Rule 401: The Financial Statement

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In every Massachusetts divorce matter, parties are required to file financial statements with the Court within 45 days of service of the summons and to update and file new financial statements for each court appearance at which financial relief is sought, as well as at the time of pre-trial and trial. A party who earns less than $75,000 per year will complete the short form financial statement. A party who earns more than $75,000 per year will complete the long-form financial statement. While only the long-form financial statement requires notarization of the party’s signature, both the short form and the long-form are signed under the penalties of perjury. A party signing a financial statement must certify that the information contained therein is true, accurate, and complete. A willful misrepresentation on a financial statement subjects the party to sanctions, including criminal penalties. While I have yet to see anyone criminally punished for information contained in or missing from a financial statement, I have seen litigants suffer the consequences of their failure to take the necessary time to accurately complete the financial statement – namely, losing credibility in front of the trial judge. If a trial judge determines a party is not credible on financial matters, which can have significant ramifications for how the judge will rule on issues of alimony, child support, and division of assets.  It is critical to take the time to accurately fill out the financial statement with the assistance of counsel.

When completing a financial statement, it is helpful to refer to the following documents:

  • Paystubs
  • Tax returns
  • Income Reporting Forms W2, K-1 and 1099
  • Bank, investment account, and retirement account statements
  • Loan statements
  • Appraisals of real estate, jewelry, and other assets
  • Credit card statements

The financial statement form contains lines for suggested sources of income, including wages, overtime, commissions, bonus, and dividends, and interest, among others.  Any and all sources of income must be listed, even if there is no line on the form for your particular source of income.  If you are self-employed, you must complete Schedule A. If you have rental income, you must complete Schedule B for each rental property.

The financial statement requires the disclosure of weekly expenses.  When listing weekly expenses, the amount listed should not be simply a guess, but should be based upon real spending habits. The Court will look to expenses to determine lifestyle and need for support. Review six months to a year’s worth of bank and credit card records to calculate your true living expenses.  Remember that you may regularly spend money on something that is not listed on the financial statement – be sure to add it.

The same holds true for assets.  You should list all assets in which you have an interest, even if the form does not contain a category for such an asset – such as an interest in trust, ownership of a rare coin collection, ownership of a business, or even frequent flyer miles.  All assets must be listed.  If you do not have a value or the item is being appraised, the asset should still be disclosed, with an indication that the value is presently unknown or subject to appraisal.

The need for accuracy on each and every financial statement filled out over the course of a pending divorce cannot be overstated.  While it may seem like a lot of work, taking the time to carefully and accurately fill out the form with the assistance of counsel can save you from the pain of a difficult cross-examination at trial – or worse.

Until next time,

Robin

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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