For most people, a divorce is the largest financial transaction of their lives. One of the most important parts of the divorce process is providing a financial disclosure to your spouse and making sure you are getting a full and complete financial disclosure in return. The following article provides an overview of the rules that apply to financial disclosures in Massachusetts divorce.
Financial Statements—Rule 401
General Probate Court Rule 401 requires that each party complete a financial statement. If your gross income exceeds $75,000 per year, you are required to complete the "Financial Statement Long Form," which is quite detailed. If your income is less than $75,000 per year, you can submit the Short Form, which still takes a fair amount of time to complete. Both of these financial statement forms are available on the Massachusetts government website (See the “Resources” section below).
Whichever form you end up using, it is likely that you will be required to submit it several times throughout your divorce proceeding, and you’ll need to provide updated financial information each time you submit it. So, for example, if you were making $80,000 a year when you first filled out the financial form, but got a raise during your divorce proceeding and are now making $100,000, you’ll definitely have to update the court and your spouse - the next time you fill out your Long Form, you’ll need to list your new yearly income.
You have to sign the financial statement under “penalty of perjury,” which means if you provide false information, you could be charged with perjury (telling a lie under oath).
Common Mistakes on Financial Statements
Estimates: If you are estimating any item, you should note that it is an estimate somewhere on the form. Otherwise, a judge will assume your expenses and income are based on actual figures obtained from careful review of past history.
Valuation: You are asked to provide values of your personal and real property. If you are not certain of the value, make sure you obtain an appraisal or otherwise indicate on the financial statement how you arrived at the value. If you are not sure, then you should indicate that on the form or in a footnote. If you are valuing a stock account or mutual fund, make sure you indicate the date that you're using for the valuation.
Leaving things out: Every account, no matter how small, must be disclosed. If you leave something out, your spouse may claim you were intentionally trying to hide an asset, which could be quite embarrassing, or even legally problematic in front of a judge.
Pension plans: Often people will leave out pensions they have earned, or not properly calculate the value of the pension. If you need help valuing a pension, you may have to speak with an actuary.
Collectibles and tangible property: Used furniture has little value, but collectibles like coins, stamps, and memorabilia should be appraised by an appropriate professional.
Mandatory Self Disclosure - Rule 410
All parties to a divorce are required to provide copies of financial records, such as credit card statements, bank records, loan and mortgage documents, and insurance documents. This requirement is mandatory and automatic - meaning both spouses must provide this information to the other. However, parties in relatively uncontested or simple matters will sometimes agree to waive this disclosure.
Discovery and Investigative Tools
In addition to the mandatory financial statements and automatic disclosure requirements, divorcing spouses can use any or all of the following methods to obtain additional financial information from their spouse or other third parties.
Interrogatories: Each party to a divorce is entitled to ask their spouse to provide answers to “interrogatories,” which are detailed written questions usually drafted by an attorney. This is often done when there is some question about whether the other party’s financial statement or mandatory disclosure is accurate or complete.
Deposition: Each party to a divorce is entitled to ask their spouse or other third parties questions under oath, in the presence of a stenographer, regarding details of the parties’ financial circumstances and financial history. The party “noticing” (scheduling and taking) the deposition can also request that relevant documents be brought to the deposition.
Subpoenas: Subpoenas can be issued to banks, financial institutions, employers, and any other person or institution which has financial records that are relevant to the financial circumstances of the parties to a divorce.
Actuaries: Actuaries are often employed to put a value on pensions and other employment-related retirement benefits.
Appraisers: Certified appraisers are often hired to value real estate and any business that is owned by either party in a divorce. Collectibles are also appraised if they have significant value.
Private Investigators: If there are serious questions about someone’s truthfulness, it is often useful to hire investigators to attempt to verify someone’s work habits, lifestyle and other aspects of their personal life which might have an impact on their financial situation.
For more information about finding assets in divorce, see How to Find Hidden Assets in Divorce, by Lina Guillen.