Episode 140 - Financial Affidavits
If we are being honest, Financial Affidavits are no fun to fill out . . . well, for most of us anyways. But, they are arguably the single most important document you will be swearing under oath to in your divorce or similar family law matter. In this show, Leh and Todd discuss why they are so important. They give examples of how they can be used against you in multiple ways in Court if you did not properly fill them out. They explain how they can help you be better prepared, and give tips on how to go about filling them out.
Leh Meriwether: Welcome everyone. I'm Leh Meriwether, and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether and Tharp, and you are listening to The Meriwether and Tharp Show. Here you'll learn about divorce, family law, tips on how to save your marriage if it's in a middle of a crisis, and from time to time, even tips on how to take your marriage to the next level. If you like to read more about us, you can always check us out online atlantadivorceteam.com.
Todd Orston: Hi, Leh.
Todd Orston: How you doing?
Leh Meriwether: Good. How are you doing?
Todd Orston: Oh, I'm well.
Leh Meriwether: You're well?
Todd Orston: I could say I'm golden.
Leh Meriwether: Just trying to do something different.
Todd Orston: Just trying to be polite. Just working on my manners.
Leh Meriwether: Oh, okay. Are you working on anything else?
Todd Orston: Manners really takes up a good chunk of my day actually.
Leh Meriwether: I heard you were a poet.
Todd Orston: Oh. I'm an amateur wordsmith.
Leh Meriwether: Oh. Well, are you ready?
Todd Orston: Oh, I'm ready.
Leh Meriwether: All right. Let's talk about something that's super exciting. I'm really excited about this one.
Todd Orston: What are we talking about, Leh?
Leh Meriwether: DRFAs.
Todd Orston: DRFAs?
Todd Orston: And by DRFAs, are you referring to Domestic Relations Financial Affidavits?
Leh Meriwether: I am.
Todd Orston: Aka DRFAs.
Leh Meriwether: Yes, so if you hear the word, it's not a SHERPA, it's a DRFA. So we are talking about financial affidavits, and some people might be... Don't do this. This is too important. I mean, if there is one single document that you're signing or swearing under oath to during a course of litigation, not too many are more important than a Domestic Relations Financial Affidavit. Because you're swearing under oath to your income, your outflow, what your expenses are, your assets are in the marriage, and what your liabilities are. And a lot of times courts, they'll make decisions, right or wrong, they'll make majority of the decision, even on a short term or a long term basis based on what you swore under oath to on that document.
Todd Orston: And once you put it in writing, once you create that DRFA and you sign it in the presence of a notary and you share it with the opposing party, at that point it is a sworn statement. It's an affidavit. It's a Domestic Relations Financial Affidavit. We're going to refer to it as DRFA. Do not forget, we are talking about an affidavit. This isn't something you just sort of scribbled and it's like, "Well, I'm not really bound by what I put in the document." You are bound by what you put in the document, or rather the opposing party has the right to assume that what you put into that document is correct and accurate. And if they do some research and they gather documentation and they can then turn around and show that what you put into the DRFA is not correct and accurate, they will use that against you every way possible. They will try to attack your credibility.
Todd Orston: So let's say you're saying, "Well, I can't pay this much in spousal support because my income is X or my expenditures are Y," but they they show that your income is lower or your expenditures are lower or... I'm sorry. Income higher, expenditures lower. Then all of a sudden they're looking at the judge going, "How can we believe anything this person is saying?"
Leh Meriwether: There's four huge reasons why this is so important. You've got to put a lot of time and effort into getting this right. Number one, they're not in order of importance. They're all equally important. But this one is it incudes your credibility, and the last thing you want to do to... All that time to get ready, make sure it's right. If you have an accountant that maybe can double check it, and ask your lawyer. I mean, it's worth paying your lawyer to double check it. Make sure things add up right. Maybe you had some math that was wrong in it. Maybe you used an Excel spreadsheet and there was formula that was wrong, which we've seen happen before. Because, like you said, suddenly you lie under that on that document that you had time to prepare for. Now everything else that maybe he said/she said. So you say one thing, she claims something different. They're going to lean on her side because you lied, what looks like you lied-
Todd Orston: I was about to say you didn't lie. It wasn't purposeful or even if it wasn't purposeful, the assumption can be made that it was purposeful.
