What You Must Know When Filling Out Financial Declarations
If you are involved in a divorce, you need to fill out a Financial Declaration telling the court about your income, expenses, property, and debts. This is an extremely important document that can make or break your case. Here are some tips to keep in mind when filling it out.
First and foremost, be honest. Besides helping the court decide a fair alimony of family support and dividing property, Financial Declarations are perhaps the best lie detector tool family courts have. People regularly make incredible claims about their finances, hide assets, overstate expenses, minimize income, you name it. Once the court catches someone in a lie it is free to disregard their testimony not only about their finances but just about any other contested issue in the case. In short, “don’t be that guy” (or gal).
This “be honest” principle does not apply to just deliberate misstatements. Even innocently over- or under-estimating your numbers can get you in trouble. For example, if you are a spouse asking for alimony and report on your declaration you make $2,000 net income per month and incur $3,000 in monthly living expenses the maximum amount of alimony you can request is generally capped by your shortfall ($1,000 per month). So if you overestimated your income or underestimated your expenses (or both) you just shot your alimony claim in the foot. (The same principle applies in reverse to a paying spouse. If you say you make more money than you really do and underestimate your expenses then you may end up paying more money than you would have if you had reported accurate numbers).
How do you avoid falling into this trap? Double check your number with records like paystubs, tax returns, bank statements, bills, and the like. It likewise helps to have a good attorney on your side looking over your statements to make sure they are consistent with your records and seem reasonable.
This relates to the second rule to keep in mind: be prepared to prove your numbers. Courts have been known to outright deny alimony or, conversely, order spouses to alimony when they have no ability to do so because a spouse failed to provide evidence supporting the numbers in their declarations.
How do you prove the numbers in your declaration? For income, paystubs and tax returns generally suffice. But if you are self-employed this gets to be more complicated you may need additional documentation such as profit/loss statements, balance sheets, or even the assistance of an expert witness to educate the court on what you are bringing in.
For expenses, the best evidence is usually bank statements, credit card bills, invoices, and receipts. It is generally not necessary to prove every single expense category on your statement, particularly if the amount is consistent with what the other side is claiming for their expenses or if the expense passes the “smell test.” For example, if you report a food budget of $700 per month and your spouse is claiming the same thing the court is unlikely to question that expense or require detailed proof. But if one spouse is claiming a food budget of $700 a month and the other side is claiming $2,000 the court will want an explanation for the discrepancy.
Another point to consider is making sure your income and expenses are consistent. For example, if someone says they make $1,000 per month, have $10,000 in monthly living expenses, but no debt to account for the difference the court will think this person (1) is hiding income, (2) overstating expenses, or at best (3) out of touch with reality. If you are the one claiming such a gap in your own finances then you had better be prepared to explain the discrepancy to the court.
Sometimes in divorce cases you may have just barely separated from your spouse and are not actually incurring certain living expenses yet but know you will be in the future. It is alright to include estimated future living expenses in your financial statements, but if you do so make sure you let the court know and explain how you came up with a particular number. For example, say you were living in a house with a $1,500 monthly payment. After separation only one spouse is going to be living in the house and making that monthly payment. But it is reasonable to assume the spouse who moved out is going to need a place of their own to live and incur a similar monthly payment in which case they can include an estimated expense in their financial statement. But again make sure you tell the court it is an estimate and be prepared to explain where you came up with that number.
When it comes to disclosing tangible personal property on a standard financial declaration, generally the court is most interested in “big ticket” items like vehicles, trailers, valuable coins and precious materials, or the like. You will likely be required to provide a more detailed inventory in the later stages of the case but this is generally not required upfront.
When it comes to disclosing financial accounts and debts, make sure you disclose everything and that your numbers are accurate based upon the statements you have. It is sometimes helpful to request a credit report from one of the three major reporting agencies to help you in this process and ensure nothing gets overlooked (the law allows you to request a report from each of the three major agencies once a year free of charge). Utah law states that if you fail to disclose financial accounts the court has discretion to award all of it to the other side. However, the Court maybe forgiving if the omission is innocent (for example, you have $25 in a bank account you started when you took out a car loan 10 years ago that you haven’t touched since then). But if there is significant value in the account and you do not have a good explanation why you did not disclose it then the court could award it to the other side. Likewise, do not misrepresent debts. For example, if you testify a certain debt is only $100 and your ex agrees to pay it but that debt turns out to be $10,000 then the other side may be able to set aside your settlement agreement and get out of paying it.
Financial Declarations are one of the most important documents in your Utah divorce case and it is wise to have an expert attorney guiding you through the process. Give us a call today at 855-254-2600 to learn more about how we can help. You can also find additional information about the rules governing Financial Declarations by reading Utah Rules of Civil Procedure 26.1.
I wasn’t aware that financial declarations are a good lie detector tool that family courts have. I feel like that’s another reason why it’s a good idea to hire trusted legal professionals. Overall, divorce sounds like it can be messy and could benefit from assistance from an attorney even if you got everything under control.
Understanding all that is written here, with my particular case I’m confused still… my fiancè is going through his divorce right now. Yeah I know how that sounds lol. They were married 25 years ago and were only together for the first year. Their children are adults and not included in the papers, the child support has been paid in full YEARS ago. There is no request for alimony or any other financial support. The assets were divided and the debt paid off years ago. It’s 100% uncontested. Why must they still share this information?