With Divorce Mediation there are two big steps that need to be taken to prepare a couple to be in a place to make the important and lasting decisions they will need to make in their divorce. The first part is getting educated on the law and the issues. It is understanding rights and responsibilities so that the couple can consider options that provide for a fair and reasonable resolution of the issues that need to be addressed. The second step is accomplishing the full exchange of information regarding the extent of the assets and debts held by the parties, the exchange of documents confirming value and balances, as well as a full exchange of information confirming the income and expense situation of the couple. This second part is referred to as disclosure and the State of California requires that each spouse certify that a full and complete disclosure be made prior to the Court granting a final divorce decree. This week’s blog focuses on this second step involving disclosure and explores how trust can impact whether mediation will be a good option for the divorcing couple.
The Role of Trust in Disclosure. Disclosure is an extremely important part of the divorce process. Both spouses need to know the nature and extent of the community estate which consists of everything that has been accumulated from the date of the marriage to the date of separation. Many separating couples have a shared understanding of the family finances at the time of divorce so they stand on equal footing in their access to information regarding assets, debts, incomes and expenses. Many other couples, however, have a family dynamic where one of the spouses has managed all the finances and the other spouse was not included in the management of finances by choice or by some other family dynamic. Whether a case is mediated or litigated, there is reliance on each spouse to gather the information at their disposal and exchange it in compliance with the Court’s disclosure requirements. A common question, especially when one spouse has been managing the family finances, is how do we know if the spouse with all the information has been forthright in exchanging that information? What if they are leaving some valuable assets out or what if they are not being honest with their disclosure of their income situation?
Navigating Trust and Divorce: Expert Mediation for a Smooth Transition
Litigation and Discovery versus Mediation and Trust with Verification. The completion of the disclosure process in litigation versus mediation can look very different. In litigation disclosure often begins with the parties exchanging preliminary disclosures early in the case. Upon receipt of these preliminary disclosures the parties decide if they are comfortable with the extent of the disclosure or if they are concerned about any gaps. If there are questions each side has formal discovery tools at their disposal where they can demand additional documents be provided, where they can ask questions under oath to explore the veracity of the disclosure, and where they can serve subpoenas on various institutions to see if there has been anything intentionally or otherwise left out. Leaving “no stone unturned” can be a very expensive and even prohibitive part of this process but if there is mistrust then engaging in formal discovery may be the only real option available to accomplish confidence in the completeness of the disclosure. So what does this process look like with mediation?
Mediation typically takes a different approach to the completion of disclosure. The parties agree at the beginning of the mediation that they will “open the books” and provide all necessary information so both parties are comfortable that a full disclosure has been made. Entering into the mediation process requires some semblance of trust between the parties that each will truthfully fulfill their responsibility and fully disclose all assets and income. So how can we instill confidence in this process when one spouse is in control of the finances? When one spouse has questions, through the mediation process, we can discuss what additional verification can be provided to alleviate any concerns. Maybe it is getting a letter from the employer confirming the extent of retirement provided through the employment of the other spouse, Maybe it is obtaining a printout from a bank confirming all accounts held with the institution bearing the name of the given spouse. It is important for both parties to be comfortable with the numbers as they will be relied on when considering the fair resolution of the division of the assets and debts, as well as for setting fair levels of child and spousal support. While mediation does not engage in formal discovery, it does allow for coming up with creative solutions to confirm numbers so that both spouses can proceed with confidence in the numbers. For spouses that are convinced that the other spouse cannot be trusted to share all required information, mediation may not be the best option and hiring an attorney to use discovery tools may be essential.
Restoring Trust Through Compassionate Divorce Mediation Services
Punishment as a means to Deter Non-Disclosure. Another motivating factor prompting spouses to fully comply with the disclosure requirement is if they fail to do so they can be punished for this failure. The Court takes disclosure extremely seriously. Failure to disclosure, whether intentional or unintentional, is grounds for setting aside terms of a divorce decree. Intentional failure to disclose can result in punitive damages to the offending spouse. We rely on this potential punishment for failure to disclose to motivate both spouses to make sure they fully comply. So what happens if you act intentionally in not providing a full disclosure to your spouse?
Marriage of Rossi and the Million Dollar Mistake In late December of 1996 the Wife in the Marriage of Rossi won $1,336,000 in a California lottery winning through an office pool. Then in early January of 1997 the Wife filed for divorce and in the disclosure process failed to disclose her lottery winnings. No mention was made about the lottery winnings in the Judgment of Divorce which was resolved through settlement in April of 1997. In May of 1999 a solicitation mailing tipped the Husband to the fact that the Wife had won the lottery back before they had separated. Husband filed a motion with the Court to address the failure to disclose the winnings and the Court found that it was not only a community asset (the money used to participate in the lottery was community money) but that as a punishment for the Wife’s fraudulent behavior in failing to disclose the asset, the entire winnings were awarded to the Husband. On appeal the trial court’s decision was upheld and the Wife was punished to the tune of $668,000 after considering that Husband had a community claim to the other $668,000 awarded to him by the Court. Wife won the lottery but lost the crapshoot of trying to get away with a failure to disclose.
Understanding the potential consequences of failing to disclose plays a big role in accomplishing complete and honest disclosure whether in litigation or mediation. The disclosure forms themselves are there as later proof if somebody has under-reported or fully failed to list an asset, or failed to accurately disclose income. If someone engages in taking the risk of secreting away assets or income, they stand to be penalized through an unequal division of assets in the aggrieved spouse’s favor, and can also be required to pay the attorney’s fees incurred in right-ing the wrong.
It is essential that couples have all the important financial information at their fingertips when they move to the portion of the divorce where they are deciding how to fairly divide things and deciding the important issues of child and spousal support. A shortcoming of Divorce Mediation can be in instilling trust in the numbers when trust is otherwise lacking. A divorce settlement in mediation is only as good as the numbers being relied upon. It is up to each couple to assess if there is comfort and trust in those numbers. It is the role of the mediator to oversee the disclosure process and help the couple identify if there is anything else that can be done to alleviate any concerns and place the couple in that important comfortable position. Be sure to choose the process that assures any concerns regarding confidence in disclosure have been addressed.