One spouse often takes a greater responsibility in handling the family finances. They may pay the bills, manage financial accounts, handle investments, file tax returns, and try to keep the family on budget. The other spouse may know how much money they are personally spending but have little idea what else is owned or owed.
This can create a difficult starting point when divorce becomes a possibility. Before the assets and debts in a divorce can be divided fairly, you first need to know what the assets and debts are. There are a number of methods to gather this information. Keep in mind that there isn’t any type of central database where you can confirm your assets. You have to have some idea as to where you bank and what you own. This can be difficult if you did not handle the family’s finances.
Timing
There are a number of formal methods to gather your financial information as part of the divorce case. However, you can help keep your costs down in the divorce by gathering some of your financial information on your own and even before the divorce action is filed.
If you are reading this because you are only considering a divorce, now is the time to educate yourself further about the financials. Become involved in the financial planning and budgeting. Review the tax documents and monthly statements. Make sure you have a way to access copies of these statements. If a divorce action is imminent, start gathering the statements together before you file and before you may lose legitimate access to some of the financial documents.
If you are in a financially abusive relationship, you may have limited access to the family’s financial information by the design of the abusive spouse. You may still be able to gather some information without putting your safety in jeopardy. However, there are cases where a spouse presents with very little financial information and without a way to safely access this information on their own. Don’t worry as there are formal methods that are part of the divorce case to access financial information when the other spouse is uncooperative or intentionally misleading.
Identify What You Own and Owe – What are the Assets and Debts?
In order to divide the marital estate, the attorney will generally create a simple spreadsheet or balance sheet of the assets and debts. To start the process, the first step is creating a basic financial inventory. You do not need to know the value of every asset immediately, but you should identify as many accounts, properties, and debts as possible with at least a ballpark value for each.
Assets
As a start, below are the basic assets to identify and to gather documents about:
- Real estate. What is the address and is there a mortgage? Provide a copy of the recent mortgage statements and a copy of the title.
- Vehicles. What are the year/make/model and Vehicle Identification Numbers of each vehicle? Provide a copy of the vehicle registration (which should state the identifying information) and a copy of the title. If any vehicle has a loan, provide recent auto loan statements.
- Financial accounts. What are the financial accounts and who are the owners of the accounts? Provide recent monthly statements. This should generally include any financial account that you have, including bank accounts, investment accounts, and retirement accounts.
- Other assets of value and any disputed assets. This can really vary on a case-by-case basis. Some assets seen with frequency:
- Small business. The documentation for a small business can be extensive and you’ll generally need your attorney to help you figure out what specific information is needed depending on the nature of the business and whether an expert witness valuation is required. This will often include information as to the assets and inventory of the business, accounts receivable, and tax returns.
- Life insurance policies. Generally, you may be requested to provide the declarations page or schedule of benefits page of the policy, especially if the policy has any cash surrender value.
- Boats and other vehicles, such as a pontoon, RV, motorcycle, or ATV. Generally, the same information is requested as for your other vehicles.
- Items in the home. If you and your spouse have already divided up the furniture and household items in a fair way, you may not need to spend time trying to identify or value these items more specifically. It is very common for the spouses to divide the furniture and household items with little assistance from the Court or the attorneys. It often involves just going through and dividing the items in the home. One party takes the lawnmower and the other takes the snowblower. One party takes the bedroom set and the other takes the dining room set. However, if the parties have items disputed or items with real resale value, you may want to specifically identify these items. This could be things like a gun collection, high value tools, a luxury brand purse collection, or any collection of real marketable value. In that case, you may want to take detailed photos of the items, including specific brands and item numbers.
- Cash. Often the easiest way to handle cash is to deposit it. Then there is a written record as to the amount.
- Cryptocurrency. Often this involves providing copies of transaction histories if more formal financial statements are not available.
While there are families of high net worth with many assets to divide, the majority of marital estates include most of their value from the same types of assets: Any real estate, the vehicles, and the retirement and investment accounts. While the other items of value are also included on the balance sheet, the above tend to be the assets of higher value to divide. The above is not an exhaustive list but often a good place to start.
Debts
The assets are just one part of the balance sheet. The marital value of the estate also includes the debts. One of the best tools to help gather information regarding debts is your credit report. You can obtain a copy of your credit report online for free under federal law at AnnualCreditReport.com. Your bank or other financial institution may also offer a free credit report but it may not be as detailed as to the account owners and payments, depending on the format. For some people, their credit report is a complete picture of all their debts owed at this time. However, it is also common for some debts not to show on your credit report. This can include things like utility bills, short-term loans, rent, or medical debt. You’ll want to provide recent statements for any debts not showing on your credit report. If the debts or spending are contested, you’ll likely be requested to provide statements for all debts.
