Financial Disclosures: Accuracy and Timeliness Pay Off
Did you know that more than two in five Americans admit to having deceived their spouse about money? That three out of four people who admitted to the behavior say that it has affected their relationship? That 12 percent say it led to divorce? The numbers, which the National Endowment for Financial Education published earlier this year, sound staggering. Yet, as an attorney involved in business and family law litigation, I am not surprised.
In my practice, I frequently come across situations where people fail to disclose details about their financial situation. They often end up in costly and emotionally taxing family law or business disputes. That can be a spouse, parent or child refusing to be candid about assets, income and debts. Or it can be a director or officer of a corporation withholding information about business finances.
Unfortunately, what many people don’t realize is that a lack of candor can be more than immoral; it can be illegal. For directors and officers, the failure to disclose certain financial information can lead to allegations of unfair business practices and violations of the California Business & Professions Code or the California Corporations Code. It can even entail claims of fraud.
Time and again, I have seen these directors and officers realize too late that their secrecy cost them dearly and that it damaged their reputation. They would have been better off making timely and accurate disclosures as part of a well prepared strategy that includes business succession and tax planning.
In situations where a spouse or partner fails to be candid about money matters it’s usually because he or she wants to keep an asset out of the community property. Like the officers and directors above, they would have benefitted from thinking proactively. A prenuptial agreement could have secured them the protection they desired for their assets.
So what’s the bottom line? Making accurate and timely disclosures to business associates and family members is important, to say the least.