One spouse always knows more about family finances. This is a financial truth in all divorces that I’ve seen repeated again and again. A marriage is a partnership including dividing the responsibilities of the home. One spouse may have more time than the other; or they may have more experience with financial matters than the other; or they may have education, skills, or traits that make them better suited to do the job. Or, maybe they handle the money simply because the other spouse won’t.
The danger of the one financial truth in all divorces.
Why does it matter that your soon-to-be ex-spouse handled most or all of your family’s finances while you were married?
You Know Far Less about the Family Finances than Your Ex
Don’t fool yourself. I’ve seen cases when someone thinks they understand the family finances and a few basic questions prove otherwise. If you’re not sure, get advice from someone who can help you figure out how much you know. If you’re the one who knows less, then…
You’re at a Disadvantage
Your soon-to-be ex-spouse could use this to obtain more assets and income. If you don’t know what you own and what you owe, how will you know if a settlement offer is fair? Don’t panic or be embarrassed. Recognize you’ll need help understanding your finances and do your best not to let your emotions take over. The person you’ll interact with most is your lawyer. That means…
Your Divorce Lawyer is at a Disadvantage
Your lawyer is immediately at a disadvantage if your spouse knows more – perhaps a lot more – about your family’s finances than you do. That’s because your lawyer is relying on what’s in your head at first, with little or no documentation to back that up. Recognize there’s a “gap” and…
Find a Process to Fix It
Does your lawyer have a solid process for organizing the family finances? Can they take you from where you are to a level playing field with your spouse? There is no such thing as a 100% bullet-proof checklist, however, there is a general strategy. You must identify, quantify, assign, and distribute assets, liabilities, and income. You may still need to…
Bring in Divorce Financial Experts
If your finances include a family business, real estate, investments, stock options, retirement accounts, complex assets, hidden assets, or fraud, you will need assistance from a financial expert who specializes in divorce matters and/or business valuation. Good divorce financial experts will bring value to your case. Don’t let them wander without a plan. Work with your lawyer to identify your objectives so you can identify the scope of the financial expert’s assignment. That way, the financial expert can deliver results within that scope – and they can also let you know if they found any red flags that warrant additional investigation. Experts could include tax CPAs, forensic accountants, business valuation analysts, divorce financial analysts, financial advisers, insurance agents, and others.
The Bottom Line
Recognize the universal truth that one of you understands the family finances better. If that isn’t you, that’s OK. You and your divorce lawyer should identify the gaps, put a solid process in place, and bring in experts when necessary.