Introducing PDDs: the Nuts and Bolts of Financial Disclosures during Divorce
In the chaos and confusion of divorce, we feel many things. Often, we feel heartbroken or betrayed. Other times, we are angry or frustrated, and, still other times, we simply cannot understand why this is happening. During this emotional time, it can be difficult to think about our financial assets, such as our house or retirement accounts. However, it is important to understand where we are financially so that we can enter into negotiations with knowledge about our finances and so that we can better prepare for how we want to land after the divorce process is completed. As part of any divorce process in California (Collaborative Practice, Mediation, or Litigation), each party must complete PDDs and provide them to the other party. But more than fulfilling a requirement, completing the PDDs is the crucial first step to a new beginning.
The Mechanics: What are PDDs?
PDDs stand for Preliminary Declarations of Disclosure. When filing for divorce in California, each party must prepare and provide his/her spouse with their PDDs. The PDDs consist of four documents:
- Declaration of Disclosure (FL-140),
- Schedule of Assets and Debts (FL-142),
- Income and Expense Declaration (FL-150), and
- Declaration Regarding Service of Declaration of Disclosure and Income and Expense Declaration (FL-141).
These forms provide a blueprint if you will of the financial picture as each spouse sees it and form the basis on which financial matters may be contested and ultimately resolved. Further, without this information, it is difficult to have fruitful settlement negotiations. For all of the above reasons, it is important to complete these forms accurately and carefully. The Declaration of Disclosure acts a cover sheet: it basically says that you are serving your Schedule of Assets and Debts, Income and Expense Declaration, and last two years of taxes. Meanwhile, the Schedule of Assets and Debts outlines the assets and debts that you believe you and your spouse or domestic partner own separately or jointly. This form asks you to attach relevant documents, such as your latest bank statements. The Income and Expense Declaration lays out your monthly income and expenses and requires you to attach other relevant documents, such as your latest pay stubs. Note the only PDD document that you file with the Court is a Declaration Regarding Service of Declaration of Disclosure and Income and Expense Declaration, which tells the court that you have complied with the requirement to serve these financial disclosures on your spouse. You should be aware that in other circumstances, such as when requesting spousal support, you may need to file the Income and Expense Declaration.
These forms are cumbersome. Do I really have to fill them out?
Divorce is a stressful process, and while it may not seem like it now, PDDs are extremely important and even helpful. They frame the conversation about your finances and make it easier to have settlement negotiations. In this way, they facilitate settlement and allow you to get through the divorce process faster. Because PDDs are mandatory, and it is the duty of each spouse to serve PDDs on the other spouse within 60 days of filing the Petition for Dissolution of Marriage or Response to Petition for Dissolution of Marriage, in a typical case they are completed shortly after the divorce process has started so the information can be a foundation for information gathering and future settlement discussions.
What happens if I fail to complete the PDDs or don’t fill them out correctly?
Because each party to a divorce is required to complete the PDDs, there can be serious consequences if a party fails to complete them. For example, the complying party can file a motion to compel against the non-complying party, which basically asks the court to order the non-complying party to complete the PDDs. The complying party can also ask the court to preclude the non-complying party from providing evidence in court on matters that would have been disclosed in the PDDs (these are known as “evidentiary sanctions”). Meanwhile, possible monetary sanctions can result, and the non-complying party could be ordered to contribute to the complying party’s attorney’s fees and costs. Finally, if a party chooses to complete the PDDs but fails to disclose an asset, that party could be subject to perjury charges and could be ordered to relinquish the entire undisclosed asset to the other party! And most important, without PDDs, it is difficult if not impossible to embark on fruitful settlement negotiations.
I am feeling a little overwhelmed. What should I do?
It is natural to feel overwhelmed by the divorce process. A lot is going on, and your life is changing in dramatic ways. Meet with an attorney specializing in family law and find a financial professional who can help you in a myriad of ways during the process including providing expert assistance with completing your PDDs.
Gretchen M. Wallacker is a Certified Family Law Specialist with Berra Stross & Wallacker in San Mateo. Her practice includes Collaborative Practice, Mediation and Settlement Oriented Litigation.
Jason Crowley, CFA, CFP, CDFA is a founding partner at Divorce Capital Planning (www.divorcecapitalplanning.com) which specializes in divorce financial planning and analysis. Jason has the distinction of being one of the select few financial professionals to hold the Chartered Financial Analyst, Certified Financial Planner, and Certified Divorce Financial Analyst credentials.