In a divorce case – whether in court or not – the parties, the attorneys and the court must know the incomes and assets of both spouses. They need to know what assets exist and how much they are worth. This is because marital assets – those obtained during the marriage – must be divided equitably. It’s in the interest of both parties to be as thorough as possible.
Many people do not have a basic understanding of their family’s finances, so when their marriage deteriorates or breaks up they are lost, without direction. Every person must understand his or her financial situation in order to move forward if the marriage ends.
What exactly needs to happen at this stage? Here are some action steps:
Obtain copies of income tax returns for at least the prior five years.This is recommended because the best way to determine prior income is to review prior tax returns. Generally five years of returns are reviewed as income may vary from year to year, especially when business interests are involved.
Obtain copies of all bank, brokerage and other investment statements for the prior three years. Review them carefully to ascertain where assets are held and where money has been spent – for example, on unknown items or in unusually high amounts – or whether money has been withdrawn from the accounts. In the divorce process, generally three years of data are reviewed but it may be necessary to review more.
It is important to discover marital debts. If one spouse has incurred a debt for which the other may be liable, that information is taken into account when dividing the marital estate. Include basic budgeting information such as costs for fuel, electricity, medical, dental, etc. (If you keep a spreadsheet or other record of these expenses you already have this information. If not, you should get accounts statements for the prior twelve months from your providers.) These figures are useful in budgeting for life post-divorce.
List names and addresses of all postal mail and email received from unknown sources. A review of incoming postal mail and emails will often reveal previously unknown debts, sources of income or assets that require investigation.
Learn what your Social Security benefits are or will be. Do the same for any other retirement benefits that you have or your spouse has, such as benefits from current and prior employers. These benefits will be part of planning for life post-divorce.
Inventory the family’s non-monetary assets and take pictures of everything in the residence, even down to contents of the closets. Assets have a way of disappearing before or during the divorce process and it can be difficult to remember what was once there or prove that something is missing. Taking an inventory of the assets and photos or videos of them can provide proof. (This can also be useful for insurance purposes whether or not there is a divorce.) The inventory and images should be kept in a safe place away from the residence. Keeping them in a car is not wise.
Finally, if you’re currently not employed, explore what your job opportunities might be should it become necessary to gain employment. If you haven’t been in the workforce for a while, start with online job boards such as Indeed.com.
Consult with a financial advisor and with an attorney skilled in matrimonial matters. These professionals will help you identify any other areas that should be explored in order to understand and document your financial situation.
The goal of all this is: Be prepared!
By Leonard Klein, Esq.
