In Connecticut, spouses who are divorcing or parents who are engaged in a child custody/child support litigation are required to fully and accurately disclose their entire financial picture to both the other party and the court. As the penalties for failure to properly disclose your finances can be significant, it is important to comply with the law.

What information needs to be disclosed? 

The Connecticut Supreme Court has issued strong rulings on the issue of full disclosure. The parties in a divorce (or child custody/child support action) have what is tantamount to a fiduciary duty to each other to fully disclose their financial condition to the other party in a full, frank, and accurate way. Full financial information and documents allow the spouses and the court to get a complete picture of total income, assets, and liabilities, so that finances can be divided and distributed among the two households in a manner that the court deems equitable. The court generally requires that each party produce the following documents: 

• Federal and state income tax returns filed within the last 3 years, including personal, partnership, or corporate returns;  
• IRS forms W-2, K-1, and 1099 for the past 3 years;
• All pay stubs or other evidence of income for the current year and the last pay stub from the prior calendar year;
• Past 24 months of statements for all accounts maintained with any financial institution, including banks, brokers, and financial managers;
• Most recent retirement account statements, including Keogh, IRA, profit-sharing, deferred compensation, and pension plans;
• Most recent life insurance policy statements on the life of you or your spouse;
• Health insurance policy summary detailing coverage, cost, spousal benefits, and COBRA costs following divorce, often obtained from your employer;  
• Appraisals of any assets owned by you or your spouse (e.g. real estate, jewelry, art collections, etc.). 

Depending upon your circumstances, more extensive documents may be required to create a more complete picture of the current and future income, assets, and liabilities for divorce disclosure.

What if my spouse or I have an ownership interest in a closely held business? 

If you and your spouse own a business together, or one of you has an ownership interest in a closely held business, the value of the business/ownership interest will need to be determined as part of the asset distribution process. When just one of the spouses owns a business/interest in a business, the party with the ownership interest has a fiduciary-like duty to provide the other party with an accurate valuation. The law does not require the non-owner-spouse to properly investigate the business’s value, since it is the owner-spouse’s responsibility to provide the other spouse and the court with a true and accurate valuation. However, we generally recommend that the non-owner spouse do their own investigation of the business valuation at the time of the divorce, since finding fraud after the fact is more difficult. If the other party sold their ownership interest at the time of divorce, the sale price would give an accurate valuation of their ownership interest’s fair market value. But in most cases, the other party does not sell the business interest at the time of divorce, so there will be no clear evidence in the future of the ownership interest’s value at the time of divorce. 

What if one of us has a trust? 

If you are the beneficiary of a trust, you must disclose the trust and its terms, even if you are not entitled to receive funds from the trust at this time. If you are currently entitled to take some money from the trust, you must also disclose how much is in the trust.

What happens if you fail to fully disclose your finances? 

If you fail to provide full and accurate disclosure of your financial information and your matter goes to judgment – either by agreement between you and the other party, or after a trial – you subject yourself to the possibility that the case will be reopened in the future. The other party can move at any time for the judgment to be reopened by the court on the grounds that you committed fraud by not accurately disclosing your financial position. 

If the court were to reopen the judgment, you would have to start over from scratch, and all the work you did to get to the original judgment would be for nothing. In addition to paying for your own attorney’s fees again, you might also be penalized for attorney’s fees to cover all the work the other party had to do to uncover the falsification of information and get the court to relitigate the case. On top of these potentially significant financial penalties, you (and your children, if applicable) would have to deal with the personal upheaval that would result from having to relitigate a divorce or child custody/child support matter that was already settled. 

How can I be sure the other party is fully disclosing their financial information? 

If you work with a qualified, experienced family law attorney, your attorney will demand thorough documentation from the other side and hire appropriate financial experts, such as a certified public accountant or business valuation expert, to analyze the documents as necessary. If the other side does not comply with the request for documents, your attorney can advise you on pursuing the production of documents and information through the court system or from other sources, such as banks or third parties who possess the needed information. 

The family law attorneys at Ruel Ruel Burns Feldman & Britt, LLC, have extensive experience serving as trusted advisors and representing clients in divorce involving ownership in closely held businesses and appeals in Connecticut. If you are considering a divorce or seeking a modification or appeal of your alimony, divorce, or child custody orders, contact our family law attorneys at 860-206-9096 or online.