What Financial Disclosures Does Colorado Require?
Colorado has mandatory financial disclosures, also known as “Colo. R. Civ. P. 16.2 Disclosures,” in reference to the section of the Colorado Rules of Civil Procedure which requires them. Both parties must provide the disclosures in every case involving a dissolution of marriage (or legal separation or annulment), as well as in a post-decree case where finances are at issue.
The financial disclosures “level the playing field” in cases where one spouse may be somewhat in the dark about the couple’s finances, and gives each attorney the necessary documentation to represent the client, as well as giving the judge the necessary facts upon which orders can be based.
There are two components to the mandatory financial disclosures:
- The Sworn Financial Statement (and supporting asset schedules), which provide an itemization of the person’s income, expenses, assets & debts.
- The underlying financial documents to corroborate the financial statement, such as pay stubs, tax returns, bank & credit card statements, etc. For a complete list of required disclosures, see Form 35.1 to the Colorado Rules of Civil Procedure.
These disclosures are due in all cases, without even waiting for a request. For a complete discussion of the mandatory disclosures, see the all-new Sworn Financial Statement in a Divorce article in the Colorado Family Law Guide.
We Agree On Everything – Do We Still Have To Exchange Financial Disclosures?
Yes. Even in cases where both spouses agree on everything, they are still required to provide each other the full financial disclosures, and to file a sworn financial statement with the court. It may seem crazy, and it’s true, it does create extra work for the parties, and extra costs paying lawyers to do all of this.
But there is a method to the madness – even when there is an agreement, the Court is still required to make sure it’s fair (in the case of a separation agreement), or that the children are receiving adequate child support per the Colorado Child Support Guidelines. The judge cannot do this without financial disclosures.
The disclosures will almost certainly be subject to less scrutiny when there is a complete agreement – you will not have an opposing counsel in court cross-examining you about every possible discrepancy in your expenses, for example. So while you may be able to cut corners a bit and not worry as much about the accuracy of your expense estimates, you still need to provide the documents.
What Happens If We Do Not Provide Financial Disclosures?
The failure to provide the mandatory financial disclosures results in courts setting aside agreements that the parties had reached.
- Divorce. The Colorado Court of Appeals upheld the trial court’s setting aside of a separation agreement when the trial court found the disclosures were not provided. Seely.1In re Marriage of Seely, 689 P.2d 1154 (Colo. 1984).
- Child Support. A post-decree child support modification was set aside to a lack of disclosures, even though all the trial court did was accept the child support agreement the parties had signed. Smith.2In re: Marriage of Smith, 928 P.2d 828, 831 (Colo.App. 1996).
Finally, merely offering the other party the opportunity to review the mandatory disclosures, without actually providing them does not comply with the rule. In Hunt,3In re: the Marriage of Hunt, 2015 COA 58. the parties signed an agreement stating that the value of the business set aside to the husband was $250,000. The agreement further provided:
“Neither attorney is offering or endorsing valuation of the business and each party has had the opportunity to perform any due diligence with regard to the value of the business as they so desire.”
After signing the agreement, but before the dissolution hearing, the wife got smart and requested discovery, learning that the business was actually worth between 3-10x more than the $250K agreed value. Nonetheless, the trial judge adopted the agreement over her objection. The Court of Appeals reversed, finding that merely making available the mandatory disclosures was not sufficient – they actually have to be provided.
The takeaway? Mandatory means mandatory! The client should work with his/her attorney and provide financial disclosures in all cases, even when there are agreements. Be patient – we’re not trying to run up the bills, but trying to prevent the agreements being set aside in the future.
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