Full Financial Disclosure: Why it Matters

Disclosure means both parties must fully and honestly share and exchange their financial information, including all assets, liabilities, including income and interests in property including those owned with a third party or in a trust. It is an essential part of the process and allows each party to properly understand what they are entitled to before entering into any agreement. If all property isn’t disclosed and covered off in an agreement there is a risk that the agreement may be overturned.

The Act states that each partner must receive independent legal advice. This means you and your partner cannot use the same lawyer or even use two lawyers in the same firm. Once agreement has been reached, one of the lawyers will prepare a draft written agreement recording the agreements reached between the parties with the assistance of their respective lawyers.

When the written agreement has been finalised, each party must sign it in the presence of their independent lawyer. Each lawyer must then witness their client’s signature and certify that they have explained the effect and implications of the agreement to their client.

A lawyer cannot properly advise on, witness, or certify, a s21 or s21A agreement unless full disclosure has been provided.

Disclosure will usually include (and be made with reference to) the following:

• Bank accounts held in your personal name or with a third party
• Bank accounts held jointly
• Mortgage statements
• Personal loans, credit cards, and other debts
• Valuations of the family home and any other property
• KiwiSaver or superannuation statements
• Shares and other investments
• Trust deeds and any related documents
• Vehicles, including cars and motorbikes
• Household chattels, including furniture and valuable items
• Income (salary, wages, or other sources)
• Business interests and financial statements
• Insurance policies
• Any other financial liabilities or obligations

Generally, lawyers will advise their client to obtain a registered valuation for the family home and any other property, as this will determine what the current market value is and provide both parties with an assurance that the sale price (if sold) or value (as recorded in a contracting out) is fair and is the then current market value. It is usually proposed that you share the cost of obtaining a valuation.

If you believe the other party has not provided full or accurate disclosure, there are options available, including applying to the Court to require them to provide the necessary information.

If an agreement is entered into without full and proper disclosure, there may be grounds for the Court to set it aside if it would cause serious injustice. Therefore, it is important to ensure all information is complete and accurate from the outset.

In short, disclosure is a key step in preparing and advising on any relationship property s21 or s21A agreement as it helps ensure that any agreements reached have been reached with the knowledge that all the relevant assets and liabilities have been taken into account.