There are two financial statement forms required for a divorce case, a short form for those with income of $75000 or less and a long form for those with income higher than $75000. Filling out these forms is a source of much pain and suffering for clients and for lawyers. They will be redone frequently because each time you go to court they have to be current. The form itself is difficult and most lawyers and clients end up making changes, adding footnotes and in other ways supplementing what is asked for by the form. There is no guidance in the rules of Court as to how to fill these out, so what does a client or lawyer do?
The first rule is make sure everything is accurate and honest and that no asset or source of income is left off the form. This can especially be a problem for clients who have cash businesses and don’t report all their income to the IRS. As divorce lawyers we must insist that ALL income whether reported to the IRS or not be shown on the financial statement form. Divorce lawyers are required to sign the form indicating that to the best of our knowledge it is accurate. It is not our problem or our desire to give advice about how to deal with the IRS.
The second rule is Explain, Explain, Explain. If your expense is an estimate, make sure it says so somewhere in the form or the footnotes. If your income is unpredictable and it is sometimes higher and sometimes lower, make sure you put it in the footnotes. Anyone filling out this form should assume(even though it is unlikely) that they will be cross examined on the witness stand about EVERY blank that is filled in and every footnote.
The last rule is to take the financial statement seriously. The most embarrassing moment in a divorce trial is usually when a client is cross examined on a hastily prepared financial statement with tons of inaccuracies . Don’t let the problems with filling out the form get you stuck. Make your best first effort at a draft, keeping in mind all of your questions and problems. Take this into your lawyer and get his/her help in answering any questions you have. No lawyer should simply hand a form to a client and ask them to fill it out. It is equally problematic to have your accountant fill out the form because the accountant will make assumptions and conclusions without informing you of any of their assumptions or conclusions. Preparing a financial statement is a collaboration in some sense because you want to involve everyone who has information and can be helpful, but in the end it is the person signing the form who is on the hook if there is a mistake. These are signed under the pains and penalties of perjury. Make sure you understand every line in the form before you sign it and take your time to get it right.