to make it official and have a lawyer draw up the agreement for you. After all, you have been told by the bank that they won’t give you a mortgage to buy another home unless you have a proper Separation Agreement. So, you might as well call the lawyer and get one going.

You call the lawyer. You thought the lawyer would just ask you for the items that you’re agreed upon and give you a bit of guidance to finish up the terms of the Separation Agreement.

That’s not what happens though.

The lawyer says they can’t represent you on a Separation Agreement unless they get all your financial documents and then give them to your spouse.

What’s up with that?

Your first thought “oh, the lawyer is just trying to run up my bill”. “It must be a make-work idea.”

Why does he/she have to know my finances you ask? You say to the lawyer:

It’s just an easy separation.
We don’t have much and we have figured out what we want.
Just type up the Agreement and we will sign it.
I don’t want him/her to know about my bank account
If I do this, the lawyer will talk me out of this deal…

You get suspicious of that lawyer and call another one. However, you get the same answer. The only lawyer you end up finding that will do an agreement says that they will make the Agreement up for you, but not put their name on it and not sign a Certificate of Advice.

What’s going on?

Here’s what’s going on.

It all has to do with what you want done. If you just want a contract written and you want no advice at all – you don’t care if you are getting yourself into hot water, or proverbially giving up the farm – then a lawyer can write the contract but not put their name anywhere on it and not sign it at all. They will not sign that Certificate of Legal Advice at the end. Really, if that’s what you are doing, why even call the lawyer at all?

If you want the lawyer to give you advice and have it done properly, the financial information must come in.

Why is that? Here’s a story to explain why.

Neil met Debbi. They married, had two children, and separated 14 years later. They both thought they knew a bit about the other’s finances. They had a business. Neil was more involved in the business and his Dad was in their business too. Debbi wanted to know a bit more about the business but it was taking very long to get the information. They decided to settle anyway and did up a Separation Agreement. However, that did not stop the arguing they were doing over expenses for their children and settling how they divided furniture. Debbi got fed up and took Neil to court. Debbi said Neil had not fully given her the details of all his finances. Debbi asked for the Agreement to be thrown out.

How can Debbi do that?

It’s all in the Family Law Act of Ontario.

All pieces of law, called legislation, have sections. Each section talks about specific laws. In section 56 it says (and I’m summarizing here) that a court may set aside -translation: throw out- a Separation Agreement if one person failed to give to the other person information on their significant assets, debts, and other liabilities at the time of the contract or if one person did not understand the nature or consequences of the contract.

What does that mean in real person language? It means that if you do a Separation Agreement and do not give your financial information to your spouse, you are crossing your fingers that your spouse will go away quietly. The agreement is really not worth the paper it’s written on. That’s why the lawyer wants your financial information to get disclosed – to protect you and your agreement. If you want your agreement to “hold up”, then you give your financial information to your spouse.

By now you’re asking “what happened to Neil and Debbi”? Debbi was successful in getting the Separation Agreement tossed. The Court said Neil had failed to make disclosure to her. The obligation was on him to make sure she knew about his assets and debts before the agreement was done. Not only did the Agreement get tossed, but Neil had to pay Debbi’s legal fees too. That cost him thousands of dollars.

This is why you should do a financial statement before you start talking about the terms of a Separation Agreement.

Doing your financial statement can be intimidating.

It is the most feared and hated document that we have to help people prepare. You have to drag through old documents and files you would rather not see again. It brings back constant memories of what you are now dealing with. The reality of today! Each time you have to call the bank or your life insurance agent or your investment broker you feel yourself getting redder and hotter under the collar. It is very embarrassing to have to tell them why you’re looking for this.

Well, to quote today’s vernacular, put on your big girl/big boy pants, because do it you must – if you want your agreement to stand. Your lawyer can help you with it – for most people, it’s not that bad a process. Some people have pensions, but even then, it’s not that bad to get the information we need to make the disclosure. One step at a time gets it done.

WARNING: If you are headed to Court, the point is moot. You have no choice but to serve and file your sworn Financial Statement along with your court Application if there are any support issues or asset issues. If you’re in court, you may stop reading this part now.

If you are not in court, keep reading!

We often translate financial disclosure into a medical example. You coming to a lawyer and asking “is this Separation Agreement a good idea for me?”, then saying you’d rather not go through the exercise of doing financial disclosure. Putting that medically, it’s the same thing as putting a prescription in front of the doctor and asking them if it will fix you – and then saying they can’t do an examination to see what’s going on with you. You just tell them one or two symptoms. How can we, as lawyers, fully explain the best possible outcomes for you if we don’t have all of the particulars of your debts, assets, and other obligations and those of your spouse?

We need to see what the law says in your situation about child support, spousal support and how assets and debts should be dealt with. Only then can we give you advice on what your agreement says.

Do you want to give up rights to spousal support, child support or the equalization of your relationship without all of the details?

Remember: it’s not the job of the lawyer to talk you out of the agreement you want to agree to. It’s the job of the lawyer to make sure you know what you are doing. If you are leaving $100,000 on the table for your spouse to keep, it’s not our job to talk you out of that. It’s our job to make sure you know that you are doing that. Sometimes people have value to things other than money, and they’re ok with leaving money on the table – we need to make sure you’re conscious of it. It’s NEVER our job to tell you what your solution should be. It’s ALWAYS our job to explain to you what the law says your rights are. You’re an adult, you can make whatever deal you want. Just remember…

An ounce of prevention is worth a pound of cure. That certainly applies here.

Don’t be deterred if your ex doesn’t want to do a Financial Statement. You do yours anyway. That is to your benefit and his detriment if he wants to reopen things later. You have given him/her your sworn Statement and received independent legal advice. You have done your part to protect you and your children against future attack on the contract. Your spouse can’t claim later that he or she wants the agreement tossed out because they did not make disclosure. It doesn’t work. You can’t say “I didn’t make disclosure, so I want to set aside the contract”.

So go ahead, take a deep breath, get into your desk drawer and begin the process. We can help. Sometimes we find a nice glass of Chardonnay or Merlot helps too. But just one.