How to Prepare for divorce tip #3: Account for the Family Finances

In this third of a series of “How to Prepare for Divorce” Tips, I recommend that you begin gathering information about your families finances.  One of the primary functions of the divorce process is to make a division of the assets and debts of the marriage. In order to get a fair division, you must know what there is to divide. This is a three-step process:

A.    Determine what you own.

Many of the assets of the marriage will be obvious – the home in which you reside, financial accounts, vehicles, recreational vehicles, etc.  Others may not be so obvious – these include things like artwork, bearer bonds, deferred compensation, pensions, proceeds from a pending lawsuit, etc.  There is also the possibility that your spouse is hiding assets (this is more likely if they are the ones initiating the divorce and it is a surprise to you, or if divorce has been discussed by the two of you previously).

Review all possible assets. Where possible, attempt to gather documentation regarding each asset or account. Remember to look for or obtain recent appraisals of real estate that you or your spouse own.

Any information that you are able to gather will save you a lot of money in legal fees. If there are documents you are not able to obtain, your lawyer may have to get them through the discovery process.  (If you have read about collaborative divorce, and I recommend you do – then you and your spouse must disclose everything to the other, thus eliminating the need to go through formal discovery).

B.    Determine what you owe.

Just as you need to determine what you own, you will also need to make a determination of all of the debts that you or your spouse have incurred during the marriage (without respect to the name in which it was incurred).  The Final Judgment of Divorce, and/or Property Settlement Agreement will need to address who is responsible for this debt – whether it is in your name, your spouse’s name, or joint names.  I recommend that each of my clients obtain a copy of their credit report, so that you know of all of the debt that is in your name. It is not unusual for a spouse to have incurred debt in the other spouse’s name without their knowledge. If that has happened, you need to know this as soon as possible.

Once you see what debt exists, obtain copies of the statements on these accounts to determine the balances. You may also need the statements if your spouse has made large or inappropriate purchases on the cards.
If you cannot find credit card statements on each of the accounts, contact the credit card company directly and request they send them to you. I recommend checking their websites because you might be able to make the request online. In the event you commence with litigation, you must produce these statements to your spouse – therefore, I recommend that my clients to get a minimum of 12 months of statements.

C.    Determine income (both yours and your spouses).

You will need to provide documentation showing your income (if you work outside the home) and the income of your spouse. This is important for a number of reasons, but primarily for child and spousal support.

If your spouse is a salaried employee, then this will be relatively easy. Obtain a copy of their most recent pay stub and your joint Income Tax Returns. If you do not have access to either of these, you can obtain a copy of your Income Tax Returns by requesting them directly from the IRS.  An attorney can help you obtain your spouse’s paystubs through the discovery process.

If your spouse is self employed, then the job of determining their income becomes much more difficult. This is why discretion about your divorce plans is important. You may want to discreetly question your spouse (or if they have one, their business partner or spouse) about income. You can also attempt to get copies of bank account statements and financial statements of the business.

Another good way to prove income and assets of a self employed spouse is to obtain a copy of a loan application or net worth statement that they may have submitted to a bank or other lending institution for a loan.
Sometimes it is difficult to prove the actual income of a self employed spouse. At this point, gather whatever information you can. In the case of a self employed spouse, your lawyer will likely have to help you by using the discovery process to obtain and analyze additional information.

The information in this post was prepared in part with information originally posted on the Alabama Family Law Blog.