Leh Meriwether: So here's another good example where we've seen situations where one party will allege that the other... So let's say the husband alleges that the wife mismanages the money, and he's been in charge of it. He took over control over it because she was mismanaging it. And then he shows up with a DRFA that is all wrong, and you're going, "Wait a minute. You're accusing her of mismanaging it. You can't even put the right numbers in there? So how can we trust what you just said?" And it makes it more difficult to settle the case. So that's one of them.
Leh Meriwether: The other reason why it's so important because you yourself are relying on those numbers. So if you don't know what is in your budget, you don't know what you can reasonably offer for a settlement when it comes to, and we're talking about support at this point. And this works on both sides. So let's say the husband's going to agree to pay alimony. Well if he doesn't know what his expenses are and he agrees to pay $5000 a month, but now of all of a sudden he finds he can't pay his bills and live in the house that he agreed to. He's going to be filing for bankruptcy.
Todd Orston: Yeah. Let's take a step back because I want to make sure that it is very clear. All issues of support at some point and in some form or fashion come back to the DRFA. Child support is calculated based on the gross income. That number is put into the DRFA. So the information that's in the DRFA gets put into the child support worksheets as do some expenses like insurance.
Leh Meriwether: Add this real quick just because we're talking about Georgia right now.
Todd Orston: Correct.
Leh Meriwether: We have people literally listening to this show around the world.
Todd Orston: So in Zimbabwe, it could be completely different.
Leh Meriwether: Do they even have child support in China? I don't know. But I know people have actually listened to it in China. But like Texas and Florida. So I just want to make it clear, when we talk about gross income, that's for Georgia. There are some states that use net income for calculating child support. I just want to make that point real clear.
Todd Orston: Good point.
Leh Meriwether: But it still doesn't change the importance of the DRFA because as far as I know, the 50 states here all require at some level a Domestic Relations Financial Affidavit. They might not be called that, but...
Todd Orston: Right. And then alimony in Georgia is a need-based request. You have to establish you have a need. How do you do that? You have a budget. You have to show that at the end of the day, at the end of the month rather, whatever income you have does not cover all of your expenses. There is a short fall. Then the focus here in Georgia turns to the payer, and do they have a corresponding ability to pay. Meaning at the end of the month, they've paid all the basic expenses, is there money left over? All of this is set forth in the financial affidavit. That's why it becomes such an important sworn statement that is used throughout a divorce.
Leh Meriwether: Right. And so lastly, the other reason is... Well, I said there's two more. One, your lawyer's relying on those numbers. So he's looking, he or she is looking at those numbers and giving you legal advice based on what you've sworn under oath, your assets, your liabilities are, your assets are, your income it, what your bills are. They make strategic decisions too as far, for example, asking for attorney's fees at a temporary hearing. Do I spend your money? I mean, the client's money, to go to court and say, "Judge, my client doesn't make enough. The other side's making five times as much. I need attorney's fees to help support this." So they're relying on this affidavit in order to do that. And so your lawyer is presenting that affidavit into court to the judge to support your request.
Todd Orston: Well, and then also we're fighting for you even before we get to court. We're fighting for you. So I maybe on the phone with opposing counsel. Opposing counsel is saying, "Yeah. I need your client to pay X amount in alimony." I may be taking a position strongly saying, "I don't know where you think the money is coming from."
Leh Meriwether: Right.
Todd Orston: "That's fine. What is your client want? $1500. Why don't you go... You know what, listen, let's round it up to $1 million, and make it two if you want because my client can just as easily pay $1 million as he can or she can pay $1500. Here's the document to show that." Now all of a sudden it proves to not be an accurate statement. Now my credibility is damaged, which hurts my ability to negotiate and potentially even hurts my ability to properly present in court.
Leh Meriwether: Yeah. So speaking of court, that's the fourth thing. The court is relying on these numbers, and I've seen situations where they was perhaps some confusing testimony about income of the parties or liabilities. And so the judge just... It was just a safer bet to go right back to the Domestic Relations Financial Affidavit and make a decision based on the husband's and the wife's affidavits because that's something that can't be appealed. He relied on something that was previously sworn under oath too, and so that was the evidence he relied on. And judges tend in domestic cases tend to give a tremendous amount of discretion, which means it is extremely hard to overturn an appeal at that point. And that's another reason why it's so important to get it right because the judge may turn around and rely just on the affidavits. I know that upsets some lawyers because some lawyers don't think that's fair because people don't put enough effort into them.
