What’s This Net Worth Statement Everyone Keeps Talking About?
Often, before a divorce case is started, an attorney will say to their client: “Start working on your net worth statement.”
Have you ever seen a dog turn its head to an angle when it hears a sound it doesn’t recognize? That’s the look I often get when I say that to my clients. My goal is to eliminate surprise and educate you about the system. So let’s talk about the Net Worth Statement used in a New York divorce. Actually, I’ll talk, you’ll have to listen at this point (you can talk back by posting a reply in the comments section below).
The Net Worth Statement (formally called a “Statement of Net Worth”) is required to be exchanged in all contested divorces. It’s also a good practice to exchange them in uncontested divorces as well.
The purpose of the document is to provide an economic snapshot of the parties’ finances. Quick, are you carrying any photos of yourself in your wallet? Most people don’t have pictures of themselves, but let’s face it, a divorce is about you and your family, and one of your first orders of business when facing a divorce is to identify what’s going on economically in your family. A Net Worth Statement forces you to take a picture of your “economic house”.
Another purpose of the Net Worth Statement is to compel both sides to swear they are telling the truth about their finances. This can be really important, especially where one spouse has taken care of the finances of the marriage, leaving the other one in the dark on many of the details.
Let’s say you and your spouse agree you need a divorce and are otherwise getting along just fine and you both think you know each other’s finances to the penny. So why do you need to bother with the Net Worth Statement? What if your spouse just hit the lottery and maybe, “accidentally” forgot to mention it to you? What if your spouse has a pension you didn’t know about? Maybe your spouse was afraid to tell you about that credit card bill they ran up. The Net Worth Statement forces everyone to come clean.
The Statement of Net Worth the Courts have created is a required form intended to help you do this. You can see one at http://www.nycourts.gov/forms/matrimonial/networth.pdf . The one you fill out needs to look “substantially similar” to the Court’s official form. In fact, many lawyers have devised their own forms and many lawyers use software (myself included) that makes it easier to fill the form out. The form is designed to try and capture every conceivable aspect of a couple’s finances typically found in a marriage.
The Net Worth Statement used in a New York divorce is somewhat different and more involved than a Net Worth Statement typically prepared by an accountant (though accountants sometimes help clients fill theirs out). It provides an economic blueprint of the four key economic factors in every marriage: expenses, income, assets and liabilities. In simple terms: your bills, how much money you earn, the value of things you have and what you owe to others.
The Courts have tried to create a form containing the common financial items that families deal with in their economic lives. Many of the categories may not apply to you, but many may, even some that may not have occurred to you. It is also possible that there may be aspects of your marital finances that the form does not provide for. That’s cool.
Just remember, the purpose of the form is to provide as accurate a picture of your finances as possible, so you and your attorney should feel free to explain things as best you can. That may include supplementing the form, explaining your answers and even including footnotes (yes, footnotes!). In my next article, I’ll give you some tips on filling out the form.
Don’t worry, you can do this! Now that I’ve stopped talking, feel free to leave your comments below.
Copyright 2012 Donald R. Wall, Esq. Copying is prohibited; thank you for only quoting with a link back.