Full Disclosure is Essential (Non est factum)
Negotiating the divorce agreement is often a emotionally charged process. In the financial planning work that I have been a part of, the memory that one person has is not always the same as the other. In one recent case, where the couple was divorcing after 6 years, both could agree that they started living common law during their university years. They both agreed that each of them had no savings and had student loans of $12,000 and $17,000 respectively. Six years later, her debt load was $8,000 and his was $14,000. Their net worth, (what one owns – what one owes) was reputedly $13,000. The divorce agreement which had been crafted by the lawyer reflected this “reality”.
The reason that I use the word “reputedly” was because one of the people chose not to disclose to the soon to be ex, nor to the lawyer hired, a small lottery win at the local casino of about $25,000 in the previous year. The money that the lucky person used to have fun came from their joint chequing account and the winnings were deposited into that person’s secret individual savings account. When the $25,000 was added to that savings account, the total value that the person had hoarded was just over $30,000.
When the secret account came to light, after the divorce agreement was signed, the offended party fought back. The original agreement was set aside due to “material misrepresentation” and a new divorce agreement had to be struck. The result of this act was that more fees had to be paid by the greedy and duplicitous partner. Perhaps, more importantly, the reputation of the person who tried to cheat the other was even further diminished.
Instances of “bad or selective memory” happen quite often. The courts, when they find out that assets have been hidden, take a very dim view of this. The result is that the court usually assign costs and other fees that can be quite substantial.
In conclusion, full financial disclosure is simply the smartest thing for both people. It speeds up the negotiation process and lowers the costs!
Note: I am in favour of marriage! Healthy and happy families are the primary units of a strong and vital society and should be encouraged to thrive by everyone… individuals, families, churches, community groups, and all levels of government! Like all noble endeavours, it takes hard work, sweat and tears to make something beautiful and worthwhile! If divorce is the route a couple takes, then make the break clean, quick, and efficient… your financial future depends on it!