The Three Wisemen of Divorce: Money, Psych & Law

Financial Disclosures

May 04, 2021 Shawn Weber, CLS-F, Mark C. Hill, CFP®, CDFA® and Scott Weiner, Ph.D., J.D. Season 2 Episode 8
The Three Wisemen of Divorce: Money, Psych & Law
Financial Disclosures
Show Notes Transcript

Financial Disclosures are necessary in every divorce.  While the process can be tedious, divorcing parties need to do the financial disclosures truthfully and thoroughly.  We know that money can mean a lot of different things to different people.    In this episode, Divorce experts Mark C. Hill, CFP®, CDFA® Financial Divorce Consultant; Scott Weiner, Psychologist, Attorney and Mediator; and Shawn Weber, CLS-F* Family Law Mediator and Divorce Attorney, chat about the importance of the financial disclosures and the emotional and legal challenges they raise.

Mark Hill:

Okay, I'm lost on this

Shawn Weber:

case, innocent, this innocent Mormon boy as a law clerk, had to call for a. I had to call a strip club. And the reason for that was that Indiana price price lap dancing tip snaps. Yeah, because the wife was claiming earlier in this much money, but he's like, Well, I know when she's at the strip club she makes.

Mark Hill:

Okay.

Shawn Weber:

Welcome to the Three Wise Men of divorce, money, psych, and law podcast. Sit down with the California divorce experts, financial divorce consultant, Mark Hill, psychologist Scott Weiner, and attorney Sean Weber, for a frank and casual conversation about divorce, separation, co parenting, and the difficult decisions, real people like you face during these tough times. We know that if you are looking at divorce or separation, it can be scary and overwhelming. With combined experience of over 70 years in divorce and conflict management. We are here for you and look forward to helping by sharing our unique ideas, thoughts and perspectives on divorce, separation and co parenting.

Mark Hill:

Well, welcome, everybody. We wanted to talk today about my area of expertise, which is the financial area. One of the most frustrating experiences anybody will go through during a divorce is the financial disclosures. People find it unnecessary. Wait a minute, this is not a contested divorce, we're working together. Why do I have to do this? Well, state is basically in at the start of your marriage. And the state needs to be in at the conclusion of your marriage. And boy, are they in it? And are they in it and they require certain disclosures income and expense forms asset and debt forms. And you are signing that those are correct under penalty of perjury. And if you should forget something,

Scott Weiner:

quote unquote, in quotes you didn't see as air quotes ladies.

Mark Hill:

If you forget something, and it's a genuine error, not a problem, if you forgot, I forgot that small $2,000 IRA that's over at fidelity. I just forgot about it. No worries. But if suddenly, like the lottery winner up in LA in the 90s, ugts forgot to tell your husband how many million dollars you won, you are at great risk. And in that particular case, what happened was all of the winnings once discovered, were awarded to husband by the judge, because it was fraud. So it needs to be done. And it needs to be done. Right. But it also involves some emotional aspects. Because you know, to quote, my favorite line from princes honor, which was an old movie, you guys may recall with Kathleen Turner and jack nicholson, where they were both hitmen for different mob factions. And there's a million dollars in a briefcase has gone missing. And jack nicholson is trying to explain to Kathleen Turner how big a deal this is. And she says to her, he says no, no, no, you don't understand the proxies. love their money. Let me explain. They love their money more than they love their children, and they really love their children. So people become emotionally involved in their money, don't they, Scott? Oh, my lord. And they get? Well, yes, I mean, and to be fair to all of us and all of our clients.

Scott Weiner:

You know, money isn't just money. Money is security. Money is safety money is in the case of individuals divorcing security for a future and however much security you had basically it's getting divided in half or some such thing. So if we invert that fraction, it's twice as significant at least, because you're going to have half as much. But that's not all that's going on. And I we were discussing this before we began our meeting here and talking about how, at the very time when you are least likely to feel trusting of your spouse. All of a sudden these disclosures are required by law to be absolutely correct or at least by intent. as Mark said you know if you forget a this or that or the other and in good faith, forget a small amount. Sure, sir, we adjust and everybody understands that. But here we are. And as I think Shawn was talking earlier about if it's if it's not a contested divorce, why are we contesting over these facts? Yes, you you have formed a contract and what you discover at the time of your divorce? Is that all along in that marriage, you were legally a fiduciary with those kinds of duties of total integrity, fairness, honor, and no no foolery. And

Mark Hill:

what does that mean being a fiduciary? How would you define that?

