The Hidden Benefits of “Tax Season” by Vickie AdamsIn most marriages, it is not unusual for one spouse to have a more “hands-on” role or a better understanding of the marital finances. For a variety of reasons (fear, control, stereotypical gender roles), the spouse who is less focused on “how the money works” may not possess the information necessary to understand or accurately convey a complete picture of his/her own financial reality.

If you are considering divorce or already in the divorce process, this knowledge becomes even more critical. Understanding the day-to-day monetary transactions within the relationship, as well as your complete marital financial history, is essential to negotiating a fair settlement and improving the odds that you will have a stable financial future.

The Hidden Benefits of “Tax Season”

  1. If you find yourself in the role of the less financially savvy spouse, wondering how you got to this place, you are in luck. It is a new year and that brings a fresh opportunity to get involved and up to speed about your finances.
  2. Many of the same financial documents that are necessary in divorce proceedings are also used to prepare your tax return. By mid-February, most of the information that you will need to accomplish either of those goals will be easily accessible (arriving in the mail, online or available through your tax professional).

They include:

  • W-2s and 1099s from self employment and other statements of earnings
  • Bank account statements and year-end reports
  • Year-end brokerage statements
  • Statements from IRAs, 401(k)s, and pension plans from current and former jobs
  • Credit card year-end summaries*
  • Rental property information, partnership and corporate returns, prior year’s tax returns

*These need to be meticulously checked line-by-line, as they often show irregularities and dissipation of marital assets

The ability to present an accurate financial picture not only serves as documentation of your existing standard of living, but is essential in preparation of the disclosure documents necessary for divorce in California. Whether you are thinking of filing, have filed first, or find yourself the respondent in an unexpected divorce action, providing your legal team with accurate financial information will be the basis for critical items such as child support, spousal support and property settlements.

Can’t my lawyer do this research for me?

Yes, and for a few hundred dollars an hour. Being able to provide an accurate financial paper trail, as opposed to a lengthy discovery process, will save you a lot of time as well as unnecessary legal fees.

If you are still married, tax preparation gives you a great excuse to open up a dialogue about finances. If you have never gone to the tax appointment, go this year. Ask your tax preparer to explain the items that are included in the return to you. Know what you are signing. If your spouse prepares the tax return, do not sign until you are sure you have a sufficient understanding of the information that’s included.

How well do you understand your own finances? If your answer is “not well,” this is the ideal time to begin to gain that knowledge. Getting up to speed requires some time and may be out of your comfort zone, but is well worth the effort. If you are contemplating divorce, a Certified Divorce Financial Analyst is your best resource to bring your financial picture into focus quickly for you.

Vickie Adams Divorce Financial PlannerVickie Adams, CFP®, CDFA