Having accurate knowledge of one’s income, assets, and liabilities is very important when going through a divorce, paternity action, or modification. Recording that information on a Financial Statement is a vital step in the family law litigation process. Yet, despite its importance, what a Financial Statement is or even how to fill one out is often a misunderstood process or is completely overlooked.
Supplemental Probate and Family Court Rule 401 (a) states that: Except as otherwise ordered by the court, each party to a divorce or separate support action or any other domestic relations action where financial relief is requested, shall file with the court and shall deliver to the other party within 45 days from the date of the service of the summons, a complete and accurate financial statement showing, insofar as possible, the assets, liabilities and current income and expenses of both parties and children involved in the case. The form of the financial statement which each party must complete is dependent upon his or her income. Except as otherwise ordered by the court, a party whose income equals or exceeds $75,000.00 must complete the long form financial statement. A party whose income is less than $75,000.00 must complete the short form financial statement.
See https://www.mass.gov/supplemental-rules-of-the-probate-and-family-court/supplemental-probate-and-family-court-rule-401-financial-statement
When going through a divorce, both parties are required to complete and file their respective Financial Statements with the court. It a necessary document needed before any divorce can be finalized and is utilized throughout divorce and other domestic relation actions.
At first glance, Financial Statements may seem like trivial data entry, as the form seeks information about how much one spends on all aspects of life such as a mortgage or rent, utilities, groceries, and all living expenses. Parties assume that they can estimate those costs and that is enough to suffice the court. Unfortunately, this could be detrimental to the party completing the Financial Statement.
It is very important for clients to take their time to determine actual expenses as opposed to estimation of expenses. This involves going through credit card statements, bank statements, or even receipts that are being held onto. Income can come from a variety of sources, including, but not limited to, jobs, inheritance, investments, rental properties, etc. The goal is to make the most accurate assessments of one’s financial situation. This information is used during the current case and all future cases to determine the financial situation of each party, including if there has been a material change in financial circumstances between cases.
What does this mean for someone going through a divorce, modification or paternity actions? The Financial Statement will be considered in determining division of assets, alimony, weekly support, and child support if applicable. It is imperative to ensure that the finances listed are accurate.
Each party will sign the Financial Statement under the pains of penalty of perjury. When the parties are before the court, a judge will inquire if each party has accurately disclosed assets, income, and liabilities. In a divorce hearing, the judge will ask if the party reviewed the spouse’s Financial Statements and if they believe their spouse accurately disclosed the same information. All of these questions are asked under oath, so it is crucial that all available information is listed accurately.
Clients will sometimes ask if the Financial Statement is really that important if the divorce is uncontested and both parties get along well. The answer is Yes. Even parties to an amicable divorce can find themselves needing to seek an amendment to judgments due to a material change in circumstances. This can happen if a party loses their job or becomes unable to work or possibly when there is a change in custody. The Financial Statements completed at the first action will be compared with future Financial Statements if the parties find themselves back in court to modify their existing agreement.
Our firm works closely with our clients to produce an accurate Financial Statement that discloses all assets, income, and liabilities so that the court and parties can rely on the document.