Shawn Weber:

Well, you know, there's the fiduciary that you think of when you when you think of like a financial advisor who invests on your behalf, or somebody who controls a blind trust or something like that, and the duties that they have, and there's this prudent investor standard that they're held to, it's a little different than that what we're talking about is a similar relationship that you have between business partners. So at least in California, you're held to the same standard that a business partner would hold towards his other partner, her other partner, and it boils down to more than anything, a duty of disclosure, and accounting. So if I manage and control the family finances, and then I do something with the money, I owe a duty of disclosure, whether there's a divorce or not, frankly, to my spouse to account for what I did. So, you know, I invested in this awesome opportunity, I need to say what I did, or did I squander it? Or did I waste it? Or did I defraud the community, that's another issue. A lot of the breaches of fiduciary duty, we see your when somebody takes money out of the family, and uses it for something that is an outside of the family purpose. You're not held to the prudent investor standard, though, when you're talking about a husband and wife, it's more of this kind of duty of confidentiality, it's this duty of accounting, and a duty not to cause harm, duty of loyalty, a duty ask a question, yes, you have a client, you have clients, they're in the middle of the divorce. They've separated, they both agreed, they separated.

Mark Hill:

Okay, but they're still working through the process of dividing the assets and so on. And wife gets this incredible opportunity to invest. And they've split some of the funds and wife goes, Well, I'm going to do that. He doesn't know about it. I'm not doing it. But he doesn't know won't hurt him. Exactly. We're gonna get divorced.

Shawn Weber:

Well, depends on where that duty arose. And so there is a duty to share community opportunities with the other spouse, even if I'm in the middle of a divorce, and we are in the middle of separation, has the legal separation occurred yet? Isn't that the dividing time? No, no, the the date of separation may have happened. And guys were given this based on our experience in California law, everyone out there should check their own jurisdiction. But a lot of the principles are similar. So we're just going to kind of stick with where we practice, which is California law. But if you're in another jurisdiction, you might check and see how it's similar how it's different. But yes, after the date of separation, that's the date that you knew that the marriage was over, you know, quote, unquote, new. And there's a whole conversation we can have about that. You still owe a duty for how you manage and control the community finances. And so if you receive an opportunity, you have a that is that arises out of a community property insurance, for example, your community property business, you owe a duty to the other person to be able to participate in that opportunity.

Mark Hill:

Let's Oh marks marks in marks. idea, though, are in his

Scott Weiner:

he said that an opportunity comes for somebody to do something that might be separate. If the people have separated their funds already, Shawn can that person operate with their own separate money in the way they wish?

Shawn Weber:

Well, in California, at least you have what are called the automatic temporary restraining orders are sometimes called standard common law restraint, or as it says, even if it's your separate property, you cannot act with impunity. Without the other person being aware of it and giving permission. You can't like spend money on things outside of the community or outside of the family. Unless you both agree, and this does trip some people up. You're not supposed to. You're not supposed to do that kind of stuff. And we see it happen all the time. You know, a case I had few years ago a guy sold a business, I'm not going to get too much details because I didn't want people to know who I'm talking about. But he sold a business and the business was valued for particular value and then he and his wife negotiated a price for which he would pay her to be able To keep his business and not have to share the stock whether what he didn't tell her is that he had already received a memorandum of understanding for proposal for someone else to buy the business for three times what the business valuation appraised at that he just didn't share that information with her. And then the ink no sooner was the ink dry on the marital settlement agreement, the judgment that he then went out and executed on this purchase. Well, the problem was she finds out and finds out that he got a whole lot more money than what it was appraised for. He had violated his fiduciary duty by not disclosing the business opportunity to her. Right.

Scott Weiner:

And he ended up having to go back to court and paint a whole lot of money. Yep, yep. Yep. That was his little lottery ticket. So what he had done was to breach his duty of loyalty to his business partner, that is to say his wife,

Shawn Weber:

yep.

