The problem in filing updated financial declarations at final hearings to approve agreements

Family Court Rule 20(a) requires “a current financial declaration” “be served and filed” “[i]n any domestic relations action in which the financial condition of a party is relevant or is an issue to be considered by the court.” A problem arises when parties negotiate an agreement involving financial issues while relying on old financial declarations, and the family court wants “a current financial declaration” at the final hearing before approving the agreement.

That problem is that the parties reached an agreement relying on the old financial declarations. For agreements involving financial issues that are modifiable in the future–basically all child support issues and some spousal support issues–a party seeking modification will need to demonstrate a change of circumstances from the updated financial declaration even though the agreement was negotiated in reliance upon the prior financial declaration. For example, if a party represented his or her monthly income at $3,000 in the most current financial declaration, but is making $4,000 by the time of the final hearing to approve the agreement, the other side must demonstrate a changed circumstance from $4,000, not $3,000 to obtain modification.

Typically, I handle this by not filing an updated financial declaration at the hearing to approve the agreement. Recently, however, a hearing judge, noting the “current” language in Rule 20, demanded both parties file updated financial declarations. Both parties did so. One party’s income had barely changed; the other party’s income was substantially increased. To modify support the first party will need to show a change of circumstances from the recent financial declaration even though support was negotiated based on a prior, lower, figure. While not an injustice in this particular case, it could clearly be an injustice in other cases.

There are two ways to address this potential injustice. One possibility is to attach directly to the agreement the child support worksheet (if one was used) to determine child support, while having language that these are the figures to be used to show a substantial change of circumstances. One could also list the income and expense figures used to set spousal support. However, often, negotiated child support is not based on the guidelines and support agreements are based on disputed financial figures. This solution won’t work in such cases.

Another option is to put directly into the agreement language making reference to the financial declarations that were used to negotiate the agreement and with additional language that “any substantial change of circumstances is based on [the referenced financial declarations].” This prevents a situation in which support is negotiated based on one set of financial disclosure, while modification is predicated on a change of circumstances from a subsequent set of financial disclosure.

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  • David DeVane

    Excellent point Greg. I like the option of attaching the Worksheet to the agreement. In cases that I mediate where support is an issue I always attach a worksheet to my mediation memorandum.

  • Greg,
    I use a bit of a hybrid approach when it comes up — recite the facts (incomes, included expenses) and resulting calculation, and then note that it’s a deviation from the Guidelines:
    “The parties acknowledge that Parent2’s child support obligation for the minor child could appropriately be set at $__ per month, pursuant to the South Carolina Child Support Guidelines, based on the following factors: Parent1’s gross income of $__ per month; Parent2’s gross income of $__ per month (which includes $__ income derived from __); credit to Parent1 for payment of the minor child’s health insurance premium of $__ per month and actual childcare expenses of $__ per month.
    In exchange for __, the child support obligation shall deviate from the amount provided by the South Carolina Child Support Guidelines. Therefore, Parent2 shall pay child support directly to Parent1 in the amount of $__ per month; these payments shall be made on the first (1st) day of each month, beginning on __. This deviation from the South Carolina Child Support Guidelines represents a __% reduction of Parent2’s child support obligation.”

    I will also sometimes include: “The negotiated deviation provided herein is not binding on the parties in any future action to modify Parent2’s child support obligation, and that term herein does not indicate that Parent2 may be entitled to such deviation if circumstances change.”

  • Good post. The Financial Declaration is probably the most dangerous legal document in the court system and almost always abused.

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