Preliminary Declaration of Disclosure
What is the Preliminary Declaration of Disclosure (PDD) and how is it used in divorce?
When a couple is working through divorce, whether it is Collaborative, litigated, mediated or DIY, one of the first (and most daunting) tasks required is for each spouse to complete forms which lists any and all assets and debts they have their name on (whether it is a jointly held asset or in their individual name, be it a business interest, pension, investment account, credit card, student loan, etc.), income (from all sources, including paychecks, rental income, or dividends and interest) and living expenses. These forms have different names in different states. For instance, it is the preliminary declaration of disclosure in California, which is made up of the FL-140, FL-142 and FL-150. In Colorado it is the Sworn Financial Statement and in Florida it is the Financial Affidavit. Each state has a different format and layout, but they all require similar information. Each party swears (under penalty of perjury) that the information contained on his or her disclosure is complete and true. The information contained in this disclosure affects several critical calculations, including child support, spousal support or alimony, and will be part of an eventual division of assets.
What can happen if you underreport your income or exaggerate your expenses?
Because you sign the disclosure under oath, deliberately falsifying your financial information can be considered perjury. Additionally, if your divorce ends up in trial, your credibility as a witness will be seriously undermined if your spouse's attorney can prove that you lied in your disclosure. And finally, even if your case never makes it to trial, your spouse may be able to force a property settlement in his or her favor if you gave false information in a court document.
It's uncommon but not unheard of for spouses to be less than truthful when completing their financial statements. If you suspect that your spouse has not disclosed some assets, there are a number of places where you (or your attorney, mediator or certified divorce financial analyst) can look for these hidden assets. The following documents should be scrutinized:
Personal income tax returns
Partnership and corporate tax returns
Pay stubs
Savings account passbooks and statements
Canceled checks, check registers, and bank statements
Securities and mutual fund statements
Children's bank accounts
Life insurance policies
One of the more common places for a spouse to hide assets is in an unusual place in plain sight; an account they opened in your name. Checking your credit score will reveal all accounts open and recently closed. If you see an account that is unfamiliar, you will want to contact that financial institution and request all the information and statements (which you are entitled to receive, and they are required to provide).
It is often the case that one spouse handles the bills and finances. The other spouse may or may not be well informed. Therefore, it may be difficult for a spouse to determine if the other party is being truthful in the disclosure. Fortunately, you and your professional will have many other opportunities to engage in fact-finding.
What are some of the more common mistakes people make when completing their disclosures?
Usually, hidden assets aren't the problem. More commonly, people unintentionally underestimate their expenses. Some expenses are easy to estimate--car payments, mortgage or rent payments, or utility payments, for example. Other, often smaller, expenses are easy to overlook--how much you pay for pet care, subscriptions, streaming services, lawn care, or school supplies, for example. Because these types of costs can really add up, don't overlook them when completing your disclosure. Review your bank account or credit cards for anything on autopay that you do not even think about. But don't exaggerate your expenses either, because you may have to defend them.
What information must you provide in your disclosure?
You'll be asked about the following:
Name and address
Occupation and job title
Employer's name and address
Frequency of your paychecks (i.e., weekly, biweekly, monthly, etc.)
Monthly gross pay
Type and amount of monthly payroll deductions
Net monthly take-home pay
Other sources (and amounts) of income
Net monthly income from other sources
Monthly housing expenses
Monthly utility expenses (gas, electric, telephone, water and sewer, trash)
Monthly grocery bill
Monthly restaurant and entertaining expenses
Monthly out-of-pocket medical expenses (doctor, dentist, prescriptions)
Monthly insurance expenses (life, health, disability, homeowners)
Monthly transportation expenses (fuel, repair and maintenance, insurance, parking)
Monthly clothing expenses
Monthly child-care (and child-related) expenses
Monthly personal care and toiletries
Educational expenses
Miscellaneous expenses
Debts of all kinds, including car loans, mortgages, 401(k) loans, student loans, etc. (monthly payment, unpaid balance)
Because divorce is based on state law rather than federal law, each state will have its own requirements regarding the financial statement. Nevertheless, the above-listed information is fairly typical.
Zen Divorce Solutions can assist clients in any state gather the necessary statements and forms to properly disclose, as well as to complete the forms. Click the button below to contact Zen.
IMPORTANT DISCLOSURES Zen Divorce Solutions does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
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