Scott Weiner:

And, but see in his head, this is where he got in trouble. In his head, he didn't think of her as a business partner. I know,

Shawn Weber:

he thought of his business partners as his business partner. So the other people that were invested with him, he was very happy to share that information. And they were very happy to keep it from the wife. But when it came out that he had kind of committed this breach, he ended up having to, to pay some stuff to make up, never mind the expensive headache of having to have your entire marital settlement agreement set aside and having to re litigate it. So So yeah, I mean, the courts take fiduciary duties as serious as a heart attack. And in California, at least, it really comes down to more often than anything else, full disclosure. And that's where you come in Mark, people need to get information to you. People need to get information to their divorce professionals so that the disclosures can be prepared, and so that we can have a clear picture of the finances. But what do you think is the best way for people to get information to you?

Mark Hill:

Well, as I said, Before, when we were thinking about what we're going to talk about today, in over 20 years of doing this work, I've never seen a client do their declarations of disclosure correctly the first time ever. They're not intuitive. They're not easy to do. They require a lot of documentary backup, and there are statutes or court rules that exist. I think, from the date of filing, correct me if I'm wrong, Sean, the date of filing to when you have to give your disclosures is 90 days, 60 days, 60 days, from the date of I believe the response, right? This the service of the filing of the response. And more importantly, the backup documents have to be within 90 days of that date. So if someone drags their feet doing it, we've got aged documents that have aged out. Now some lawyers are real sticklers about this and others. candidly, don't think is that relevant or important. And so it's really dependent upon the legal representation you're working with. But the truth of the matter is, it's better if they are up to date, it makes it easier to do the case, if you agree on the pie. You can't divide a pie you don't agree on. So what you need to do is both of you do your disclosures, if you have any disagreements around them, the opportunity then is to work through them so that we can sit down at the table and go Okay, now we agree on everything. The amount of money wasted by lawyers on just fighting over the pie before they even get to talking about who gets what is crazy when we get into litigated world. Well, and there's this duty, it's a sua sponte duty they call it sorry to drop Latin in there, but it's spontaneous duty, you have to you have to provide information, whether it's asked for or not, or whether you think the other person already knows.

Shawn Weber:

You know, and and and that that's, I see people get in more trouble over that than anything. You have to you have to not only do you have to do your disclosures, but then you have a duty to augment your disclosure, when there's a change of material change of facts and information. Yeah. And the other thing that I find is that people

Mark Hill:

as many times as they can be told some do not understand what the backup documents need to be. screenshots don't work. We need a number of things on there. And statements worth backs work best and statements that I we get in terms of PDFs are it Deal? Because it's got everything on there. It's got the title, the account number. Yeah, the other ones whose name is it in? What's the value? What's the date of it? What's the institution. And we need all of that information and screenshots that are labeled. This happens increasingly, because of technology. People take photographs of things and think it's going to work. Well doesn't work, it doesn't work. Because often what they're taking photographs of are a summary page. Yeah, it shows the value. But it's everything on the top is titled in bill Smith's IRA. Whereas in fact, there's six accounts down there. Once a trust account, once his individual name, his wife's IRA is in there. And they're all listed there. And help me out here, I need account numbers. I need titling, I need to know what is where. And that is a big problem.

Shawn Weber:

I you know, a lot of people, I think they're really smart. And maybe there's some trust issues for some folks. But you're really smart. If when you have a financial consultant on your case, just give them the passwords, to the you know, if you have the Smith, you know, whatever, Morgan Stanley account, just give them the passwords to the Morgan Stanley account or the fidelity account, then they can go on there and pull down what they need. And that makes your job a whole lot easier. It does. But it's a rarity that clients are comfortable in doing that. But I don't trust my ex husband, why would I trust somebody else's X has? Well, there's that there are companies that will allow you read only access to a third party, they do it for accountants all the time. And you can have that discussion with your financial advisor, or their institution. So there are ways around that. But I gotta tell you mean case by case in point this morning, Sean, were we working with this client, it's got the best of intentions, but really struggled with kind of complying with this and and got very frustrated. And when I understand why, because it's a frustrating process. In fact, I call it you know, the worst part of the divorce process is negotiating the settlement would be worth many people look back on it. And go, Mike, as you say, the the annual probe that is there's financial disclosures can be very, very, that's the most disturbing part. Well, because it feels like a violation. Yep. You know, you've said this before, that sometimes people have the proverbial I gotta drop my financial trousers for you. Yeah, you know, and it's very, it feels like a violation to have to do all of this disclosure, especially if you're one like during the marriage where you weren't comfortable sharing that kind of information with each other. I might say, as an aside, that could be part of our problem. If you're not willing to talk to your spouse about your money, that could be part of why you're here in the first place. But that besides that, it can be very difficult for people and then there's also the person on the other side that's receiving this information. Scott, we were talking about this this morning, you know, why would I trust that your disclosure is correct when you had an affair, right, and broke your vows the most important vow for our relationship? How do I trust that, that what you're saying about the stock options is correct.

Mark Hill:

Frankly, I mean, that not only is that a good question, but the answer to the question is I don't? Yeah, right. I know, that's the point. You don't have to trust because we we need to documented that.

Shawn Weber:

If that Cold War, adage, trust but verify,

Mark Hill:

right, because because the non, I think in terms of the moneyed spouse and the non moneyed spouse, where one person has been responsible for the money in the marriage, and those another duties have been taken on by another, the other spouse, so the unmanaged spouse, sometimes the moneyed spouse comes in, and they've got everything, they got a binder, they've got it all, but they don't want to let it go. Because that's control. That's power. And I will literally say to the client is usually a man. I will say, sir, that puts you at a huge disadvantage. And they'll do a double take. I mean, what do you mean, I'm at a desk, I got, I got my binder. And my response is, well, your wife wouldn't know a good deal if it walked up and better on the leg, which he because she doesn't know anything. And you're telling me how you're going to be generous and what you're going to offer is going to be a great deal for her. Wouldn't it be valuable for her to get an education so she can understand that that is in fact true. And before people start sending their letters, we know sometimes the woman is the moneyed spouse and the maxilla. The out spouse, we know increase increasingly, increasingly so but I do not find that the women are as reluctant to lay release control as men are. That is interesting, because yeah, but women are reluctant to pay spouses. Oh my god. That's actually and studied, hell hath no fury like a woman having to pay spousal support to a deadbeat ex spouse as they say it. Yeah. So it's interesting.

Shawn Weber:

Yeah, there is differences in the genders as much as we don't want to be too gender normative. There are differences in how people from their perspectives approach money and disclosure. And power, money has power.

Scott Weiner:

Well, meanwhile, what we do see reversal. universally, we see almost without exception, in these cases, I people are very, very uncomfortable doing the disclosures. It's right at the time, when you least trust somebody, you're asking them to trust them. For basically, going forward in life. For the rest of your life, the outcome here is going to matter. And you know that that's kind of what Mark does for a living is.

Mark Hill:

Yeah. And the reality is that and I say this to clients, because they don't think in these terms. This is really important to get it right, because this is the largest financial transaction of your lifetime, in most cases, if there's been a divorce, or marriage of some length, and people go, Oh, yeah, that's I guess it is, but they don't think of it in those terms.

Shawn Weber:

Yeah, it's half of everything you own. So let's get this right. Yep. Yeah. And so So the moral of the story is, number one, disclose, disclose, disclose, and when in doubt, disclose. Right. There's no secrets between spouses. In fact, there's virtually no objection, evidentiary objection that you can make to a request for financial information. In a divorce case, there's none of this Oh, well, that's a violation of my privacy, there is no privacy between spouses, when it comes to money. Second, get the information to us in a way that is going to make it easy for us to put your disclosure together. So PDFs of statements are better than photographs. When you say, yeah, put them all in one file instead of several files, or you would I bet you would prefer to getting like photographs of things, you'd prefer to just get a stack of papers, I bet.

