Each party in a divorce must complete a financial statement form and file with the Court to get divorced in Massachusetts – it’s required. Yet the financial statement form comes with little if any instructions. Most clients and their attorneys hate these forms because they’re time consuming and painful to complete. However, learning why the form is necessary and how it’s used may make you love (or at least not hate) the form!
7 tips for completing the family court financial statements:
- The Court financial statement form incorporates the concept of full disclosure of income, assets, expenses, and liabilities. Why? Because in divorce you are dividing or reallocating income, assets, expenses and liabilities, and can’t do so without knowing what those are. The Court financial statement form that each party completes, lays it all out there for both parties to see. This allows the Court to be sure that the parties have a shared understanding of their finances, and to determine if an agreement with respect to those finances is fair and reasonable.
- In Massachusetts, the financial statement form requires you to list income, assets, expenses and liabilities on a weekly basis. Why? I don’t know. Most of us budget on a monthly basis. However, sometimes when we think about our budget only on a monthly basis we forget about some of the little things that we do weekly. Capturing a complete financial picture is important, so don’t get stuck on the form being weekly vs monthly. It is easy to convert – just multiply any monthly figures by 12 and divide by 52. Easy.
- Some people are good at finances, and some are not- it is not a function of intelligence or degrees. There are clients with Ph.Ds. or who have high level jobs who have trouble doing their financial statements. Clients have difficulty completing the financial statement form because they may not have taken care of the finances in the family, they may lack experience around finances, or there may not have been transparency about finances so there was not full disclosure during the marriage. There can be many reasons why it is easier for one person to complete the form than the other. Some clients, especially if there is a business involved, might even need their CPA to help them complete the form. Because these documents are very important in reaching resolution by agreement or at trial, you need to spend the time to get it right. Work on the form when you can concentrate and are not interrupted, and after gathering all the information and documentation you need to complete the form. Get assistance from your attorney, financial professional, friend, family member, or even your spouse to help you complete the financial statement.
- Financial statements are “works in progress;” it can take time to complete them and complete them accurately. So, don’t despair! You may not get it all right on the first pass. Make sure, however, that it is complete and accurate when you file the form with the Court; the financial statements are signed under the pains and penalties of perjury.
- Financial statements are incredibly useful tools to create budgets for both parties and to help explore options for settlement. Most of us spend little time in our ordinary lives thinking about budgets and really doing the math. The financial statement required by the Court forces one to do that and can be eye opening. How much do you really have to earn to meet your expenses after taxes and before paying or receiving support? What are your priorities for you and your family, and how do you maintain those post-divorce? Do you need to review those priorities because your financial picture will look different post-divorce? Seeing the math in black and white on the financial statement form helps clients really think about how best to divide and reallocate their financial resources in divorce.
- When completing a financial statement, make sure your asset values are current. What professionals, if any, do you need to make sure the values are accurate? Real estate appraiser? Mortgage broker? Business valuator? Pension expert? Tax advisor? Financial planner? Use professional resources available to ensure you have the most up to date and accurate information.
- Financial statements are critical tools for helping clients think creatively about solutions in divorce that work for them and their family. They help give an accurate picture of the parties’ finances in divorce, and they can help parties decide: whether to keep the house or not; what expenses may have to be modified upon divorce; the need for financial planning and budgeting or asset management; or the effect of divorce on retirement planning or a family business. Financial statements also help the attorney to draft the divorce agreement if settlement is reached, as the parties’ finances are captured in a concise way on the documents.
So, what is there to hate about court financial statements? They take time, they are not always easy to fill out, they can make you feel stupid, and they can create anxiety when you look at them and start to realize the implications of divorce on family finances. But what can you love about them? They help you understand your true financial picture, they can be used to create budgets and open up options you may not have even considered when discussing settlement, they level the playing field by making sure the finances of both parties are on the table, and at the end of the day help you work with your attorney to find the best settlement options for you, and help you understand how to move forward when making transitions in divorce, because you know where you are starting from. The forms are also required- so complaining about them doesn’t help but getting them done accurately does.
Rather than fighting financial statements, put a little heart into them. Think about working with your financial statement as another tool in the divorce process; it will benefit you in the end!