Financial Discovery in Divorce

For couples going through a divorce, the process can be extremely difficult and it can sometimes be overwhelming for everyone involved. Investigating financial issues in a divorce usually involves a process called “discovery”. Discovery is necessary in order to identify and value all marital property. If either spouse does not voluntarily disclose all financial information, their attorneys can go through a more formal process as an alternative method of acquiring this information. Once a petition is filed by either party, both spouses are required to disclose economic, financial, and personal information about themselves. The process can include requests to produce or document demands relating to assets, income, liabilities, and expenses. It can also include written questions called interrogatories, or requests for admission. Information is not only gathered from each other but also from third party sources, including banks, brokerage firms, financial advisors and employers.

The purpose of discovery is to allow each spouse to obtain the information necessary to view a complete and accurate representation of their financial situation. It is important to cross reference all records received, including comparing tax returns with financial statements and banking records to check for any suspicious activity. If a spouse fails to provide any of the required documents, the court has the power to compel compliance by ordering the spouse to produce the records and can even impose sanctions and fines to the parties who don’t comply.

Another way for an attorney to get relevant information for the opposing party is by oral deposition, which is testimony given under oath. Typically, depositions are taken after the initial documents have been exchanged and records have been examined and analyzed. Spouses who lie under oath during a deposition can be charged with perjury, and this usually dissuades them from being dishonest.

Obtaining records through discovery can be very expensive. The cost must be weighed against the potential benefits. Is the cost of discovery worth the potential value of the “hidden assets”? In addition, this can be a slow and painful process, yet it is extremely vital in achieving a fair result. When performed properly, discovery can either increase the likelihood of settlement or better prepare each party for a potential trial.

-Spencer J. Tannenbaum, CPA with Moore, Ellrich & Neal, P.A.