Mark Hill:

Yeah. I mean, if it comes down to that, what I want is the original documents, drop them off, mail them to us, we'll scan them, if you are not able to do so but scan documents are best. I know that when we get to actually doing the disclosures, we want all the statements to be in one PDF. I know that's how you do it, Shawn. But the way I want them as individual documents, because if they do age out or circumstances change, I want to be able to just replace the one document I've got, it's easier for me. So that's just a practical thing. But and I can't tell you how frustrating it is when you have a spouse who is really together and ready to move forward and does all the disclosures. And the other side drags their feet for month after month after month. And suddenly now the other spouse has to produce all night new documents because they've aged out. If you want to upset the other spouse, that's the way to go. It will you will be shooting yourself in the foot if you do that, whether you're in litigation or in mediation or whatever, any amount of delay will be charged to your account. And it will be community money or whatever it is. But or it may be emotional, emotionally charged, you will suffer in some way. Well, yeah. And even though being honest, and getting everything out on the table, let's say for the person who wants to delay the divorce, because he never really wanted the divorce in the first place. And so he's dragging his feet and just kind of being resentful. It's just it's just, it's just delaying Avenue in. Yep. Yeah. It's like pulling off a band aid. But what happens is that some people come into this process thinking, if I can just delay long enough, the other spouse will come back to their senses and come back into the marriage. And so it's important for us to help the clients understand No, this divorce will occur. You have filed for it. She's ready to go, sir. And you this is going to happen. Delaying doesn't get better, but I don't have to go any faster than I want to do I? Well, eventually the courts will become involved and they will compel No, we can't

Scott Weiner:

see the person who resists in that tone that I was affecting there is simply costing himself or herself fortunes and if we had to know that

Mark Hill:

and Shawn I had a new developing case where the husband dragged him feet so much that the wife said, this is not going to work. We're not gonna, we're not gonna do this. And so went to litigation, because the husband had dragged his feet so much. And it's a rarity, very few cases that we do end up in that direction. But there's a prime example of sort of non engagement and non involvement in the process and the hope that it will just kind of go away if you ignore it, and the dangers that that poses to your own circumstances.

Scott Weiner:

And you lose control of the process. When you give it over to litigation, folks.

Shawn Weber:

I always tell people stay in charge, don't don't give it up to litigation situation, because that is a train that will take off whether you're ready to or not. And you can't stop it. And it's very expensive. Once the momentum goes over there, it's very hard to move it to an out of court settlement. I call it the divorce escalator. Yeah, you ever tried to get off an escalator, you know, and by the way, this one goes down, not up. And you try and turn around and get off it, it's not easy to do, yeah, don't do anything that's going to cause your other your partner to want to go to litigation, that is not going to help you in the these tactics at some time. And sometimes, because people just can't emotionally deal with it. And that's when I send them to you, Scott. I'm like, you know that, if you're having trouble moving ahead, and the other person is about to jump ship and go to court, go to a divorce coach, go to go to a psychologist or a therapist and have them help you keep your head screwed on, right. So you can get the case done, because I know it's it's overwhelming. Sometimes people feel like a deer in the headlights.

Mark Hill:

You know, one thing that just occurred to me when you were talking there, Shawn, was that during this COVID era that we're working through, the courts are having real trouble processing cases. And, you know, clients will come to us and we'll say, Well, have you filed yet? No, no, no, I'm gonna do it next week. And then they get into the court processes. Nobody can see. But Shawn has a big grin on his face. Because the truth of the matter is, there's one client I have right now who has filed three times paid three filing fees because he refuses to let Shawn help him do it right. How long would it take you Sean's to do a filing in your office half hour. This guy's been working on that now for about a month and a half. He's filed three times, he's gotten three rejections. He doesn't know why he wants me to help him. It's like, I don't do that I don't work with the courts go, you gotta talk to an attorney. And that is just a little aside here around the finances that I think is helpful for people considering divorce to understand.

Scott Weiner:

I want to say one, one more thing about all this, which is that in a larger sense, what we are counseling folks out there to do in this meeting today, about disclosing getting things done getting things down, doing it clearly doing it openly, is a a more general directive than just about the money. You know, it when you work in a mediative kind of style, you can put things out there that wouldn't come about in a court settlement, where you might be able to trade. Or you might be able to say simply, I know this doesn't mean that much to you. But it means a lot to me, I'd like to have this or that or the other outcome for myself for my relationship with my kids. And those things can happen in a mediation circumstance where you really can put those things out in the table and in the room. Once you get into litigation, it becomes the proverbial fixed sum game, where most times the other attorney is will will feel like they are not doing due diligence for their client if they let you have anything that that other person would want. That is what the virtue of mediation is.

