subject: The Joy Of An Ex - Full Disclosure Of Financial Assets And Income [print this page] The financial decisions separating spouses must make during this time of transition will greatly influence their individual sense of security as they move into their new lives. Regardless of the dispute resolution process chosen to resolve separation issues, individuals must fully disclose their respective financial situation to each other. Not only is this a legal obligation, but it must be the basis on which any acceptable settlement is reached.
Financial issues are often buried in a myriad of emotional issues, including power imbalances and mistrust, each of which makes productive negotiations difficult. Financial arrangements that once appeared so "fair" become something quite different when couples are separating. Fear, greed, the feeling of entitlement and obligation, the sense of dependency and desire for independence make it that much more challenging to make intelligent, lasting decisions. It is only when there is an honest effort to fully disclose and share all financial information that meaningful dialogue can begin.
It is not usually a person's intention to "hide" assets or understate income, even though that is how certain behaviours will be interpreted. Often it is the lack of understanding of one's financial situation and what is included in "income" that leads to such mistrust.
In most families, the task of managing money and investments is delegated to one person and communication around financial decisions may have been very limited. Even the person, to whom that task was delegated, may have lost control over the details of all that financial "stuff". Gathering all the documentation together may present an enormous chore and even the thought of doing so is scary enough to make progress difficult. Unless both spouses feel comfortable with the information they have, it is usually beneficial to seek help, from a qualified financial professional, to assist in the gathering and presenting of this important information. It is also important to engage appropriate specialist to value assets like property, businesses and pensions so that the range of values used in any settlement discussions are acceptable to both spouses. If the numbers do not ring true, there will never be a sense of fairness around any settlement reached. There is no such thing as one right number, but there is such thing as an acceptable range of values.
The full disclosure of income is the basis for determining both spousal and child support. Understanding what is included as "income" is often a challenge. And even though a person may have enjoyed a fairly constant income level for a period of time, it is very understandable that individuals separating, whether or not they will be potential payors or payees, will believe that their income levels may not continue at that level in the future. In separations where there is a higher level of conflict, there may also be an intentional effort made to reduce income. Human nature is just that. Fear and greed are not emotions to be taken lightly.
In disclosing income, several things must be taken into consideration. Income for the use in determining support levels (or "income sharing") is not the same as the bottom line reported each year to Revenue Canada. Total annual income includes all of the money a person earns from employment, self-employment and investments and "other" sources as included in income reported on line 150 of the T1 Revenue Canada return. This "total income may be increased or decreased by a number of adjustments that may be applicable. (The details are beyond the scope of this discussion and appropriate financial and legal advice should be obtained.) Certain income may be "imputed" as well. By this we mean that additional income may be attributed to a spouse although it is not viewed as income by Revenue Canada.