Other Common Financial Information Requested
You’ll likely be requested to provide other financial information as to your income. Tax returns are full of details as to the property of the parties and as to any tax debt due. You may be asked to provide several years or more of tax returns. Especially if child support or alimony is requested, you’ll likely be requested to provide copies of recent paystubs and/or W-2’s. You may be requested to provide other proof of your monthly expenses or monthly bills due, especially if alimony is requested by either party.
Balance Sheet
Once the basic documents are gathered, often this information is organized into a simple spreadsheet or balance sheet. This helps organize what you own or owe, including the name of the account or asset, how it is titled, and an estimated value.
The goal at this stage is not to determine who gets what. It is to establish what exists or what other information needs to be gathered before decisions about property division are made.
Gather the Info You Do Know
If your spouse has always handled the finances, you may not know where important records are kept. Start by gathering documents you can legitimately access rather than trying to reconstruct the entire financial picture from memory.
This could include reviewing the financial records that are kept in the home. This could be reviewing the hard copies of financial statements or tax returns kept in the home and making copies of important documents.
This could be noting details as to where the banking does occur. It is common for a party to know what financial institution is used for some banking even if they may not know the account numbers or the amount held in the bank account.
This could be taking a photo of the vehicles even if you don’t have access to the titles or registrations. This could be taking photos of the household items of value before you move out.
If you have an accountant that completed joint tax return, ask for copies of the tax returns and any financial documents that were provided to complete the returns.
In sum, obtain copies and proof of assets and debt that you have legitimate access to. Your attorney can then help you “pull the thread” and find the additional financial information that the other spouse is failing to disclose. While there is no central clearinghouse to request all your bank statements, knowing even one financial institution used by your spouse can lead to a location to send a subpoena for records. Once you have those records from the bank directly due to the subpoena, you can review these records in detail and “pull the thread” to see what other transactions are going in and out of the accounts and what other financial institutions are used to handle the marital funds. You continue to seek further information based on the information that you find.
There are also other legal methods of locating non-disclosed assets and the subpoena is just one example of many.
Historical Documents
Older records can also matter. Statements from the time of the marriage, purchase records, inheritance documents, or records showing how an account was funded may help establish the history of an asset.
Do not automatically discard older financial statements simply because they show outdated balances. The history behind an account can sometimes be as important as its current value. Especially for assets or debts with a pre-marital value, you may need to know prior values or transactions histories to determine the marital value.
Generally, start with the recent statements and then your attorney can help guide you as to what historical documents or proofs need to be gathered.
Look Beyond Whose Name is on the Account
Seeing only one spouse’s name on an account or title does not answer how an asset will be treated in a Nebraska divorce. In Nebraska, the marital estate is presumed to include ALL the assets and debts that accrued during the marriage, no matter if the title or account is in one name or both. Don’t make the mistake of thinking that something is yours or theirs just because it has one spouse’s name on the title.
For example, a retirement account will only have one spouse’s name on it. However, if those contributions into the account were contributed or accrued during the marriage, the retirement account balance (or at least the portion that accrued during the marriage) will generally be included on the marital balance sheet to divide as a marital asset.
Pre-Marital and Non-Marital Documentation
For longer marriages, there often is little to no value that is not marital. However, for marriages later in life or where an inheritance or large gift was received, a large value of a spouse’s assets can be considered pre-marital or non-marital and not included on the marital balance sheet to divide.
For example, if the spouses married later in life, a spouse may have had a significant value in their retirement account at the time of the wedding. With proper documentation as to the pre-marital value, the Court may find that only the portion that accrued during the marriage is divided. The pre-marital portion is awarded 100% to the spouse that accrued this value prior to the marriage. You’ll need statements and documentation as to the value at the time of the marriage to help prove this.
For another example, a spouse may receive an inheritance and keep the inheritance in a separate account solely in their name. With the proper documentation as to the funds being from an inheritance and being kept separate from marital property, the Court may find this value is not from any marital efforts. This non-marital value of the inheritance is awarded 100% to the spouse that received this inheritance.
What if Financial Information is Missing?
