Simple Tools: The Financial Affidavit

Why, When and How to use your Finanical Affidavit.

The most important tool in your divorce is frequently the most over-looked, and avoided. Even its name is off-putting; but it is the key to understanding all of the other issues which arise. It is called (drumroll, please), “The Financial Affidavit” (yawn).

Frankly, most people should keep a current finanical affidavit available whether or not they are contemplating divorce. A financial affidavit is just a form that shows you how much you have in income, expenses, liabilities and assets. While these may sound like no-brainer questions, most people cannot accuratelty answer these questions off the top of their heads. Sometimes one member of a family knows all the answers and the other just relies on that person. Sometimes neither party can answer them. Rarely, but sometimes, both parties are very aware of all of the finances.

It is surprisingto me how often a client – or an opposing party – resists using the simple form available on the Judicial Branch websites of most states. It can be a little complicated the first time you look at it (for example, in Connecticut, you have to divide every monthly amount by 4.3 weeks). But the value of this tool far outweighs its inconvenience.

Here is a link to the CT “Long Form” to give you a sense of the questions it poses.

WHY: Look, I hate to be the one to tell you, but divorces frequently come down to a set of financial decisions. After the child-rearing and emotional issues have been resolved, it is similar to a business transaction. People want to know: How much child support will I have to pay or receive? How much alimony? What portion of the debts and assets will be assigned to me? The answer to these basic and all-important questions is not a secret magical formula. It is a direct function of the information contained in your own personal finanical picture.

Simply put, better informed is better prepared. Building your own financial affidavit will likely compel you to ask questions and make some calculations that you never thought to ask. Questions like how much money do we spend on restaurants each week? How much equity is in our house right now? Do we have retirment accounts, and how much are they worth? Not only is this good information for the court. It is good information for you. If you are trying to imagine what a post-divorce future will look like, knowing your finanical picture can help define those scenarios. Picture knowing how much money you would have if you sold your house; how much disposable income you have right now; and what you are paying for health insurance each month. These are the questions people pay attorneys and financial consultants to help them figure out. And, ironicaly, you are the only one who can get them the information which unlocks these secrets!

WHEN: Early and often. If you bring a completed financial affidavit with you to your first meeting with your divorce attorney or mediator, you will save yourself time and money getting to the heart of what the case will entail. In most jurisdictions you will need to disclose the information within the first few weeks of any divorce action, and so will your spouse. So, why wait? Get the information to your attorney as soon as you can. The earlier your lawyer or mediator is informed about your case, the more accurate they can be in looking for an appropriate resolution.

FAQ: Why should I divulge my information to my spouse? Aren’t we going to be fighting about this? Shouldn’t I keep it a secret?

Answer: The court will compel you to share all information, anyway. Any knowledge which is not exchanged voluntarily is likely to come out on the witness stand – either in depostion or at trial – anyway. But, of course, voluntarily costs less time and money.

HOW: Despite the mysterious-sounding 4.3 weeks rule and all of the detail (weekly grooming costs!?), these forms are straightforward once you understand them. And, as with so many things, the internet has made the work easier than ever. Start by finding your most recent paystubs, tax returns, mortgage loan statement, and credit/debit card statements (these can be downloaded from your banking institution). These 4 sets of documents will provide you 80% of your necessary information. When you are ready to get started, set aside one hour of time. Supply yourself with one scratch copy of the form to work on and a blank copy to fill-in later, a sharpened pencil & eraser, a calculator, a note pad for jotting questions or doing calculations, and a tall glass of your favorite beverage. Preferably non-alcoholic, to cut down on mistakes. Then, start filling in the blanks. Any questions you still can’t answer, just make a note and move on.

Pro tip: On your first time through the form, use the figures as you find them. If your mortgage is a monthly amount; write it that way. If you spent a total of $5,000 on vacations last year; write it that way. Get your figures all in one place; convert it to weekly later.

Once your first draft is complete you have a choice – you can stop there and give the draft and your supporting documentation to a professional to complete for you. You have already saved yourself hours of professional fees by making a solid first draft. Or, you can go for it and convert the figures to weekly on your own. It is not so hard. Any monthly amount gets divided by 4.3. Any annual amount gets divided by 52. So, if you spent $5000 on vacations last year, you would put $96 as your weekly vacation budget. If your monthly mortgage loan payment is $2000, that’s $465 per week.

And now – here’s the icing on the cake… you have created your own financial snap shot! If you are not getting a divorce, you have a realistic budget to use when you plan for future events. If you are going through a divorce you now know what each of you should have when the smoke clears. Even if its not much, at least you know what it is!

What We Love: Divorce is an opportunity for growth. Taking charge of your life begins with understanding your finances and leads to your own empowerment.


Cohabitation After Divorce

twinbedsIn an ironic twist on the old wives tale that living together before marriage would lead to divorce, there seems to be a growing trend of post-dissolution cohabitation, or – divorce leading to more couples living together after marriage.  Until the economy is on more solid footing, sometimes it just makes fiscal sense to combine incomes and keep one larger home instead of two smaller ones.

Let’s face it – most divorcing couples begin by complaining that they are living together “as roommates,” anyway.  We frequently hear that the romance has gone out of the marriage and one of them has been sleeping on a couch or in a spare bedroom for months, sometimes years.  Instead of being life partners, divorce becomes appealing when spouses feel more like business partners.  Was the mortgage paid on time? Whose turn is it to pay for cleats? Did you buy yourself something frivolous with the end-of-year bonus?

When the person you live with is nothing more than the other half of your bookkeeping team, it can be difficult to feel generous, romantic, or fulfilled.  If that person was never meant as more than your rent-partner, there should be no hard feelings.   But, when that person vowed to love and honor you “ ’til death parts us,” an extra fifty dollars missing from the checkbook takes on a whole new meaning.

And so the new arc of relationships might look something like: friends-lovers-roommates-spouses-lovers-roommates-friends.  With the time a couple spends as spouses representing the top of the curve.   We know the conversation that often progresses paramours from lovers to roommates, “We sleep at my place most nights anyway, why should we keep paying rent for two apartments?”  Maybe the converse conversation, on the other side of the marital peak is, “we never sleep together anyway, and you might as well just stay here instead of us paying two mortgages.”

One of the reasons those old wives gave for how living together could lead to more divorces was the theory that without a proper commitment at the beginning, the living arrangement would always be too casual. The door to the birdcage would always feel open, and therefore once that door closed, the commitment would suddenly feel false.  If post divorce behavior can serve as the mirror image to pre-marital behavior in this example, then maybe once the proverbial door is left permanently ajar, there is more reason to be careful and respectful inside the cage.

One of the double-edged swords of marriage is that it is where we can relax, let our hair down, and be most ourselves.  Unfortunately, sometimes the person we love the most gets the brunt of our unregulated selves.  Too often, the very behaviors we would never tolerate from, or foist upon, a mere roommate feels safe and comfortable with the people we should most cherish.  If that has happened, and the marriage is truly over, then maybe a step backwards – into the less comfortable and more polite behavior – is worth a try.  At least until your finances are a little more secure.

Only you know whether you can draw a clean line, though.   If a post-divorce cohabitation is still too hot (either with hatred, sex, or a combination of the two); maybe go crash on a friend’s couch until you can afford that second mortgage.

What We Love:  As long as you are willing to work together, divorce does not have to lead to bankruptcy. There are more options today than ever before.