In my work as a Certified Divorce Financial Analyst™ and divorce mediator, I will sometimes be given a Financial Affidavit for review. I was recently reminded of the difference in the depth of information and subsequently the analysis that I perform when I do my financial analysis versus what information is provided by clients when they are asked to fill out a Financial Affidavit. (Note: Financial Affidavits are called different things in different states. For example, in New Jersey, it’s called a “Case Information Statement (CIS)”, in Utah it’s a “Financial Declaration”, and in New York it’s called a “Statement of Net Worth.”)
For instance, my fillable budget form is far more inclusive, and it serves as a reminder of all those expenses that people tend to forget about, like lawn and snow removal service, annual termite service, annual car registration fees, Christmas gifts, veterinary care for the pet and paying your CPA every year. These are just a few examples that can add up and have a big effect when you are depending on support. If you don’t ask for an expense to be covered, it won’t be! Repair expenses related to the home are often overlooked and things like hot water heaters, the roof, HVAC major appliances should be discussed to see if they are nearing the end of their life span. Discussing these future costs might help someone face the reality that they cannot afford to keep the marital home.
While a Financial Affidavit will ask for actual and anticipated expenses, it doesn’t allow for an examination of changing expenses through the years. Expenses are not static and negotiations should be based on realistic projections about how expenses will change. For instance, a couple might know that car payments on the husband’s car will end in 3 years or that the wife’s car is about to die and that she will need a new one. The wife might want to buy her own home but it might take six months to a couple of years of support payments before she can qualify for a loan and make that purchase. One child might be headed for college next year, and while child support payments will end, college related tuition or support will start. All these things can be addressed in my software, where individual expenses can be started or stopped in any given year, up to 20 years out. My clients don’t just see anticipated expenses in one snap shot, because that is not real life.
Income and expenses will affect the long term net worth of both spouses. My analysis might show that based on a given settlement proposal, one spouse may have to dip into his or her half of assets to make ends meet and his or her net worth and capital will decline rather than increase. This is incredibly enlightening, particularly in long term marriages, and makes negotiations easier when one spouse will clearly have far more net worth at retirement than the other.
These are just a few examples, but they apply to the majority of the cases I handle. Many of my clients have been in long term (20 plus year) marriages, are over 50 and cannot afford to make financial mistakes in their divorce. Using a financial expert such as a Certified Divorce Financial Analyst™ in settlement negotiations as either a financial expert, an advocate or as a financial neutral is a very beneficial if you want your clients to thoroughly understand the near term and long term financial effect of their divorce.