By Wendy Spencer
Information about all aspects of your finances is critical to a reasonable divorce settlement. Yet even when you think the documents are at your fingertips, gathering them can be work. Here’s how to start this tough but vital job if you face the end of your marriage.
I often tell clients to assemble all information as soon as divorce becomes even a remote possibility. If your spouse also foresees divorce he or she may try to hide funds, disguise income or block you from obtaining information.
Precautions. Many states enforce laws concerning open and fair disclosure of information pursuant to divorce; divorcing spouses still sometimes try to hide or alter information.
If you still live in the same house as the person you’re divorcing, make copies of all financial documents and store them somewhere else, such as with a trusted family member or friend or with your attorney. This includes documents on your computer as well as documents housed online. Change passwords to your online financial sites to limit access.
Types of information. Secure documents that show your assets, liabilities, income and expenses. Your state may have some financial document that you probably need to complete and file as a part of the divorce, which, much like a tax return, helps you clearly detail your financial inflow and outlay as well as you the value of your property and any debts.
Also consult with an attorney or experienced professional regarding what documents you must share with your spouse as part of the divorce.
Documents can include (but are not limited to) detailed values of:
401(k) retirement plans, individual retirement accounts; brokerage accounts; savings and checking accounts; life insurance policies (including the cash value, death benefit and type and terms of the policy), 529 plans for college savings and your children’s accounts.
Your real estate, including the purchase price and current value.
The Kelley Blue Book value of your motor vehicles.
The estimated value or purchase invoices of artwork, jewelry and various collections. Furniture receives an estimated garage sale value.
For stock options and executive perks above and beyond a normal salary, you may need to contact your tax preparer or other professional for estimates.
You must report all liabilities, including all loans, debts, lines of credit, mortgages, credit card balances, payments owed to Internal Revenue Service, loans from relatives and pending lawsuits against you.
Income. Report all income from all sources.
Your state may define income as salary, perks, bonuses, expense accounts, Social Security benefits, pensions, annuities, investment and after-expenses business profit, royalties, trust income, child support and public assistance you receive and net from rentals.
Other possible income documents: personal and business income tax returns, pay stubs, executive signing agreements and stock and stock option reports, among others. Courts may require several years of your income tax returns, sometimes to average your income if what you make varies year to year.
Expenses. One of the most onerous yet important categories of information to pull together, this can show shortfalls in your income and greatly help you negotiate a divorce settlement.
Documents include your mortgage payment statement, credit card statements, utility and grocery bills, bills for dining out and receipts for reasonable costs for clothing, insurance, medical co-pays, auto expenses, income taxes and more.
The easiest way to pinpoint all your expenses: Go through your checkbook register and credit card statements. If possible, use your state’s divorce finance form.
Note: You can average expenses for a year, but also pin down expenses that you pay more frequently than once a month. These are easy to overlook.
A lot of work? Yes, and every number can be another tool to help you to get a fair and reasonable settlement.
ABOUT THE WRITER
Wendy Spencer is president of Spencer Capital Strategies Inc., an independent Money Concepts contractor in Arvada, Colo. She writes for AdviceIQ, which delivers quality personal finance articles by both financial advisors and AdviceIQ editors.