The early stages of divorce can be emotionally trying and confusing on multiple levels, and for many women, nothing is quite as dispiriting as trying to locate and decipher the financial records required for an equitable divorce settlement. Of course, the challenge is even more difficult if you were not the one responsible for household finances during your marriage.
But, take heart. In order to achieve a successful divorce settlement agreement, you’ll need to Think Financially, Not Emotionally®, and I can start you down that path by walking you through the initial phases of the financial discovery process.
First, your lawyer will ask you to complete documents concerning your assets/liabilities and income/expenses. These forms are generically known as “Financial Affidavits,” but each state uses its own terminology to describe them. For example, in New York, a Financial Affidavit is called a Statement of Net Worth. In New Jersey, it’s known as a Case Information Statement. The courts in Utah call a Financial Affidavit a Financial Declaration and in Connecticut, it’s simply called a Financial Affidavit.
Whatever they’re called, these financial documents are critically important to the outcome of any divorce. However, most women (and their husbands for that matter) don’t know how to accurately complete them. When faced with these documents, many people will simply estimate. Others will take a guess, because they don’t have access to the information they need, or they may not know how to find and/or compute it.
But, using “guesstimation” as a strategy is completely wrong! It is critically important that Financial Affidavits are as accurate as possible. Omissions and/or errors in your figures could have a significant impact on the financial outcome of your divorce. So, as it turns out, what you really need is a Lifestyle Analysis, which will give you the numbers you need to accurately complete your Financial Affidavit. A Lifestyle Analysis identifies your spending habits as a couple, along with the day-to-day living expenses incurred during your marriage, with an emphasis on the last three to five years. It includes recurring and ordinary expenses, as well as unusual and non-recurring expenses, and it’s often required by the judge and serves as a verification of the net worth and income and expense statements submitted by both spouses.
Once your attorney has your Lifestyle Analysis and your now precisely completed Financial Affidavit in hand, he or she will hopefully be able to maximize the amount of alimony and child support you will receive and effectively argue for the most advantageous division of your assets.
As I’m sure you’re beginning to understand, compiling a complete financial dossier is no place to cut corners. Rather than wing it, please consider enlisting a divorce financial planning expert to help you prepare a comprehensive Lifestyle Analysis. Why? Because:
1. Your lawyer won’t get involved in the financial minutiae of your lifestyle. While you’re preparing your Financial Affidavit, don’t expect your attorney to meticulously comb through all your tax returns, bank account, brokerage account and credit card statements from the past few years. Absent any glaring omissions, your attorney will typically rely on the information you provide, and he/she will assume it is correct. (In fact, you will have to sign a statement on the forms attesting, under penalty of perjury, that the information you provided is correct.) In some cases, your divorce attorney or his/her paralegal may offer to assist you with a Lifestyle Analysis, but he/she is unlikely to have the expertise in divorce finances to do so as thoroughly, efficiently, or cost-effectively as a divorce financial planning expert. Even CPAs and financial advisors are unlikely to realize what analyses and projections they ought to conduct on your behalf. It’s not that these professionals aren’t competent at what they do; it’s just that divorce finance is simply not their specialty, so they haven’t had the advanced training or hands-on experience needed.