How to Prepare a Financial Statement under the Family Law Rules

This How-To Brief outlines the steps to take when preparing a financial statement.

1Determine which financial statement form is required

  • Form 13 (Support Claims) Family Law Rules (Forms):
    • when making or responding to a claim for support, but not making or responding to a claim for property or exclusive possession of the matrimonial home or its contents
    • always in the Ontario Court of Justice
  • Form 13.1 (Property and Support Claims) Family Law Rules (Forms):
    • when making or responding to a claim for property or exclusive possession of the matrimonial home and its contents, whether or not a claim for support is included
    • always in the Superior Court of Justice
    • Divorcemate offers a blank Form 13.1 Financial Statement with instructions which can be sent to the client for the client’s initial draft.
  • See the link to the above-listed Family Law Rules forms in the Resources section of this How-To Brief

2Calculate income and expenses - Parts 1 - 3

Income and Benefits

  • Set out income for a specific (current) time period.
  • If self-employed, may be appropriate to use last year's income with explanation.
  • If wage-earner, use present or future income.
  • Include every source of income whether taxable or non-taxable (e.g., gifts lottery winnings, investment income (interest, dividends, capital gains), employment insurance, pension, CPP, OAS, RRSP withdrawals).
  • If necessary, note and complete "Schedule A" to the Financial Statement form: "Additional Income Sources"
  • Note hybrid income - both income and capital such as stock options; treat this income as Canada Revenue Agency would.
  • Other benefits are to be included in income such as a company car, health/life/disability insurance benefits, sports/gym/club memberships.

Expenses

  • Set out expenses for a specific period.
  • Ideal to use the last 12 months of cohabitation if reflective of current situation.
  • May have to use two expense calculations: one for the intact family and one for the family since separation (can use Proposed Budget area of form).
  • Note any expenses that the other party still pays (include it and then provide an explanation).
  • Do not exaggerate the expenses, strive for accuracy and completeness.
  • List expenses that are not separately described/categorized on the form in the appropriate column.
  • Retain receipts in an orderly fashion for questioning and proof.
  • See link to Sample Document 1 in the Resources section of this How-To Brief, which lists examples of specific expenses.

Other Income Earners in the Home

  • Must be completed in full if making or responding to a claim for spousal support or "undue hardship"

3Calculate property and debts - Parts 4 - 5

  • Review Part I of the Family Law Act and in particular, section 4.
  • Gather and compile in a disclosure brief the supporting documents for as many of the listed assets and debts as possible.

Property (Part 4)

  • Note the dates set out in the financial statement:
    • Date of Marriage,
    • Valuation Date (most often the date of separation)
    • Statement Date (the date the financial statement is being completed).
  • Clarify each of these dates in the statement; ensure consistency with the pleading (Application or Answer, as the case may be).
  • List only the property owned (as opposed to "used" or "possessed") by the client on the applicable dates.
  • Show 50% interest and value for jointly-owned assets as “joint @50%”
  • Note whether or not the joint tenancy for jointly-owned assets is intended to be severed.
  • Use market value, not purchase price or replacement value.

Debts and Other Liabilities (Part 5)

  • List only debts owed by client on the applicable dates.
  • List one-half value of the debts owed jointly as “joint @50%”
  • Include contingent or future debts, such as deferred personal taxes, capital gains tax and costs of disposition.
  • Consider appropriate discounts, e.g., net present value, minority share
  • Include debts to parents, friends and other relatives.

4Calculate property and debts at date of marriage (Part 6)

  • List all property owned and debts owed on the date of marriage.
  • Gather and compile in a disclosure brief the corresponding supporting documents / evidence.
  • Note: A home owned on the date of marriage, which is a matrimonial home on the valuation date, does not entitle the owner to a "deduction" from net family property on the date of marriage. Any associated mortgage debt is omitted, too. [Review s. 5 of the Family Law Act].

5Calculate excluded property (Part 7)

  • Review s. 4(2) of the Family Law Act.
  • Include inheritances and gifts acquired after the date of marriage from third parties.
  • Also include insurance proceeds, damages for personal injuries.
  • List property that can be traced clearly.
  • Note: Excluded property is included elsewhere in the financial statement and in this category as well. The values would be the same in each.

6Disposal of property (Part 8)

  • Disclose all property by category that was disposed of in the two years prior to the making of the Financial Statement or during the marriage (whichever is shorter).

7Calculate child budget

  • There may be some situations where a child expense budget is required. For example, if the child is over 18 years of age, in "shared custody" situations under section 9 of the Child Support Guidelines, or in relation to claims for special or extraordinary "section 7" expenses.
  • List the expenses that are clearly child-related.
  • List the differences in those expenses where higher amounts are directly attributable to the children.

8Attachments to the financial statement

  • The financial statement will not be accepted for filing in the court office (Rule 13(7) of the Family Law Rules) unless:
    • copies of the client's notices of assessment for the previous three taxation years are attached, or
    • the financial statement contains a sworn statement that the client is not required to file an income tax return pursuant to the Indian Act.
    • If a client did not file tax returns and/or does not have Notices of Assessment for the last three years, contact the CRA at 1-800-959-8281 for a copy of an Income and Deduction printout.
  • Recent pay stub, pension stub, Employment Insurance stub, Worker's Compensation stub or proof of any other sources of income (Rule 13(6) of the Family Law Rules) should be attached.
  • Income tax returns attached to the financial statement must be served on the other party(ies), but need not be filed in the Continuing Record unless the court orders otherwise (Rule 13(7.1) of the Family Law Rules).
  • (See the link to the above-listed Family Law Rules form in the Resources section of this How-To Brief)

9Ongoing financial disclosure: updating the financial statement

  • The Family Law Rules require the financial statement to be updated and corrected from time to time (see chart in "Guide to Procedures in Family Court", in the Resources section of this How-To Brief).
  • If the financial statement is more than 30 days old, you must serve a new financial statement or Affidavit indicating that there is no change in the financial statement or that the change is minor, and detail change - Family Law Rules Form 14A, Affidavit.
  • Correcting information: you must also serve a new financial statement to correct or complete information or, serve Affidavit (Family Law Rules, Form 14A) if changes are minor.
  • (See the link to the above-listed Family Law Rules form in the Resources section of this How-To Brief)

Resources

Statutes and Rules

Case law

  • Bhoi v. Bhoi 23 R.F.L. (5th) 255 (Ont. S.C.J.)
  • A lawyer representing a family law client must ask the client pertinent questions, identify ambiguities and seek clarification of financial information and then relay the information to the court.
  • Buttrum v. Buttrum 15 R.F.L. (5th) 250 (Ont. S.C.J.)
  • A family lawyer must supervise the client’s completion of the financial statement
  • The lawyer must ask the client pertinent questions so as to ensure that the disclosure is accurate and complete