Todd Orston: Right. Except for the fact that attorneys also have the obligation to make a diligent review, do a diligent review of the document to ensure that the information in there is accurate. So we have that obligation. But you as a client have that obligation to make sure that you're providing the right information.
Leh Meriwether: Exactly. And up next, we're going to hear Todd's poem about DRFAs.
Leh Meriwether: Come on, Todd. You know you want to do the poem.
Todd Orston: Oh. There are things I want to do right now, Leh. Cite poetry is not one of them.
Leh Meriwether: Come on. You're letting down the listeners.
Todd Orston: Oh, Leh. Leh, it's a work in progress. The reason I don't want to do it is because people have been known to cry. They've been so emotionally moved by this poem that I just... People are driving. I don't like that responsibility.
Todd Orston: All right. Fine. Fine.
Leh Meriwether: Yes.
Todd Orston: And I hate you. Don't cry.
Todd Orston: Roses are red. Violets are blue. DRFAs are extremely important documents used in the context of divorce actions due to their ability to detail financial information that impact issues like child support, alimony, and equitable division of property. And so are you.
Leh Meriwether: I'm crying.
Todd Orston: See, I told you. I warned you. I warned you. People cry when they hear it. I'm fairly certain it's for good reasons. You asked for this.
Leh Meriwether: I did. I did.
Todd Orston: Now let's get back to the important stuff.
Leh Meriwether: Yes.
Todd Orston: DRFAs.
Leh Meriwether: DRFAs. Financial affidavits. Domestic Relations Financial Affidavits. That's what we call them here in Georgia. I know that they have different names in different states, but they're pretty much the same. We're talking about how we spent the whole last segment talking about how important it was and how there's four big reasons why you really need to pay attention to it and how it can negatively impact your case if you don't.
Leh Meriwether: I think it's important though now because they probably just heard. Oh my gosh. If I don't have it to the penny, I'm going to look like a liar on the stand.
Todd Orston: You have to do everything you can to be as accurate as you can be. But, for instance, if somebody is putting their financial affidavit, remember it's going to be broken down into different segments. So the first page is really just general information. When I say general, it's more a summary. What is the gross income, what is the net income, your name, some identifying information, things like that. Then it goes into there's different segments. One is going to be a more concise breakdown of income. One is going to be a breakdown of expenses. One is going to be a breakdown of assets. So you have to be very accurate. But let's jump for a moment to expenses, for instance, and let's say we're talking about utilities. What I will tell people is, okay. Do I need you to take the last 12 months of your electric bill, add them up, and give me the exact to the dollar amount? No. Give me a rounded number, and we'll put that in. Then you're not going to be able to be cross examined or at least if you are cross examined, the court's not going to be upset that you didn't put in, "Well, the exact average is $227.36."
Leh Meriwether: You rounded it down to $227.
Todd Orston: There you go. Right, exactly. I would love to see that cross examination. So be as accurate as possible, as you can be. There are some times where you do want to be as accurate as possible, but even a little bit of rounding, the court's not going to... If your car payment is $428.93 and you put $429, you're not going to be subjected to a ridiculous cross examination on that point.
Leh Meriwether: You won't look like you lost your credibility.
Todd Orston: Yeah. So now, if you are off... If your food allowance or your food budget is $327 per month on average and you put $1000, well now all of a sudden you are open to some cross examination. And if it's proven that, "Hey, I have your bank records. Show me one month where you spent $1000 on food."
Leh Meriwether: Well, actually it was more like $1500.
Todd Orston: Right. Exactly.
Leh Meriwether: I've actually had that happen before.
