Financial Disclosures in Divorce

Financial Disclosures in Divorce

An Arizona divorce doesn’t just separate spouses, it also separates one household into two. To complete a divorce, Arizona residents must either come to terms on all aspects of their divorce in a settlement agreement detailing the fair and equitable division of their marital assets, their shared child custody schedule, child support payments under the state’s guidelines, and spousal support (in some circumstances). If they are unable to come to mutually agreeable terms in an agreement with the help of their attorneys and mediation, then the case becomes a contested divorce which must go to court for a judge to decide. Either way, settling the terms of an Arizona divorce first requires both spouses to make full financial disclosures unless both spouses agree to waive the obligation to make full financial disclosures.

couple getting divorced.

What is a Financial Disclosure and Why Is It Important In a Divorce?

When one spouse makes the decision to divorce and files the initial paperwork, they become the petitioner in the Arizona divorce process, and the other spouse becomes the respondent. The respondent has 20 days to file a response to the petition, or 30 days if they currently live out of state. The discovery period of the divorce occurs after the respondent files their response. At the beginning of the discovery period, both spouses’s attorneys will assist in filling out full financial disclosures.

Key Financial Disclosures During the Discovery Process 

The disclosure lists each spouse’s separate and joint assets, accounts, properties, incomes, and debts. To get a full financial picture, each spouse’s attorney may request specific documents from the other. Documents commonly exchanged during financial disclosure include:

  • At least three years of tax returns
  • Pay stubs and other proof of income
  • Bank account statements
  • Investment account statement
  • Health insurance, life insurance, and other policies
  • Retirement and pension plans

The discovery process and financial disclosures ensure that both parties have all the information required to fairly negotiate all terms of their divorce.

How Do Financial Disclosures Help With the Separation of Assets in an Arizona Divorce?

Arizona does not require a strict 50/50 division of marital assets but instead requires spouses to agree on a “fair and equitable” division or for a judge to decide for them. The financial disclosures ensure both spouses have full access to all financial information so each spouse can retain their separate assets and fairly divide their marital ones. In an Arizona divorce settlement agreement, separate assets include the following:

  • All property, assets, businesses, and investment accounts owned by a spouse before the marriage
  • All property, businesses, and assets inherited by a spouse during the marriage
  • All property and assets gifted to one spouse alone during the marriage
  • Debts incurred by a spouse before the marriage

Marital assets include the following:

  • All real estate property purchased during the marriage regardless of the name on the deed
  • All businesses, bank accounts, and investment accounts opened or contributed to during the marriage regardless of whose name is on the account
  • Retirement and pension plans
  • Vehicles, RVs, and boats
  • Art, antiques, collectibles, furnishings, houseware and electronics
  • All debts accumulated during the marriage

Financial disclosures help attorneys and divorcing spouses gain the full picture of the separate and marital assets and debts for the division and distribution process. 

Sometimes the disclosure reveals that one spouse now has a claim to a portion of the other spouse’s separate assets due to the comingling that commonly occurs during marriage. For instance, if one spouse owned a business or property before the marriage and the other invested money or time into improving the value of the asset, they have a right to their share of the increased value. Also, allowing a spouse access to a separate account commingles that account, making it marital property.

For spouses with high or diverse assets, the financial disclosures are detailed and complex. The process of scrutinizing the assets and determining each spouse’s fair share can quickly become challenging.

How Do Financial Disclosures Impact the Other Aspects of an Arizona Divorce?

The financial disclosures exchanged during the Arizona divorce process are critical in determining other outcomes of the divorce as well as the division and equitable distribution of the spouse’s assets. The information included on these forms and the value of each spouse’s income and assets also determines important divorce orders for child support and spousal support.

Financial Disclosures and Child Support Orders in Arizona

Arizona uses the Income Shares Model to determine child support. This method requires each spouse to disclose their full income. This information, combined with the number of overnight child custody days each parent has, the number of children, and any exceptional medical or educational needs of the children determines which parent becomes the child support paying parent and which one receives child support—typically, the parent with the fewer overnight parenting days pays the parent with the greater number of custody days, but income and assets play a significant role in determining this essential portion of the divorce agreement.

Financial Disclosures and Spousal Maintenance (Alimony)

Child support is an automatic obligation in Arizona divorces when spouses have children, but spousal maintenance isn’t automatic and isn’t appropriate in all divorce cases. The financial disclosures submitted by both parties in the divorce and scrutinized by their attorneys help determine whether or not spousal maintenance is appropriate. Depending on the circumstances, including both spouse’s incomes and the division of their assets, the higher-earning spouse may be required to pay a monthly amount of spousal maintenance to the lower-earning spouse. The spouses may either agree to these terms during the negotiations for their divorce agreement or take the matter before the judge in their divorce trial. A judge is more likely to award spousal maintenance to a spouse who put aside their own education and/or career goals to raise the children and maintain the home, a spouse who supported their spouse through their education and career-building, a spouse with small children at home, or one whose age or medical condition prevents them from joining the workforce.

Most spousal support orders are temporary or rehabilitative, remaining in place until the lower-earning spouse increases their earning ability and gains self-sufficiency.  

How Can a Divorce Attorney Help?

The full financial disclosures submitted by both spouses are essential for making determinations on spousal maintenance. An experienced divorce lawyer in Phoenix from Stewart Law Group will assist with filling out and filing disclosures, requesting documents and submitting requested documents, and providing skilled representation throughout the process of asset and debt division in an Arizona divorces.