Preparing a Financial Declaration

A financial declaration gives the court an overview of your monthly income and monthly expenses. Both parties need to file a sworn financial declaration (under penalty of perjury) whenever child support, maintenance, attorneys’ fees, or any other financial issue needs to be determined. This is sometimes the most important document you and your attorney will file in your entire case. The court will look closely at both parties’ financial declarations to assess need and ability to pay spousal support and other financial obligations. Accurate financial declarations often show a lot about the spending habits, lifestyles and even the credibility of each party.

Keep in mind that this is a sworn declaration under penalty of perjury

It’s critical to be up front with your attorney about all sources of income and spending. Don’t underestimate your attorney’s ability to use creative solutions you might not think of to present a financial declaration which is both honest and strongly presents your position.

These instructions are designed to help you prepare a first draft of your financial declaration. Your attorney will review that draft with you and work with you to make any necessary changes before it is signed by you and then filed with the court. The purpose of the draft — and it is just a draft — is to give your attorney the most information you can so that we can file a financial declaration that is both accurate and presents your case in the best possible light.

Sealed Financial Documents

A financial declaration needs to be based (as far as possible) on your financial records, and not just on your best guess about the money you earn and spend. And in order to verify that the information you have given in your declaration is correct, you need to file certain financial documents along with your declaration. The main documents that the court requires are your previous six months of pay stubs, the previous six months of statements for any bank, savings or investment account that you operate (but not credit card statements), and the last two years’ tax returns including W-2′s (and/or 1099′s for those who are self employed). If you own a 5% of more interest in any company that files a tax return, you will also need to include the company’s complete tax return for the last two years.

These documents are not part of the public court record of your case. They are automatically sealed in a non-public court file (this is why they are referred to as “sealed financial source documents”). The other party and the other party’s attorney will however have access to these documents. You can protect your privacy to some extent by partially redacting information such as account numbers (so long as the final four digits are still legible, and the account can be identified) or the address of your employer (if you have a legitimate reason to be concerned about the other party knowing where you work). Talk to your attorney before you alter your financial source documents in this way.

Look at the standard financial declaration form which you have received from your attorney. Ignore the Summary of Basic Information for now, as it will be filled in later. There is some pretty straightforward personal information for you to complete. Enter your name and date of birth at the top. Then in Section II “Personal Information”, put in your occupation, highest year of education completed and whether or not you are currently employed. If you are currently employed, enter your starting date at your job. If you are currently unemployed, list when you last worked, what your earnings were, and the reason for your unemployment. Please provide this information even if you think that your attorney already has it.

Section III “Income Information”, gets into the meat of the math portion of the financial declaration. You need to determine how much you make per month before any deductions. Without scaring anyone off with too much math, the average month has 4.3 weeks (52 weeks per year divided by 12 months). This means that if you are paid once per week your average monthly income is your weekly income multiplied by 4.3. If you are paid once every two weeks then your average monthly income is your biweekly income multiplied by 2.15. If you are paid twice a month you just add the two pay amounts together your income for the month. And finally, if you are paid monthly this, of course, is the easiest to figure—just look at your pay stub and write down the gross pay figure.

What if your monthly income varies, because you get bonuses, overtime, sales commissions, or because you work for yourself? Our general advice is: don’t get too cute. For example, if you have averaged $15,000 in yearly bonuses for the last 4 years, unless you have strong evidence that there will be no bonus this year (e.g., a memo from HR) the best approach is to add $1250 a month ($15,000 divided by 12). Likewise, if your overtime work for the last 6 or 12 months has varied, but averages to about $400 extra a month, you should include it. If for these or any other reasons your income varies from month to month, include a note to your attorney explaining this. Withholding any income information from your attorney is a terrible idea. Your attorney will work with you to decide how to best present a variable income to the court.

Your wages and salaries are entered in section 3.1 line a, in the first column. There is also a place for any other income you receive (apart from employment) to be reported, such as interest and dividend income, rental income, spousal maintenance, etc. The second column is for the opposing party’s information. Don’t worry about this item—your attorney can fill this in if appropriate.

With deductions from income follow the same steps as above to get your average monthly deductions. You can find your income tax and FICA (Social Security and Medicare) deductions on your pay stub. Depending on how often you are paid per month multiply each deduction by the appropriate amount to get the monthly figure. There are other deductions that can come into play as well, such as required union dues and pension plan payments. Enter each of your deduction amounts in section 3.2. Note that if you only started making pension or 401(k) payments recently, the Court may decide that you just started this to lower your net income in expectation of litigation. Again, your lawyer will advise you about how to best represent this to the Court.

In section 3.3 you will need to take your total income and subtract out your total deductions. Take the figure from 3.1(f) Total Gross Monthly Income and subtract 3.2 (h) Total Deductions from Gross Income. This is your Monthly Net Income and needs to be entered here and at the beginning of the Financial Declaration under Declarant’s Total Monthly Household Expenses in section 1.

For section 3.5, Income of Other Adults in Household, only list those adults that share in your household expenses. This typically romantic partners or family members that help out with any of the household expenses. In the case of a roommate situation where you are splitting the rent and the utilities, include neither their income nor their portion of the expenses in the financial declaration.

Section IV. “Available Assets” is fairly self-explanatory. These figures do not have to be exact. For instance, if you have $528.62 in a savings account, you can just put down $500.00. Cash on hand is just that, how much cash you are carrying around with you at any given time. Anything that you have in the bank, whatever the account, goes on the next line. If you own stocks and bonds, they are listed here, as well as the cash value of your life insurance (if any), and other kinds of savings accounts such as money markets, certificates of deposit, or mutual fund accounts. Retirement accounts are not listed here unless for some reason your retirement money is in a form that is currently “available” to be turned into cash. Similarly, the value of any real estate owned, such as a house, is not listed here.