Todd Orston: I had that too where the expenses were really high, and my client... Basically I had him prepare the financial affidavit, and I was doing my review. And I see this is the car payment, reasonable. Here's the electric, reasonable. Here's the groceries, $1500. And I said, "Whoa. Hold on." And I confronted my client, and I said, "Listen, we're going in front of the judge saying not only can you not pay support but you may even need support. I mean, you have nothing. You're not working. $1500, you're telling me you really spend $1500?" The response, "Yeah, Whole Foods is expensive." What? I don't even shop at... No. I'm not going into court and saying you can't pay support or whatever financial contribute because you have to shop at Whole Foods. So that's where the attorney comes in where we have to review it, make sure it's accurate, make sure it's reasonable because once you put your Herby Hancock on it... I know it's John Hancock. Anyway, once you put that-
Leh Meriwether: The unknown signature on the...
Todd Orston: I'm telling you right now, if he tells me he doesn't know who Herby Hancock is, all right, we're done.
Todd Orston: Anyway, so once you put your name on it, it's a lock. You are absolutely locked into those numbers, and you are then subject to a cross examination in different forms and fashions. And that could be used against you.
Leh Meriwether: Yup. I even had a case one time where looking through it and she listed on her thing that their vacations is $4000 a month. I was like, "Wow. That's one heck of a vacation every year." Turns out, it was supposed to be $4000 for the whole year. She just forgot to divide it by 12.
Todd Orston: And that's fine. Mistakes happen. That's where attorneys come in to make sure that the information you're putting in... That happens all the time where people mistakenly instead of doing a monthly amount, they do a yearly amount or vice versa. So it's so important if you're doing this on your own, for instance, or even if you have an attorney, don't just assume the attorney got it right. Don't just assume that the document is accurate. Go through, fine tooth comb, make sure that it's all accurate because once you're done, once you sign and have it notarized, it's a lock.
Leh Meriwether: So the first thing you should do when you know you've got to do a Domestic Relations Financial Affidavit is to gather as many documents as you can. Pull together your utility bills if you can, pull together anything regarding the mortgage, like how much you owe on your mortgage-
Todd Orston: Car payment, insurance payments, anything.
Leh Meriwether: Now you maybe in a position where you don't control it and you don't have a clue. You know what, then you put questions mark because sometimes, like for instance in Florida, you have to file a financial affidavit at the beginning of a case. You don't have to do that in Georgia. You have to do it before a temporary hearing, but if you're asking for support. But every state has a little nuance of when you're supposed to do it. So get as much information. If you don't know the answer, you're better off putting a question mark because you're affirmably saying, "I don't know and I don't have access to the information to say one way or another." You should avoid guessing wherever you can. Now perhaps you make an educated guess. How much is your house worth? "Well, I don't know. We've been living in it for 15 years, and we haven't had it appraised ever."
Todd Orston: I have not used question marks, but I have put unknown. I have put estimated. So if you're talking about a value, I've put... What's the value of the house? $230,000 estimated. So that way if you are cross examined, because remember, that's what we're talking about, the danger. You're being cross examined. And let's say I'm cross examining you, and you put $230,000 but I have a document that shows maybe it should be $260,000. If it says estimated there, then it's... "Well, you say $230,000. Isn't it true that on Zillow, $270,000?" I put estimated. I'm not an appraiser. I put down what I thought the value is. If I can get more money for the house, fantastic.
Leh Meriwether: And Zillow's not-
Todd Orston: Yeah, exactly. But that wouldn't be... That's not a true appraisal, but my point is you're not looking yourself in. You're using words and a question mark may work where you're showing the court, "Hey, I'm not exactly sure. But I'm trying to give the court as much information as I can."
Leh Meriwether: This a little practical tip filling things out. I see people make mistakes as far as calculating things for how much they get paid. So, for instance, you hear bimonthly, you get paid twice a month. Well, that's easy. You just take your paycheck stub and multiply it times two and that's your monthly amount. But if you get paid every other week-
Todd Orston: That's 26 payments.
Leh Meriwether: That's 26 payments. So you got to multiply it together and then divide it by 12 to get the right number. Just those little things that people can quickly forget because I've seen people put the wrong numbers on their financial affidavit. You may not realize it until you get to court. I've seen that happen. But even then, you just need to be prepared to explain how you made... This is another important point. Remember how you calculated the numbers you put on there because you maybe cross examined in court and it's in court you realize you put the wrong number. And then they ask you a question about the in court about that and say, "You know what, you're right. I messed up. I just multiplied it times two. I didn't do it that way."
Todd Orston: And then it's a simple mistake, an accident as opposed to purposeful misleading.
