Everyone, all my divorced friends and even my lawyer, keep talking about financial affidavits. And frankly they sound intimidating.
What are they and why are they important for the divorce process? In many states, one of the few mandatory requirements for obtaining a divorce is filing a Financial Affidavit, sometimes referred to as a Financial Statement or Statement of Assets. Financial Affidavit forms are divided into four major sections: income, expenses, liabilities and assets. Both parties have to fill out the form independently–it's purpose is to get a realistic snapshot of your current financial situation and a good way to get "all the cards on the table."
Why is it called an affidavit? It's called an affidavit because you are actually swearing to its validity; so hiding assets or "forgetting" savings accounts is a dangerous game to play. Conversely, do not spend hours filling out the expenses category, determining exact figures for electricity costs. Is it $83.23 per week that you spend on electricity or is it $80.20? That is not the intent of the document.
There are Financial Affidavit templates on the court website but my lawyer wants me to use his personal format. What do I do? The website supported affidavits are court approved so they are adequate as far as your requirements for the court are concerned. However, there are a lot of reasons to use a more expansive affidavit. A complicated financial picture is better presented on a more detailed Financial Affidavit, the more information available the better. It is really valuable (but not mandatory) to use the same format as your spouse so that you can easily compare apples to apples. And filling out a Financial Affidavit can be a very valuable learning tool. Many people, believe it or not, have no clear cut idea of what they spend or where their money is invested. The Financial Affidavit helps to visualize "where" you, and your spouse, truly are financially.
Tips & Tactics: It truly is possible for you to fill out whichever form you choose to use. In fact, if you are looking to save money on attorney fees, this is the place to do it . After all, you are the person providing the information to plug into the Financial Affidavit form. And attorneys can literally spend hours filling in your Financial Affidavit.
1. Don't let this task overwhelm you. Take a few items a day and fill them in. This seems ridiculous, but when you are in the midst of a gut-wrenching divorce, figuring out just how much you spend a month on car tolls or exactly how much is in your IRA can be overwhelming.
2. Look at this as a fact-finding mission rather than an invasion of privacy (yes, the court will be seeing that you spend $300 a month on massages/pedicures, but they really don't care.)
3. Don't go overboard with details in the expense section, but do in the asset section. If you leave out the dog walker expense, that's ok. If you estimate or even forget to put in the $4,200 old 401(k)–this will be a problem.
4. Remember, your Financial Affidavit is for your information; only include your sole and joint accounts. Expenses should include whatever it costs to live your life, whether or not you actually pay the mortgage or phone bill, etc. If you receive temporary support, that is income; if you pay it, that's an expense. If you share the children's expenses, state the full amount and then show your 50% of those expenses.
5. Unless you are a bazillionaire, you don't need to hire a financial planner to fill this out (or unless you have a particular phobia about money issues and you just would rather pay someone else to figure out this portion of your life.) In fact, if you are looking to save money on attorney's fees, this is the place to do it. After all you are the person providing the information to plug into the Financial Affidavit form. And attorneys can literally spend hours filling in your Financial Affidavit.
6. Try to come up with an agreement on what the house is worth and both use the same figure; the mortgage balance is a finite amount and will be used to come up with the equity amount you have in the house. If you have a disagreement about the value of the house, you will need an appraisal done; sometimes an unnecessary expense, sometimes a valuable tool.
7. Remember, joint assets are considered 50 - 50 only for the purpose of the Financial Affidavit. It is not the percentage that you will necessarily settle upon. For example, the listings will look like this:
*Joint checking account: $6,000 Plaintiff's 50% interest: $3,000.
*House: $720,000 -$600,000 mortgage = $120,000 equity Plaintiff's 50% interest: $60,000
It may end up (in the distribution of assets that you agree upon) that you keep the entire checking account or that your spouse gets a bigger portion of the house, etc. The 50-50 proportion is just for assumption purposes, again for the judge to compare apples to apples; it is NOT a settlement statement.
8. Accounts for children in your name (UTMAs, college funds, UGTMAs) are listed on the custodian's (your) Financial Affidavit but are not added into the Asset total.
9. Since it is an affidavit, it must be sworn to. Your attorney (as a commissioner of the court) can notarize your signature; or if pro se, go to your bank officer, friendly paralegal, etc.
10. You will also see your spouse's Financial Affidavit. Again, if you are looking to cut expenses, make clear to your attorney that you will be the one to review your spouse's Financial Affidavit and that you don't need your attorney to review the other side's document for hours and then decipher it for you. If you are uncomfortable with facts and figures use a financial professional or accountant to review your spouse's Financial Affidavit. They are less expensive and more educated on facts and figures than a divorce lawyer.
FYI- If, for example, you both turn in Financial Affidavits that show one party with assets of $2.5 million while the other only has $150,000 and your Separation Agreement does not call for any "even-ing out" of these assets, a judge (at your uncontested hearing aka divorce hearing) can question the fairness of the settlement and will often take testimony from the parties to make sure of each party's due diligence.
If the judge is not "satisfied," he/she can actually refuse to divorce you. After all, divorcing in an equitable distribution state–means the division of assets & liabilities should be fair not equal. If the court doesn't consider the settlement fair based upon the Financial Affidavits, then the judge can exercise his/her authority and make you go back and renegotiate.
That being said, Financial Affidavits can also be just given a cursory glance. So you will see, that all that time spent worrying about whether you portrayed to the penny how you've spent your money or that the judge will question how much you spend on your child's Math Tutor, is really in vain.