Going through a divorce can leave you feeling as though your life has been turned inside-out — and this is especially true when it comes to your finances. Lawyers and judges are likely to scrutinize and question every aspect of your financial life, and considering they may have considerable input into your financial future, it’s important that their decision-making is based on accurate information.
The divorce Financial Affidavit is a specific legal format that standardizes the process for presenting financial information and, at least in theory, helps ensure that nothing is left undeclared. A Financial Affidavit is required of each spouse in contested (and even some uncontested) divorces, but be forewarned: The document is called different names in different states. Depending on where you live, you might file a “Case Information Statement” (New Jersey), a “Statement of Net Worth” (New York), a “Financial Declaration” (Utah), or something else entirely. Regardless, the purpose is always the same: to provide the court with a detailed, formal presentation of a divorcing couple’s current financial situation.
The Financial Affidavit sets forth precisely what you own and what you owe (assets and liabilities), and what you earn and spend (income and expenses). It seems straightforward enough, at first. But people soon realize there is much more to the process than glancing over a few canceled checks and last month’s credit card statement.
Here’s what to know about Financial Affidavits:
Much depends on where you live.
Just as the name of the document differs from state to state, the rules and regulations governing Financial Affidavits vary from state to state too. (Sometimes, there are even differences between counties in the same state!) Be sure you know what information the court in your jurisdiction requires of you, and that you have the correct forms in hand to provide it.
You must sweat the small stuff.
Financial Affidavits ask for very specific information. You will be required to itemize your every expense according to category and subcategories — from the obvious ones such as mortgages, cars and school tuitions, to things that might not immediately come to mind, such as pet sitting, manicures, and magazine subscriptions. Even an expense that seems straightforward at first — like what you spend on your car — can get fairly complex once you factor in components like the cost of your loan or lease, repair and maintenance, parking, tolls, gas, insurance, registration, etc.
Expenses that seem small can add up significantly, and errors, omissions and guesstimates could affect your temporary and permanent child support and alimony as well as the other terms of your divorce agreement. So, while sorting through months of credit card and bank statements, utility bills, insurance records, and the like to ferret out all the particulars you need for your Financial Affidavit can seem daunting (and tedious!), it is absolutely necessary. Resist the urge to “guesstimate.” Most people who guess at their financial information end up way off the mark, which can do more harm than good.
The stakes are high.
The court will rely heavily on your Financial Affidavit when deciding alimony, child support (including temporary alimony and child support), and fair division of assets, so it’s critical that the numbers you provide are accurate.
You’re both under oath.
Both spouses are required to swear, under penalty of perjury, that the information provided in the Financial Affidavit is true. That doesn’t mean that no one will ever lie or “accidentally” forget to mention income or assets, but it does mean that the court can assess penalties for doing so, including by awarding 100% of the hidden assets to the other spouse.
It’s important to note here that your Financial Affidavit can be revised. Rather than risk decisions being made on false information, you should submit an updated Financial Affidavit as soon as possible if your financial circumstances change.
Your lawyer can only be so much help.
Be aware that your attorney will probably only review your Financial Affidavit for the most glaring errors, omissions, and inconsistencies. That leaves plenty of room for inaccuracies to slip through. For example, if you state on your Financial Affidavit that you spend $1,000/month on clothes, and this doesn’t represent a widely disproportionate percentage of your income or expenses, your attorney will likely assume that it’s true, even if you meant to say $100.
Expert assistance can make all the difference.
Given today’s financially complex divorces, it is an excellent idea to consult with a divorce financial advisor, who will complete a Lifestyle Analysis and the Financial Affidavit on your behalf. (A Lifestyle Analysis identifies a couple’s spending habits and day-to-day living expenses incurred during their marriage, with an emphasis on the last few years. It includes recurring and ordinary expenses, as well as non-recurring and unusual ones. Often required by the judge, a Lifestyle Analysis serves as verification of the net worth and income and expense statements submitted by both spouses.)
A skilled divorce financial advisor can also spot signs that your soon-to-be ex-husband might be hiding assets. Hiding assets and/or income is underhanded, illegal… and distressingly common. Find an advisor who knows what to look for.
Technology can help track the details.
There are cool new tools available to help with expense tracking and budget management. Consider the online CASH™ Smartwatch budget app developed by finance guru Nicole Lapin, who wants to help women become more financially literate.
“Personal finance is not something that’s necessarily taught in school, and if you’re like me, your parents might not have talked to you about it,” Lapin told me. “So, many women today are lost, confused, scared or intimidated by money management. I saw a void in the marketplace, and I created a tool to help women better understand their personal finances.”
CASH™ helps you track expenses you might otherwise forget… cab fare on a rainy day, a bottle of water after a walk in the park, a tip for someone who helps you out. Over time, such items add up to unexplained gaps in many people’s budgets. Leaving these expenses off a Financial Affidavit would result in an inaccurate representation of what it costs to live your life.
“I am really passionate about helping women who are ready to take control of their lives and finances,” Lapin said. “It’s not as difficult or scary as you might expect — once you have the right tools.”
Using tools like this is a great way to Think Financially, Not Emotionally® — a smart strategy both during divorce and for ensuring financial security long afterwards.
Jeffrey Landers is a member of the DailyWorth Connect program. Read more about the program here.