Leh Meriwether: Exactly.
Todd Orston: That the court doesn't feel like you were trying to mislead the court.
Leh Meriwether: So that's incredibly important. Just like it's incredibly important that we take a break.
Todd Orston: And I promise no more poetry.
Leh Meriwether: Oh, man. No, actually, that's a good thing.
Leh Meriwether: So, Todd.
Todd Orston: Yes, Leh.
Leh Meriwether: I heard you got more poetry.
Todd Orston: I promise you, you would not want to hear my next poem. And the FCC probably wouldn't. No, I'm kidding.
Leh Meriwether: Yeah, we don't want to get banned from the radio.
Todd Orston: No more poetry. To all of our loyal listeners, I promise, no more poetry.
Leh Meriwether: That's probably a good thing. All right. So we're back. Meriwether and Tharp Show. If you want to listen to past episodes, divorceteamradio.com. If you want to read more about Todd and Leh, you can find us at atlantadivorceteam.com.
Leh Meriwether: Okay. So we're talking about financial affidavits. We're trying to make it funny because they can get boring. I mean, let's be truthful. Let's be honest here. If budgets were exciting, everyone would have a budget.
Todd Orston: Oh, you'd have like weekend, DRFA parties. What are you doing over the Christmas Break? Oh, going to get a little crazy. We're going to sit around, do some DRFAs.
Leh Meriwether: Because, I mean, and I'm not trying to pick on... A lot of clients come to us and they don't have a clue what their budget is. They've been busy with life. I mean, it happens all the time. They're not alone. I'm not trying to pick on our clients. If you look across society in the United States at least, I don't know about other countries, it's a huge issue that people don't do monthly budgets. Dave Ramsey is making a fortune talking about budgets.
Todd Orston: Well, they are so important for so many reasons. Obviously we've been explaining why it's important in the context of a divorce. One other reason that it is important in the context of a divorce is you need to understand what your needs are going to be once you're not in a marriage where you're sharing expenses. When you're sharing the expenses, have one home, one mortgage, all of that, then you're sharing expenses and things are more possible in terms of your budget. You need to understand... I can't tell you how many clients I have come in and they're like, "I don't know what I'm going to need. I don't know what kind of a house I'm going to live in or apartment. I don't know what kind of car I can drive. I don't know what moneys going to be there for me to buy food. So, no. I don't know." Well, a DRFA, that's what that document is there to do. One of the purposes.
Todd Orston: It's to let you know what are your needs going to be so that when we get into court and if we need to ask for alimony, we can justify it. We can say, "Here you go, judge. Here is the document that proves everything we're about to tell you that my client needs money or my client doesn't have the ability to pay." Let's say if the request is made against them.
Leh Meriwether: So you brought up... Interesting question I've got for you. All right. So let's say the spouse moved out of the house, and they took their car with them. So your client is living in the house. The spouse that moved out, let's say it was the husband moved out. He's paying the note on the car, but the note is actually in your client's name. Should she list that car note on her Domestic Relations Financial Affidavit?
Todd Orston: So here's the thing, if they're not the one paying it... So there's two ways to look at this. If they're not the one paying it and the other party is the one who is actively and has been actively making every payment, then arguably no because it's supposed to be a snapshot that shows exactly what your expenditures are. Now if you have an expectation that they are driving it for right now and paying it but hopefully within a month or so you're going to get that car. So you're anticipating. Yes, they're driving it right now, and they're nice enough that they're paying the rent or not the rent but the lease payment or the payment for it. But I'm going to get it back and I'm going to assume responsibility. Then you may want to put it on there, but you may, again, want to have a note there that says, "This is an anticipated amount because once I get the car and I assume that payment, this is going to go onto my budget." So you have to be very clear, but you can't just say, "Oh yeah. I'm paying that." No, you're not.
Leh Meriwether: Yeah. So but you can or you should list it in the liability section.
Todd Orston: Absolutely.
Leh Meriwether: So most affidavits, they have a section about what are your liabilities. You may not be the one paying them, but-
Todd Orston: It's in your name.
Leh Meriwether: But if it's in your name and you have a legal obligation to it, it should be on there.
