According to the Women’s Institute for Financial Education, each year, nearly 2.8 million men and women go through the emotional and financial trauma of divorce. And, financial survival is one of the most common concerns.
One of the biggest mistakes divorcing couples make is being in the dark about their finances. If one spouse in the marriage has historically been the financial decision maker and records keeper, he/she may have an unfair advantage when it comes time to settle the financial issues in a divorce. Though it’s underhanded and illegal, sometimes a spouse may try to move or hide assets without his or her partner’s knowledge. He or she may try to hide cash in a safety deposit box, under-report income or over-report expenses and/or hand off property to family and friends with the intention of getting it back once the divorce settlement is finalized. If any of these activities are suspected, it’s critical to engage a qualified forensic accountant and Certified Fraud Examiner to investigate the financial trail and assist with financial fraud detection. In fact, the use of forensic accounting in divorce proceedings is becoming increasingly more common.
For couples heading toward the divorce process, my most important piece of advice is to take stock of your financial situation and start gathering and making copies of your documents and records before the process even begins.
The courts require each spouse to file a financial affidavit — a formal document detailing these common financial factors included in a marriage: income, expenses, assets, and debts and liabilities, etc. This document provides the courts with an overview of a couple’s current financial situation, and is necessary for the final divorce settlement agreement, as it is also used to determine alimony, child support and division of property.
Below is a financial checklist of items to consider that will be a great asset to your legal counsel in a divorce settlement.
Financial Checklist for Divorce
- Account for the contents of any safe deposit boxes you may have.
- Obtain current income information since your last tax return, such as payroll stubs, investment properties, rental/lease agreements, dividends, interest, royalties, etc.
- Review any retirement plans and insurance policies.
- Include statements from loans, investments and checking and savings accounts.
- Look at credit card statements and income tax returns within the past five years.
- Review brokerage statements from all accounts of securities and/or commodities dealers or mutual funds.
- Do you have any business financial statements? These include a net worth statement (balance sheet or list of assets and liabilities) and an income statement (cash flow or income and expense statement). Having copies of your spouse’s business records could lead you to uncover hidden assets.
- Obtain any statements related to pensions, money purchase plans, profit-sharing or employee stock options.
- If you have any outstanding debts, you’ll need to produce documentation. Such items can include mortgages, personal loans, credit cards, promissory notes and lawsuits pending or previously filed in court.
- Make a list of all personal property owned prior to your marriage as well as acquired during the marriage by gift and/or inheritance.
- Include appraisals of any assets you’ve owned within the past five years.
- Review employment records during the term of the marriage to show evidence of wages, salaries, bonuses, commissions, raises, promotions, expense accounts, and other benefits or deductions.
While you’re reviewing your financial documents and statements, it’s also wise to assess your current credit and request a copy of your credit report. It’s critical to protect your credit score during a divorce. Review any debts you have and monitor debts that your spouse has access to, such as credit cards, bank loans, mortgages and home equity lines of credit. Consider signing up for a credit monitoring service to alert you if there is a change to your credit history. The health of your financial future and post-divorce finances are not to be taken lightly.
You’ll want to rely on a trusted team of financial and legal professionals to guide you through the lengthy and complex process of divorce. A family law attorney and forensic accountant can work together to ensure that all the legal and financial details are in place and nothing is overlooked.
Do your homework and retain an experienced family law attorney and forensic accountant with proven track records of success to help.
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If you need any additional information or have questions, contact Withum’s team of professionals.