Mark Hill:

And also the judges have a limited or constrained by the law in a way that we are not necessarily constrained in mediation. Now that may sound scary to people because it's like, wait a minute. You mean the law would give me one thing and you're going to tell me we're going to do something different that must disadvantage me? No, not necessarily. The truth of the matter is when you have you know, the Solomon idea, cut the baby in half, right? We don't want to cut the baby in half. You take that baby, I take this baby. But if you go to a judge, the judge may have no choice but to divide the baby down the middle. Is that Shawn?

Scott Weiner:

Well do they might evaluate it just to say

Shawn Weber:

Everybody's, my children, no children were harmed in this example. But no, I mean, there's the parable of the orange, like we talked about in our last podcast, where two women are fighting over an orange, they go to the magistrate, he just cut the orange in half, and then neither of them got really what they want. And because one one of the zest, and the other one wanted the juice, you know, and so we, you know, when you, when you do your financial disclosures, and you work with a financial professional, you can get a much, you can have much more control over the big picture, as opposed to the cookie cutter, because I haven't found a cookie cutter yet that fits everybody the same way. So lose control, go to court, want to keep control, stay out of court, and then look for solutions that are that are that are workable, but there won't be any solutions, if the if the financial disclosures are done, and done quickly and done efficiently, because it just, I mean, Mark, how many cases do we have the drag on and on and on? Because people aren't getting the stuff done? So do do that. Yeah.

Mark Hill:

And they cost more because of this? Well, yeah, it ends up costing more money. It's not just it's not just upsetting the other spouse, because candidly, sometimes in a divorce, you don't care if you've got, you know, money exact money that you spend rehashing the same crap over and over again, because you can't exactly and you know, it's cutting off your nose to spite your face this really Yes. Yeah.

Shawn Weber:

And a lot of times people do that mark, when you say not, because they're being spiteful, but because they're just deer in the headlights.

Mark Hill:

That can happen. Yes. Which is why that giving counseling, and helping people understand that it's not to their benefit, and you need resources, especially if you have a marriage of some duration, and you've acquired assets of any significance during the marriage or you have children, you probably need some assistance in getting this done and getting it done right. So that you don't either find out years from now. Yeah, you made a stupid decision. Orit takes years.

Shawn Weber:

So gentlemen, we've done it again. We've we've burned another half hour or so of the public's time. But Scott, if, if folks want to talk to you about they're overwhelmed with with all the work they've got to do on their case, what should they do?

Scott Weiner:

They should call me. My name is Scott Weiner. I'm a clinical psychologist and an attorney inactive as an attorney, but still law trained. Remember the bar, call me 619-417-5743. And I will try to assist you with the overwhelm and help you not to do the sorts of things that we were discussing today making the errors of putting your heels down when basically the process is going to move forward anyway, and get loosened up, proceed through and give it your best.

Shawn Weber:

And Mark if they need a divorce financial consultant. What should they do?

Mark Hill:

Well, normally, I would say go to my website and fill out the contact form but I just found out the contact form yesterday is not working. So please do go to my website, Pac divorce Pac di vo rc.com and check out what we do and how we operate. But if you need to contact us, you're going to have to use a phone just like Scott. I promise I will respond 858 to 574612.

Shawn Weber:

And if you want to get ahold of me to resolve any dispute that you have, whether it's a divorce or something else, we will connect you with the right mediator for the right case for the right work. And my website is Weberdispute solution.com again, that's W berdisputeresolution.com it' Weber with one B thanks for listening to another episode of the three Wiseman of divorce, money, psych and law. If you like what you heard, be sure to subscribe, leave us a review and share with others who may be in a similar place. Until next time, stay safe, healthy and focused on a positive bright future. This podcast is for informational purposes only. Every family law case is unique. So no legal, financial or mental health advice is intended during this podcast. If you need help with your specific situation, feel free to schedule a time to speak with one of us for a personal consultation.