Todd Orston: And usually when we do a Domestic Relations Financial Affidavit in the liability section, we will put next to the liability is it in wife's name, is it in husband's name, and that way it is clear. You may have a list of five, 10, 15, 20 liabilities. It could be mortgages, credit cards, car payments, whatever, and we will be clear because sometimes that's very important. If one party is like, "Okay. How about this. I'm going to be really fair. You take whatever debts in your name. I'll take whatever debts in my name." All right. That'll be a good way to deal with this. No. I don't think so. There's 19 debts here, and 18 of them are in my name that you want me... No, that's not reasonable. This is a document that you want a judge to look and at immediately have a snapshot, have an understanding of what your financial world looks like.
Leh Meriwether: I would add to that. So when you're putting all those things in there and you start having questions, and this is actually going back to the last show. So this is a pro tip on how to prepare it. Don't start on the first page and have a question and call your lawyer. And then you get to page three and you have another question, you call the lawyer. Go through the entire affidavit. Fill out everything that you can fill out, and then write questions as you go along. And then have just one phone call. Sometimes you can do it with a paralegal. Sometimes the paralegal knows how their lawyer likes to fill things out or they understand what the plan is. And they'll go, "Oh, no. Let's go ahead and put this here, this here. List it but put that you're not responsible for it." And the paralegal can help.
Todd Orston: Our paralegals are incredibly involved in the discovery process, and I include the preparation of a DRFA in that process. So absolutely. Now you may work with an attorney who is like, "Nope. My paralegal doesn't do that kind of work. Those questions should come to me." That's fine. Going back to last week's show, that's where you need to understand how your attorney works and basically just in that initial meeting say, "Hey. When I have questions about discovery, should I be coming to you or will I save money if I go to Mary or Bob the paralegal?" Go to the paralegal, and if there's a complex question, they will pass it on to me. Fantastic. Great plan.
Leh Meriwether: Yup. And you may during the course of the case, you may actually have to do multiple financial affidavits. I've seen where because the case lasted so long, there was four done through the course of the case because things changed.
Todd Orston: Well, especially on a temporary. Let's say you have to do one for a temporary hearing, you're not anticipating usually... You're not going to be anticipating things unless your client is about to move out. You know they're moving out so they've done some shopping, and there is an anticipated cost for an apartment and other things. The utilities for second home. Then fine. You may even go to court with two. Here's the current, and once my client moves out, this is what's anticipated. But that's going to be very different than the final one, let's say six months later where it's like, "Oh, now I do know. I will be moving out. I'm going into an apartment or a house. That's what the cost is, and here's all the expenses associated with me living on my own." So yeah, you'll absolutely. Usually. I can almost guarantee you will have to have a version one and a version two if your case has been going on for a period of months.
Leh Meriwether: Right. And you made a good point. Go out, figure out what those numbers are. Don't just say, "You know what, I think my apartment's going to be $1000 a month." No, find out. The apartment that I plan on moving in that's within the same school district of our children, it's $1200 a month, and this is the name of the apartment complex. As soon as the divorce is over, I'm going here, and that's why I need this much alimony.
Todd Orston: And also, now we're getting a little bit, or I'm getting a little bit more into how do you handle a hearing like that and what kind of evidence do you need. You should really be going with almost like a house where you have an appraisal and they have comps.
Leh Meriwether: Right.
Todd Orston: My opinion is you would go into court, have some comps. So if you're just going with one apartment complex that opens a door to an argument of, "Couldn't you find something cheaper? Really? All right. You're telling me that rent is $1600. Find something for $800. Find something for $900." If you go in and you're like, "Here are three main just nice but nothing over the top places. This one is $1600. This one is $1550 and this one is $1710." Now all of a sudden you're looking at the court going, "Look, judge, this is what the average price is."
Leh Meriwether: Or you come in and go, "I have called. There are eight complexes within the kid's school district. We have both agreed we want the kids to stay in the same school district. And only one of them has a vacancy." So just be prepared. So this all comes back, going back to the other show, just being prepared. Making sure everything put together.
Leh Meriwether: All right. Well, so you can start to see how this financial affidavit really lays out the plan. It's almost part of the plan, especially if you get to a hearing. Now you can also do multiple financial affidavits that same concept applies in a mediation. So you get ready for that mediation. You show, "Well, her DRFA says she only needs this. That's because she's currently did that at the temporary hearing when she was still living in the house. You're asking her to move out. Your client wants her to keep the house. Here's a new affidavit that reflects what her expenses are going to be at that point and time." Oh.
