Financial Transparency in Divorce

In getting a divorce, there is a requirement that the parties demonstrate financial transparency.

There are several reasons for financial transparency. Part of the rationale is that each party is entitled to know what the facts are prior to negotiating a settlement or presenting their claims at trial. Another part of this is that the parties need to disclose their income and expenses so that the court may gauge whether the proposed child support and child-related finances are in the best interests of the children. And the court has a duty to make sure that the division of the marital estate is fair, especially when there may be a history of domestic abuse power imbalance.

How can a client be expected to advocate for what they want and what is fair unless the client knows what the accurate facts are for income, expense, assets, & expenses?

Transparency is all about facts. And facts are best reflected in third party documents – not your notes or your spouse’s spreadsheets but rather the documents you have received from outside of the marriage – your employers, banks, lenders, utilities, credit cards, vendors, financial planners, insurance agents, plan administrators, credit bureaus, title companies, cancelled checks, receipts, invoices, and even handwritten notes showing you paid cash for the girl scout troop fees. If a third party document pertains to the income of the parties, their expenses, their non-marital & marital assets, and their debts, it is going to be collected for the sake of transparency.

Our divorce casework starts with collecting these documents from our new clients, along with their completed intake questionnaire. Then our divorce casework ends with these documents, as their data is used in the spreadsheets and calculations that lead to a settlement or the documents themselves serve as exhibits at trial.

Each divorce is different and thus the documents we collect vary greatly. Also in a third to a half of our divorces our client does not have access to either the family’s financial documents or their spouse’s finances; in these circumstances, we are able to get them from their spouse in due time after starting the divorce. Recognizing the above variations, here is a list of the documents we request of clients in a customary divorce:

Income - General

  • Last 3 years’ federal tax returns and schedules
  • Last year’s W-2s for both parties
  • Last year’s 1099s for both parties
  • Last 3 months’ pay stubs for both parties
  • Signed Release for tax preparer(s) of the parties
  • Executed copy of prenuptial agreement
  • Employment contract(s), if any

Income – Unincorporated Self Employment

  • Last 3 years’ bank statements
  • Signed Release for tax preparer(s) for that party
  • Signed Release for bookkeeper(s) for that party
  • All financial records, balance sheets, detailed income statements
  • Copies of any loan applications from last 3 years

Income – Incorporated Self Employment/Partnership/Family Business

  • Articles of Incorporation
  • Bylaws
  • Corporate Meeting Minutes
  • Resolutions
  • Last 3 years’ balance sheets
  • Last 3 years’ income statements
  • Last 3 years’ cash flow statements
  • That parties’ wage documents (i. e. W-2s)
  • That parties’ distribution documents (i.e. K-1s)
  • Signed Release for CPA(s) for the corporation
  • Signed Release for bookkeeper(s) for the corporation

Expenses

  • Last 2+ Month’s Bank Statements (Checking, Saving, Investment Accounts)
  • Last 2+ Month’s Credit Card Statements
  • Last 2+ Month’s Mortgage Statements
  • Health Insurance Fee Schedule for each party’s available health insurance based on single coverage, single plus one, each additional person, and/or family coverage, regardless of whether the parties use these any/all of these coverages.
  • Documentation of the last 12 months’ of daycare expenses

Assets

  • Executed copy of prenuptial agreement
  • Copy of a legal description of real property
  • Copies of documents from the initial purchase of real property
  • Any real estate appraisals that have been completed
  • A copy of the latest property tax bill
  • Kelly Blue Book report for each vehicle
  • Documentation for any Whole Life Life insurance policies
  • Last 2+ Quarter’s Retirement Account Statements
  • Documentation of any Gifts or inheritances
  • Documentation of any assets/equity owned by client at the time of the wedding

Debts

  • 1-3 Credit Reports From www.AnnualCreditReport.com
  • Any promissory notes or other debt documentation
  • Last 2+ Month’s Credit Card Statements
  • Last 2+ Month’s Mortgage Statements
  • Last 2+ Month's Student Loan Statements
  • All medical debt documentation
  • Any Chapter 13 Bankruptcy payment plan documentation

Of course, the documents above only pertain to those facts. The intake, the questionnaires, and the other firm meetings will collect all of the other facts and positions such as the earning capacity of the parties, their education and job experience, health of the parties & children, Facts and attitudes about custody and placement, drug or alcohol abuse, extramarital affairs, physical violence/other possible tort actions, mental health, et cetera.