Section V “Monthly Expense Information” is an important section which you need to complete as carefully as you can. Remember that these monthly bills are assumed to be for the future, post separation. So do not include (for example) the cost of running and insuring a car for both you and your spouse. Keep in mind with which parent your children will be living when you estimate costs for utilities and food.

Many bills are paid once a month so these are easy to fill in, but be aware that some are billed at different intervals, such as the electric bill, which is usually billed every two months. The figures that you give here all need to be average monthly figures. So you will need to average (for example) your gas bill to show the average amount that you pay over the course of the whole year, both winter and summer.

The top of the list, section 5.1 Housing, is usually your largest single expense. This is for your monthly rent or your first mortgage payments. Any additional mortgage or home equity line of credit payments go on the next line. If the taxes and insurance for your home are not included in the mortgage payments, you will need to list them separately (otherwise, simply state “included in mortgage figure”).

Next is the section for Utilities, section 5.2. Keep in mind that some utilities are billed at rates other than once a month. The standard utilities are listed; heat, electricity, water, sewage, garbage, telephone, and cable. Two utilities that are rapidly becoming standard that are not listed here are cell phones and internet. Add these items to the list, if (like most people) you do pay them.

When completing Food and Supplies, section 5.3, you must remember that the figures here are for your household post-separation. You may have to make a good faith estimate if you are not yet separated or if this has happened very recently. State the number of people you are buying food for in your food budget figure. Then fill in the amount per month that you spend on food and household supplies bought at the grocery. Any food eaten out is filled in on a separate line. Please note that if money is tight you, like many people, may need to curb your spending on eating out after separation! Again, if you have questions about what amount to list, make an educated guess then contact your attorney about your questions.

With section 5.4, expenses relating to children, you again need to keep in mind which parent will be paying these expenses. There are the standard expenses listed such as day care, clothing and tuition, but you should add any other items such as expenses for books, magazines and clubs or recreation, if your children incur these expenses regularly.

Transportation, section 5.5, is next. If you are currently paying a loan or lease for any vehicles, the monthly payment is listed here. If you have just split up and you were not paying the loan or lease before, but think you will be paying it now, then list it.

Vehicle insurance payments are entered in this section as well, however, if you pay at some other rate than monthly, i.e. every six months, then you will need to figure out your average monthly expense. Gas, oil and ordinary maintenance is a little harder to establish. Estimating the amount that you spend on gas in a week and multiplying by 4.3 will give you a starting figure. Depending on how often you take your car in for regular maintenance, you will need to estimate an amount per month that you spend. For instance, if you take your car in once every three months, divide the average bill by three and add to your figure for gas. This is for normal maintenance only, oil changes and the like, not for one time bills for major repairs. Parking expenses are listed next. If you take alternate transportation to work or have other transportation fees, list them on the next line.

Section 5.6, Health Care, covers any sort of out of pocket expenses for health care. If this expense is fully covered by your employer you should leave blank the insurance portion of this section. If you do pay insurance, either out of pocket or by payroll deduction, list the monthly amount here. Any co-pays for medical visits or prescriptions need to be listed here as well. You will need to estimate a monthly average for any sort of recurring appointments and check ups. Children’s medical expenses would be included in this section if you will be the parent providing the health insurance or paying for the medical bills.

Personal Expenses, section 5.7, are for just you, so don’t include any costs for children. These too are fairly standard expenses similar to the ones listed in the children’s section. There are places to list your average monthly costs for clothing, hair care/personal care, clubs and recreation, education, books, papers, magazines, photos, and gifts. Think about other personal costs that you might incur regularly, and itemize them here. These might be things like dry cleaning, church donations, etc.

Section 5.8 for Miscellaneous Expenses is a good place to detail any other expenses that are deducted from your pay like disability policy premiums. Life insurance premiums (if not paid by your employer) should be listed here. Any other regular expenses that you have not already mentioned should be listed here. However, this section does not include credit card expenses or outstanding loans or debts that are not directly related to property, real estate or vehicle. These debts are listed in section 5.11.

You now total all of the monthly household expenses, sections 5.1 to 5.8, and put the total in section 5.9 Total Household Expenses. This amount also is put at the beginning of the financial declaration, under Declarant’s Total Monthly Household Expenses.

The Installment Debts section, 5.10, is for any loans or outstanding debts that are listed in sections 5.1 to 5.8. This includes debts which are paid in a fixed number of installments like consumer loans which are not credit cards and are listed in the expenses sections 5.1 to 5.8. This also includes vehicle loans and mortgages (here you state the total amount of the debt and not just the monthly payment which you gave in your monthly expense).

Other Debts and Monthly expenses are placed in section 5.11. Student loan debts and credit card debts should be listed here. If there are any other debts that are not covered in sections 5.1 to 5.8 then list those here as well. The total of your debts is noted here and then put back in the Section I summary under Declarant’s Total Monthly Debt Expenses. This total is added to the total from section 5.9 and entered here and at the beginning of the financial declaration under Declarant’s Total Monthly Expenses.

Section VI, Attorneys Fees, can usually be filled out by your attorney.

At the end of this process, you have a total monthly income figure, a total monthly household expenses figure and a total monthly debt expenses figure. The court will rely on these figures in making all kinds of financial judgments from child support to attorneys’ fees. so as we said at the beginning of this article, accuracy is important. We can help make sure that your declaration is filled out correctly and completely, but we rely on you for the raw data that will form the basis of your declaration. We hope that when you understand how this document works, you can help us make the process as efficient and painless as possible.