Financial Disclosure for Family Mediators: Tips from a Pro

Getting your clients to complete their disclosure fully can be a real challenge for mediators. Member Matilda Kissi, a Senior Family Law Clerk met with Toronto family lawyer Lauren B. Israel, who is an expert at helping clients understand and complete this task. We asked Matilda for her advice:

FDRIO: What is the part of financial disclosure that most clients struggle with the most? What tips do you have for mediators?

Matilda: The hardest part is the expenses/budget section.  Most people inflate the numbers because they think it will help them and show that they need more money from their ex partner.  That could not be further from the truth.  When your expenses exceed your income, questions are raised as to how your financial needs are being met.  This is problematic. 

I recommend people look at their expenses from the previous month as a guide.  Winter months may often be higher than summer months. If there is a lawyer on the other side, they will go through the budget with a fine-tooth comb and make an inference that expenses are being met through another source of income that’s not shown on the budget. You do not want your mediation process to break down because one side wants to impute income based on high expenses.

Tip: Mediation is all about building trust and it usually starts with financial disclosure.  I suggest that mediators reinforce that the financial statement be completely honest. They need to understand that even though mediation is confidential, a sworn court form could possibly be used in subsequent litigation.  So, they need to be sure it is complete and accurate, and should err on the side of over-disclosing.  If they are not confident, they should be advised to get legal advice before swearing their financial statement. Mediators should be very familiar with the form and understand it themselves.

FDRIO: What are some specific challenges for clients when completing their disclosure?

Matilda: I often say be as realistic as you can be in the numbers.  If clients are using their credit cards as a means of living, that is fine, and it should be reflected in the debts section.  There should be a check and balance.  It can be hard to recall everything so I tell people to make sure they have a document that backs up the numbers (e.g. bank accounts statements, credit card statements).  Include both individual and joint accounts for both date of marriage and separation, if available, credit cards, loans, debts owed to people, etc. The need for documents includes extracurricular activity receipts for children.   

The question has to be asked, “are these payments/expenses being made currently?” Clients tend to put expenses that they will incur in the future or did in the past including those that their ex or partner are paying.  The proposed budget is for future expenses, so if they are moving in a month and expenses will change, say so.  I would suggest mediators ask that specific question “what are YOU currently paying”.  Ultimately, be as transparent as possible so that your ex cannot infer that you are living beyond your means.  And if you are, your debts can account for how you are doing it.

FDRIO: What do you say to clients who don’t want the other person to know everything about their finances?

Matilda: You have a legal obligation to disclose your financial situation to the other party pursuant to Rule 13 of the Family Law Rules.  The law requires this to be done pursuant to section 41 of the FLA.  Failure to exchange all financial disclosure could result in an agreement being set aside, which in turn becomes much more costly in the end, both financially and mentally.  In essence, you go through the entire process for nothing; what a waste of time, effort and lots of money.  Setting aside can happen at any point, from months to years from now.  Transparency is key. To help clients understand better, I often refer them to the case of Quinn v. Epstein Cole.

FDRIO: This is an issue that comes up often in mediation: when are the income and/or assets of a new partner relevant?

Matilda: Income/assets of a new spouse or partner are relevant when the other party is seeking to reduce their child or spousal support obligation .  That person might be claiming “undue hardship” for a number of reasons,  including other children in that particular home.  A person seeking a reduction would have to provide their partner’s income information so that a determination can be made as to whether there is a higher standard of living in that household due to the partner, compared to that of the other parent.  In addition, a partner’s income is relevant when their finances are intertwined, perhaps, they are income splitting or own a business together and it is unknown what an individual’s true income is.  

Thank you Matilda!

FDRIO member Matilda Kissi, is a Senior Family Law Clerk met with Toronto family lawyer Lauren B. Israel