The decision to get a divorce is one of, if not the most, agonizing decisions you will ever have to make. It will affect every aspect of your life and should not be taken lightly. The considerations involved are complex and will have consequences for years to come, even longer if you have children. Along with the hurt and self-doubt you will likely feel due to the end of a once happy relationship, you may also be confronted with the overwhelming realization that your life, for the foreseeable future, is about to be turned upside down.
The stress of even acknowledging that there will be a divorce can paralyze a person and prevent them from taking the necessary steps to gather as much information as they can, as soon as possible. While such a reaction is understandable, the faster you are able to gather critical information, the better position you will be in to negotiate a settlement or take the case to trial.
What becomes clear in any divorce is that, if you are not the person who handles all of the finances in the marriage, then you are left to rely on your spouse’s truthfulness when it comes time to divide the marital assets. This is a recipe for disaster.
Knowing all of your marriage’s financial assets, as soon as possible, is critical.
Traditionally, spouses split duties in their marriage. One person might take on the role of primary caregiver to the children while the other assumes more of the financial responsibilities. Although this division may have made things easier in your day-to-day lives, when it comes time to divorce and divide their marital assets, one party is at a distinct disadvantage. If you don’t know all of the marital finances, not only could you be short-changing yourself and your children, but the process can also take longer and be more expensive.
All too often a prospective client will come in for a consultation and when the conversation turns to marital assets and spousal income, they are unable to present an accurate financial picture of the marriage or account for all of the marital assets. By this stage, it may be extremely difficult to get an accurate accounting because their spouse has already started preparing for the divorce action.
Additionally, at some point in a divorce litigation, you and your spouse will each fill out your own separate Net Worth Statements that list your assets, your expenses, and your ongoing income. In many divorces, a party will attempt to reduce or hide their income and increase and overstate their expenses on the Net Worth Statement. If this is your first notion of the family finances, you may be unable to challenge their assertions. Even in a healthy relationship, neither spouse should be less than fully informed on, at least, the basic assets, income, and expenses of the marriage.
So how and, more importantly, when should you start gathering financial information?
Gathering Financial Information and List of Assets
Well, the first step is to gather as much financial information as possible. Ideally this would occur prior to your having the initial conversation with your spouse about getting a divorce. However, if that time has passed, or if your spouse is the one who brought up the topic of divorce, you should start gathering that information as soon as possible.
Now, you’re probably sitting there saying to yourself, “Ok, but what type of financial information should I be looking for?” The short answer is everything that could be a marital asset. That doesn’t fully answer your question, though, does it? The real answer rests on your particular financial situation. Why? Because every marriage is different. If you and your spouse have fixed incomes, no children, rent an apartment or home, and your only major assets are your vehicles, then there may not be much to gather. On the other hand, if your spouse is self-employed (for example, as a contractor or the owner of a pizzeria), they may have squirreled away a considerable amount of cash in a safe or even under a mattress (yes, people really do that!). If you don’t know the approximate amount your spouse actually makes or where they hide their unreported assets, you could be depriving yourself and your children of a substantial amount of spousal maintenance and/or child support.
Below are only some of the types of information you should be collecting or looking for.
- Last 5 years of tax returns
Tax returns, if accurate, provide the most information to properly calculate spousal maintenance and are required by the court if the parties cannot reach a settlement prior to seeking judicial intervention. It’s also important to understand that by signing your joint tax return, there is a presumption that you are aware of its contents. By gathering the last 5 filings, you can determine if there has been a steady increase in salary, which can play an important role in negotiations or, where a recent salary is not in line with that of previous years, can be used to impute a higher prospective salary for the purposes of maintenance and child support.
- Your spouse’s current income
This includes last year’s W-2s, 1099s, or K-1s, plus a recent pay stub. These records will provide what deductions are currently being taken out and show if there have been any significant increases in income in the previous year. Like tax returns, the court will require that these documents also be disclosed.
If your spouse is self-employed, then you should be familiar with their company and how it accepts payment. Cash, PayPal, Venmo, Bitcoin, and other nontraditional forms of payment are, in this day and age, places that your spouse may hide income. At the very least, knowing how they collect payment and what they charge for their goods or services can provide your attorney with a good starting point to look into during discovery.
- Checking and Savings Accounts
Do you know all of your and your spouse’s accounts and their current balances? Unless an account contains funds that were strictly obtained from an inheritance or personal injury award, there’s a good chance that some, if not all, of those funds are considered marital funds, and you’re most likely entitled to some portion of them.
- Pension Plans, 401K, and Deferred Compensation
If during the course of the marriage your spouse acquired or contributed to a Pension, 401K, or Deferred Compensation Plan, then some portion is considered a marital asset and is subject to equitable distribution. You should know whether your spouse has any such assets and an approximate balance. Your attorney will explain the formula for dividing these retirement benefits.
Like pensions and 401Ks, if these assets were acquired during the marriage, it’s more than likely that some portion of them is a marital asset. Get the name of the stocks, the date they were acquired, their present value, find out where they are held, and any other identifiable information.
- Separate Property (Inheritance/Personal Injury Award)
While separate property is normally not considered a marital asset, like most things in life, there are exceptions. For instance, if your spouse inherited a vacation home after one of their parents passed away, that would typically be considered your spouse’s separate property and would not be included as a marital asset. However, if during the marriage your spouse used marital funds to renovate the vacation home and increased its value, you may be entitled to a portion of that additional worth. Make a list of any property that your spouse may claim as separate property, where it is located, and what improvements, if any, were made during the marriage.
- Motor Vehicles/ATVs/Motorcycles/Boats
If obtained while you were married, cars, ATVs, snowmobiles, boats, and other recreational equipment are martial assets, regardless of who primarily uses them. Try to ascertain the make, model, mileage, condition, and amount of any balance owed so your attorney can assign an approximate value.
- Other Marital Property
Another marital asset that people often overlook in a divorce are items purchased by their spouse strictly for their own use and enjoyment. If the item was purchased during the marriage with marital funds, it is a marital asset. These items can be very valuable. If, for instance, over the course of a 10-year marriage your spouse accumulated a collection of rare baseball cards, that is a marital asset subject to equitable distribution. Other commonly overlooked items are tools, jewelry, firearms, sport collectables, and antiques.
If you don’t know the current value of a particular item, that’s ok. Take pictures and write down all of the information you can find so your attorney can help you assess it’s worth. Even if you don’t want the item, knowing its value will give you leverage in negotiating a settlement. For example, if your spouse has a tool collection that is worth $15,000, you now have leverage to negotiate for something else you may want, say, the living room and dining room furniture. Without knowing the value of the tool collection or just assuming it’s theirs could cost you getting something else you want.
While not an exhaustive list of marital assets, gathering as much information from the categories above, even before you broach the subject of divorce with your spouse, will give you a number of advantages going forward. First, it will allow you to have a meaningful conversation with your spouse and know if they are telling you the truth. Second, it will give your attorney vital information they need to assess your case and lay out a comprehensive strategy to achieve your goals. Third, knowing exactly what you’re entitled to puts you in a better position to begin planning for your future after the marriage. Finally, and most importantly, it will give you a sense of balance, which is critical at a time when emotions are high and you are facing a multitude of important choices that will affect the rest of your and your children’s, lives.