Sometimes the problem is you simply do not know where the records are. Other times, you have an idea but no access to the documentation for the specifics. Your spouse may have information or documents that are not readily available to you or may not voluntarily provide information to fully understand the financial picture.
Don’t worry. This is a common problem. Some cases the parties are upfront and able to exchange documentation without a formal court method to force the parties to do so. Often this is not the case. It is very common for the parties to exchange their financial information in a formal manner as part of the divorce process. One of the most common methods in Nebraska is by sending “discovery requests.” These are often in the form of “Interrogatories” and “Request for Production of Documents” where you send a formal and detailed list of questions and documentation that you are asking the other party to answer and produce. This commonly includes formal requests for tax returns, pay stubs, retirement statements, among many other specific requests for information depending on the specific assets and debts involved or suspected in your case.
This formal process is called the discovery process and can be enforced by a court order to compel. The formal discovery process can be particularly helpful when the marital estate includes:
- Businesses or ownership interests
- Investment or retirement accounts
- Unusual or unexplained transfers
- Debts you do not recognize
Other common methods of finding financial information includes sending formal subpoenas to financial institutions to obtain the financial records from the financial institution directly or taking the other spouse’s statement in a recorded question and answer session called a deposition.
Rather than filling gaps with assumptions, identify the unknowns and discuss with your attorney how the appropriate legal process can be used to obtain additional information.
Avoid Major Financial Moves
When one spouse has historically controlled the finances, the other spouse may understandably want to take immediate control and may want to race to move assets before the other party hides or removes the value. However, major financial changes can create additional issues if they are made without understanding their legal and financial consequences.
Before making significant changes, discuss them with a divorce attorney. This may include a discussion and serious consideration before:
- Withdrawing large amounts of money
- Transferring marital funds
- Selling or giving away property
- Taking on substantial new debt
- Making unusually large purchases
- Changing financial arrangements without documenting the reason
- Withdrawing from a retirement account
There may be legitimate reasons to move money or open a separate account, especially when household expenses or immediate financial needs are involved. However, moving money without court permission can also have major legal or tax repercussions and should generally be avoided. While there are times that you need to act to protect yourself, you should first discuss with an attorney to determine your best course of action to do so. Oftentimes, there is a way to protect yourself that does not involve negative legal or tax consequences.
Understand the Numbers Before Agreeing to a Financial Settlement
A common problem when a spouse tries to handle their divorce without legal representation or tries to use mediation in substitution for hiring an attorney is when the spouse starts negotiating a settlement arrangement without first having a reasonably complete picture of the marital estate. You should first create some version of a marital balance sheet and have legal advice as to what is legally “fair” before you start making decisions as to what you will accept as your fair share of the marital estate. If you start negotiating without really knowing what you have or what is legally “fair,” you may end up agreeing to something that is very favorable to your ex and way less than what a judge would have awarded to you had you asserted your rights.
For example, an agreement in which one spouse keeps the house while the other keeps a retirement account may sound straightforward. However, if you take into consideration the different cash values, tax considerations, debt obligations, and level of liquidity, this could be a very unfair agreement for one spouse depending on the overall numbers.
The same applies to debts. Knowing that a debt exists is different from understanding whose name/liability remains on the account, how the debt was incurred, and how it may be addressed as part of the divorce.
Preparing Your Financials for Your Divorce Attorney
You do not need to solve every financial mystery before you share your documentation with your attorney. Most attorneys are going to have a list of documents and information that they’d like you to gather. Gather the requested records but also make note of the information that you do not have. Explain to your attorney if you or your spouse historically handled the financial matters and if you have any suspicions of assets or debts that may be missing or moved.
Financial Preparation for Divorce Starts with Information
Not knowing everything about your family’s finances does not mean you need to figure it all out before speaking with an attorney.
Start by gathering financial statements and other records you can access, identifying your known assets and debts, and making a list of accounts or documents you cannot locate. Preserve older financial records and avoid major financial moves until you understand their potential consequences.
Financial preparation for divorce is about knowing what you can document, identifying what remains unknown, and bringing those questions to your attorney before making important decisions about the marital estate.
Law Office of Julie Fowler, PC, LLO
Trusted Family Law Attorney in Omaha, Nebraska
Facing a divorce, child custody dispute, or child support matter in Omaha? You don’t have to navigate family law alone. Whether you need a divorce attorney, a child custody attorney, or comprehensive family law representation, our experienced team is here to protect your rights and your family’s future.