Understanding Financial Disclosure Obligations in Your Divorce

For nearly all separated couples, the divorce process is filled with conflict. But in Ontario, there’s one part of that process where cooperation between spouses is strictly mandated by law:  Financial disclosure.  It plays a central role in ensuring fair outcomes on virtually every aspect of a divorce, including property division, spousal support and child support.

If you’re at the stage of your own divorce where you are required to exchange financial information with your Ex, here are the key points to know.

Why Financial Disclosure Matters

Your upcoming divorce likely involves numerous issues to be resolved with your Ex. Many of these will hinge on your respective financial circumstances.

For example, if the court must determine the spousal support payments that one of you owes the other, it cannot do so unless it has a complete and accurate financial picture. The principles that underpin the Canadian Family Law regime expressly call for the court to evaluate your individual needs, means, and ability to pay.

Let’s face it:  It’s tempting to withhold information.  Maybe it’s underreporting your income a little, hiding the fact that you have a secret bank account or investments, or conveniently keeping it secret that you inherited a large sum from your Aunt Millie.

The problem is that your Ex might be tempted, too. And if either of you withholds or mispresents your financial information, this will skew the court’s assessment and lead to an unjust result.

So it’s not just about honesty – it’s about getting a fair outcome for you both, and one that’s in line with the policy and goals of the Family Law legislation.

What Needs to Be Disclosed

The required financial information will depend on the issues in your case, but generally, the parties to Family litigation must disclose their income, assets, and debts. Typical disclosure includes:

• Income information: This usually involves the last three years of personal income tax returns and Notices of Assessment from the Canada Revenue Agency. It can also include recent pay stubs, employment contracts, business financial statements (if self-employed), and any other sources of income such as investment or rental income.
• Assets: This means providing details of everything you own. Examples include real estate, vehicles, bank accounts, RRSPs, pensions, investments, business interests, and valuable personal property. You will be asked to provide account statements, pension valuations, and other documents showing current values.
• Debts and liabilities: You must also disclose what you owe. This includes mortgages, loans, credit card balances, lines of credit, tax arrears, and any other liabilities. Recent statements or letters from creditors are typically required.
• Additional supporting documents: Depending on your situation, you may need to provide other financial records such as trust documents, shareholder agreements, or documentation of gifts and inheritances.

The Financial Statement

If you and your Ex are divorcing in Ontario, you will typically need to complete a formal Financial Statement, in a format that is dictated by the Family Law Rules and Court protocol. This is then filed with the Court once your litigation is underway. There are two types:

• Form 13 (for support claims only)
• Form 13.1 (for support and property claims)

Even if your case is resolved outside of court, similar disclosure is expected during negotiations or mediation.

The Form requires you to list all income sources, assets, debts, and expenses. It must be accurate and kept up to date if there are changes.

If you are unsure how to value an asset, such as a pension or business, you may need professional help from an accountant, pension valuator, or financial advisor.

Ongoing Duty to Update

As mentioned, you and your Ex must keep your Financial Statement up to date as your divorce proceeds – even if that’s over a period of months or years.  That’s because financial disclosure is not a one-time task.

Instead, the Family Law imposes an ongoing obligation on you and your Ex to keep each other and the court informed about significant changes in your financial circumstances. For example, if you change jobs, receive a bonus, or sell an asset, you will likely need to provide updated documentation.

Consequences of Non-Disclosure

If either of you fails to provide full and honest disclosure, the consequences can be serious.

For example, if you underreport your income – perhaps to try to avoid paying your Ex the full support they are owed – then the court can take a guess at your true higher income amount, using the available evidence.  This is called “imputing” income.  This leads to your plan backfiring, since the court can chooses a figure that is even higher than what you actually earn.  Plus, the court can order you to pay costs.

This was the outcome in an Ontario case called Gordon v. Wilkins, 2020 ONCJ 115.  The father was a former personal injury lawyer, who’d had his license to practice revoked for professional misconduct. He claimed he could not work, and could not pay support.  However the court found that in the past he had earned substantial income of over $2 million at least one past year, and could not provide any satisfactory explanation for the apparent disappearance of his funds.  He provided incomplete and delayed financial disclosure, except for suddenly advising that he had earned exactly $70,000 in two specific years, but without credible proof.  The court concluded he had breached his duty of full and frank disclosure – in view of his prior earnings, skills, and earning capacity – imputed to him an annual income of $150,000 for specific years. It then used those figures to calculate his child support and spousal support obligations.

As another example:  Let’s say you and your Ex reached an agreement on some of your disputed issues. However, it later comes to light that you did not provide full financial disclosure called for by law, before the agreement was reached.  That means your Ex went into the negotiations without having a clear and true picture of your financial circumstances.  The court can set your agreement aside, and again order costs against you.  This will lead to a re-opening of the issues you thought were resolved, which can add time and costs to your divorce process.

This is what happened in a case called Laliberté v. Monteith, 2021 ONSC (Div. Ct.), the husband and wife used a mediator to help negotiate a separation agreement. It later devolved that during those negotiations, the husband had misled the wife into thinking his business was worth about $8 million, when in reality he was secretly negotiating to sell it for $30 million.  He admitted that he deliberately withheld this information.  The court set aside the separation agreement entirely.  It rejected the husband’s claims that he was unaware of his duty to fully disclose his financial information, noting that he was represented by a lawyer throughout.

Promoting Fairness and Reducing Conflict

Financial disclosure can feel invasive, but it is one of the most effective ways to build a fair resolution. When both of you have access to the same information, your negotiations will be more transparent, and your outcomes will be more predictable. It also reduces the likelihood that in the future you will have to go back to court to challenge any support orders or property division agreements.

Get Good Advice

Divorce can be difficult, and it can involve many unpleasant aspects. Providing full financial disclosure might be one of these, but it’s a mandatory process and cannot be avoided.  So it’s important to do it correctly from the outset, since it will make your entire divorce more fair, and less combative and costly.

If you are unsure about your disclosure obligations, give our offices a Call or request a Free Consultation. We can give you tailored legal advice that helps you understand what is required, and how to comply.