How Do I Fill Out My Net Worth Statement? Part II – Income

A Statement of Net Worth, is required to be exchanged in all contested divorce actions and in some uncontested divorce actions as well. In Part I, I gave you some tips on how to fill out the “family data” and “expenses” section of the form. In this post, let’s move on to completing the “income” section of the form.

“Income”… looks simple enough, right? Many times it is. But looks can be deceiving. Often care has to be taken to complete the form correctly and accurately. Remember, you are trying to paint an accurate picture of your marital finances. Let’s take it a step at a time.

‘In this section you are going to focus on your income. Your spouse will deal with their income from their employment or otherwise on their net worth statement.

If you are employed as a regular employee and receive a W-2 tax form, start with that. List your employer, address, annual salary, bonus (yes bonus!), commissions, tips (yes, including tips!), and fringe benefits (like use of a car, memberships in clubs, “perks”). The starting point is your current income, but if your income fluctuates a lot, go back to last year’s income, as it correlates with what you reported on your tax return.

CAUTION WILL ROGERS: Not that anyone ever does this….. but… if your actual income is “different” than what you reported on your income tax return (and chances are your spouse is aware of your “real” income), FULL STOP, call your attorney and request a face-to-face meeting to discuss this and how you will deal with it in completing your net worth statement. This is serious. Divorce is rarely fun, but dealing with tax fraud is never fun.

A word about bonuses… bonuses almost by definition fluctuate. You may have had a great year and are worried that this year may not be as good. You don’t want to predict the future only to be disappointed. The best way to handle this is to indicate on your net worth statement what your most recent bonus was, indicating that it fluctuates (and likely is determined somewhat arbitrarily by your employer). Don’t worry… Judges understand this. Usually they will look back several years to see just how consistent your bonus compensation has been. However, don’t make the mistake of not listing it. You won’t fool anyone and you don’t want to lose your credibility with your spouse or the court.

What if you aren’t an employee? If you have been unemployed or haven’t worked (like a stay-at-home Mom or Dad), just list zero for your salary/wages. The self-employed should list what you “take out” of your business. This should include the amount you take out in compensation (including cash), “personal” expenses that are paid for by the business (meals, insurance, commutation, auto expenses, memberships to name just a few).

If you work several jobs… list them all. This includes “moonlighting” jobs, and seasonal work.

So, once you have listed your wages/salary and income from your work, are you done? Nope. You may receive income from other sources like investments, interest, stock dividends, capital gains, contractual pay outs, loan payments, pension and retirement benefits, inheritance, insurance payments, disability, gifts, public assistance, the lottery, residuals, partnerships, royalties and Social Security… list ‘em…. List ‘em all! By the way, the section “other income” can include winnings from gambling or even illegal activity.One final note… why is it so important to list all income? First, you are completing your net worth statement “under oath”. That makes it a crime to intentionally complete the form incorrectly or incompletely. Second, your spouse likely already has a good idea of what your income is or at least where it comes from. If you leave something out you will lose your credibility with your spouse and their attorney and you will leave yourself open to being cross-examined at a deposition or trial where you will look untruthful. This will hurt your case and make settlement much more difficult. Don’t shoot yourself in the foot here. List it!

OK, once you have finished the income section of your net worth statement, you are about half way done. In my next blog, I’ll talk about the “asset” section of the form. Hang in there, you’ll get through this!

Next – Part III

Copyright 2012 Donald R. Wall, Esq.  Copying is prohibited; thank you for only quoting this blog with a link back.