There is a specific legal format for presenting financial information in divorce court so that it is presented uniformly. In most divorce cases, you and your spouse will have to prepare and file a “Financial Affidavit”. (Note: Financial Affidavits are called different things in different states. For example, in New Jersey, it’s called a “Case Information Statement (CIS)”, in Utah it’s a “Financial Declaration”, and in New York it’s called a “Statement of Net Worth.”) In New Hanover County, NC where I live it is called a Financial Standing Affidavit. The form varies between states and sometimes between counties within a state but in general they cover the same financial information.
Completing a divorce Financial Affidavit correctly is critical. Most attorneys hate math, and the financial aspects of your divorce are their least favorite. After all, they went to school to become legal experts, not financial experts. That’s why you should consult with a Certified Divorce Financial Analyst (CDFA) who will work with you to complete a Financial Affidavit on your behalf. The Financial Affidavit is the backbone of your case and it’s important to get it right because so much rides on the accuracy of the information you provide. You must be able to identify your assets and liabilities and what you earn and spend (a budget). Your spouse’s attorney and the judge will scrutinize and question you on these financial facts so you must be able to substantiate them. You need to have proof of your past earnings and/or spending to show a pattern and prove your lifestyle. Temporary and permanent spousal support and division of assets and debts all rely heavily on the contents of your Financial Affidavit.
Both spouses are required to swear, under penalty of perjury, that the information in their Financial Affidavits is true. Of course that doesn’t stop people from purposely or “accidentally” omitting all of their income and/or assets. But courts can impose severe penalties for lying, including awarding 100% of the hidden assets to your spouse.
Getting help to get it right is important.
Your attorney may only review your Financial Affidavit for the most obvious kinds of errors, omissions and inconsistencies and he or she is not likely to go through it with a fine-tooth comb. Some attorneys encourage you to ask for unreasonable amounts, creating an adversarial situation, protracted negotiations and high legal fees. Padding your budget can make you lose credibility in the eyes of the court and make everything you list look questionable. Omitting items can have a long term effect on your ability to cover your expenses. Little expenses that you might not immediately think of can add up, and these can be revealed with a thorough look at your bank accounts and credit card statements.
For affluent couples, a Lifestyle Analysis should be prepared to identify a couple’s spending habits and day-to-day living expenses incurred during the last few years of their marriage. In cases of high-income families, where the parents’ combined adjusted gross income is more than $30,000 per month ($360,000 per year), the supporting parent’s basic child support obligation cannot be determined by using the child support schedule. In those cases, it’s especially important to identify what is spent on the children. A Lifestyle Analysis serves as verification of the net worth and income and expense statements submitted by both spouses.
In working with you on your financial documentation, a skilled CDFA can look for hidden assets and/or income, which is very common with business owners and highly compensated.
So while analyzing your assets, debts, income and expenses is tedious and something you might want to avoid during this very stressful period, guessing and winging it will have long term affects. Working with a CDFA can even be cost neutral, getting you as much or more back in support you otherwise would not have asked for had you prepare this critical document on your own.