Deciding whether to end a marriage is a life-altering and emotional experience. But a spouse, especially one who was not heavily involved in business or the couple’s finances, should also take steps to determine the financial impact of their divorce.
It is important to gather important information while planning for divorce. First, tax returns contain a substantial amount of information. Tax returns for the most recent three years and W-2, 1099, K-1 forms and other supporting documents for these returns also contain supporting information. Contacting the tax preparer or submitting an IRS Form 4506 can assure copies are provided.
Gaining tax information when there is ownership in a privately held business may be difficult. However, these documents can help reveal any personal expenses paid through the company that would be undisclosed. Next, preparing a lifestyle analysis can help predict expenses before and after divorce. Being realistic is vital. A perceived one-time expenditure can become an ongoing expense which can led to an underestimation of spending needs. Health care and education expenses have also increased at a faster pace than inflation and should be considered.
Monthly bank and credit card accounts for a three-year period should be gathered to substantiate earlier spending. Online expense trackers expedite this step, gathering information by connecting directly to banks and credit card accounts. It may also be necessary to file a financial affidavit with the court containing information about both spouses’ current financial situation and including items such as income, expenses and a net worth statement detailing assets and liabilities. Tax returns should provide details about income while the lifestyle analysis will reveal information about spending.
Other important documents will also help assure that the affidavit is accurate and contains no omissions. These include investment, banking and savings accounts and employer-sponsored retirement plan information which may also be contained on the internet. Obtaining a credit report will help with figuring out liabilities and outstanding joint obligations that need to be closed. The search should also include collectibles, assets held in a safety deposit box and other assets that are hard-to-value.
An attorney can assist with this planning and information gathering. An experienced lawyer can also help assure that any settlement or court order is fair and reasonable.