Todd Orston: Even though they're estimates, the one thing that isn't changing is the need to be accurate. You go in there with unreasonable requests or incorrect data, and all of a sudden you have potentially derailed all your settlement efforts or any efforts in court because your credibility is shot, and the other parties not going to want to just give you money if they don't feel like it's warranted or necessary.
Leh Meriwether: And up next, we're going to talk about the asset and liability section of the Domestic Relations Financial Affidavit and where there are some potential pitfalls that you will need to avoid.
Leh Meriwether: Welcome back everyone. I'm Leh Meriwether, and with me is Todd Orston. I've got some good news. Todd has said he is giving up poetry.
Todd Orston: Forever.
Leh Meriwether: He is not going to quit his day job to become a poet. So I've got some good news.
Todd Orston: Thank you, Leh. And I want to thank all of my non-fans that-
Leh Meriwether: I know you were starting...
Todd Orston: ... hate mail.
Leh Meriwether: I know you were struggling with that. After a lot of soul searching during our short break, you've decided to give that up.
Todd Orston: Yes.
Leh Meriwether: All right. Now after that good news, let's talk about some more good news. How to do a Domestic Relations Financial Affidavit or DRFA the correct way. We've been talking about the income and how you list your expenses and how there could be some nuances that you definitely should run past your paralegal or your lawyer depending on the circumstances. But now we're going to talk about assets because there's potential pitfalls if you don't put that information in there correctly.
Leh Meriwether: So one of the things we like to recommend that our clients do is when they start putting that together, their financial affidavit that they pull real estate deeds and closing statements, personal financial statements if they've ever done any before because that's important.
Todd Orston: Now, let me also say we've been talking about different versions.
Leh Meriwether: Right.
Todd Orston: If very early in the case you are finding that you may have to go into court for a temporary hearing or an emergency hearing, don't worry about... I don't want anyone listening to be like, "Oh gosh. I have to pull deeds. I have to do all of this." For a temporary, no, you don't. At a temporary, really what the court is going to be dealing with is the issues that are relevant in a temporary hearing. And that's things like support. The division of property and all of that and what assets you have and assets and how they're going to be divided, that's really a final issue. That's going to be relevant when you're going to mediation to try to settle. That's going to be relevant when you're going to a final trial.
Leh Meriwether: Right. So but in that final trial mediation vein, personal property inventories.
Todd Orston: Absolutely.
Leh Meriwether: We don't like to spend too much time in personal property, but I've seen cases where there's actually a lot. There is value in some personal property in the marital home. I've seen I think, was it you that had a case with $100,000-$200,000 worth of rugs are in the house?
Todd Orston: Yeah. Yes, correct. There were antique rugs. I've had cases where there were coins, and we're not talking about you own one or two coins. We're talking about very sizable, very valuable collections. Wine collections. Assets like that. Sort of like what we were talking about I think in the last show, fighting over the toaster. No, you don't need to put the toaster on. Although, I will tell you personal property, I've seen cases where you resolve everything, and everything sort of breaks down when you're dealing with the personal property. It's usually over nonsensical stuff.
Leh Meriwether: Chainsaws.
Todd Orston: Yeah. Well, you would fight for a chainsaw. I mean, if it's a nice chainsaw, I might fight for that. But you understand the point. The point is you might have to do create a complete list of the personal property. But in a DRFA, in a financial affidavit, when we're talking about the assets, usually we're talking about the really, really valuable ones. The cars, the homes, the rental properties, the coin collections, wine collections, any other collections, artwork, things that have significant value. Courts not going to want to or really care about the toaster.
Leh Meriwether: And in that vein, I've seen people list like their contents of their home being worth $20,000. I've had to break it to them sometimes that if you had a garage sale, you're not getting $20,000 for everything in your house, and that's a lot of times, that's the way... Again, unless it's something valuable that you can have an appraiser come and say, "Yes, it's worth that." But if you're doing a garage sale, what would people pay for it?
Todd Orston: Well, I think that comes down to the delivery, Leh. You're saying, "Yeah, I've seen your house. $150 maybe. I don't think so, sir."
Leh Meriwether: But the point is sometimes people overvalue what's in their house.
Todd Orston: Correct.
Leh Meriwether: And it can create an offset that you don't want in the divorce.
Todd Orston: And also a mistake that people sometimes make is let's say you go out and you buy a couch for $4000. A very nice, very expensive couch. Can you turn around and sell that couch today for $4000? No. Or the TV you bought five years ago for $3000, that same TV right now is $400, and that's new. In other words, you bought a 50 inch TV for $3000. Today that same model, probably better model is like $400. So no, you're not getting that value.
Leh Meriwether: Yeah.
Todd Orston: So you have to think of it also in terms of not the replacement, like if I'm buying brand new, but what is that property actually worth.
Leh Meriwether: And then I've seen situations where... Here's another pitfall. They list an asset, but they forget to list it as separate property. So as some financial affidavits will have a section that allows you to check a box that this is separate property. So let's say you had an IRA that you had before you got married, and you never touched that IRA. When I say you didn't touch it, you didn't contribute to the IRA during the course of the marriage. Now the IRA's worth twice as much as a result of market forces. You don't want to suddenly make that part of the marital pie that the court can divide because you didn't identify that it's separate property on your financial affidavit.
Todd Orston: Yeah. And I will tell you another document that we work on, we're not going to go into it here today, but we've done shows on this topic. We do something and prepare something called a Marital Balance Sheet, and that is just focused on assets and liabilities. And it's a very important document. Judges love when they get them because it really makes their job easier when it comes to dividing assets and dealing with debt. So you definitely want to listen to that show if you are unfortunately going through this process because the Marital Balance Sheet, as important as the DRFA is, when it comes to property division and debt division, the Marital Balance Sheet or MBS is incredibly, incredibly important as well.
Leh Meriwether: And there's some courts that are now requiring Marital Balance Sheets, not just here in Georgia but I've seen in other states as well where 10 years ago, it wasn't a requirement. But now everybody's putting them in there, and so of course you double check. A lot of times those numbers come from the Domestic Relations Financial Affidavit.
Todd Orston: Yeah. This is another point I definitely want to make. If you are preparing both a DRFA and a Marital Balance Sheet, make sure that the information in each is the same. You don't want to put in your DRFA your house is worth X, and in the balance sheet it's Y because once again, you're credibility is damaged. And it opens you up to a cross examination. Then it makes you just look foolish or maybe even deceitful.
Leh Meriwether: I think the more tricky one might be how do you list the business value on your financial affidavit because if you are the sole owner of a LLC or a subchapter S corporation or something along those lines, you have to list that as well. But the problem is how do you... A lot of times you don't know what the value is.
Todd Orston: No, but that goes to your question mark, right? You may have to put a TBD, to be determined. You may have to put some kind of a note there. But should you list the business? Absolutely.
Leh Meriwether: So it's a full disclosure. You may not know the value, but you at least list, "Hey, I know this is here."
Todd Orston: Right. And there are valuation techniques that if you value it one way using one methodology, it has $1 million value, but if you value it a different way, it has $100,000 value. So putting an actual numerical value can be very dangerous because again maybe it's the wrong value or you calculate differently than opposing counsel does, and now you've open the door to a cross examination and attack on your value. As opposed to putting in to be determined, that's you saying to the court, "I recognize there's an asset. I recognize the business has value. I don't know what it is. But we'll determine that."
Leh Meriwether: Retirement accounts is another important thing that there can be a pitfall. So it's really important that when you list the value of a retirement account, you try to include in there the date of that valuation because we've seen over the years as a result of market force, things going way up and going way down. And you can submit a financial affidavit to the court on Monday for a trial on Friday, and between Monday and Friday, the market tanks, and you're... I've seen this happen before and suddenly what was $90,000 in a 401K when we got to court was only $40,000.
Todd Orston: And remember, going back to your point where a judge could base certain decisions solely on the affidavits, on the financial affidavits. If you put in that the asset is valued at $50,000, the court could say, "Okay. I'm just going to do a 50-50, and it'll be $25,000 to each or whatever." Or maybe even just 50-50. It'll be split. Well, maybe it's 50% or 50% is $25,000. But maybe it's now doubled in value. Maybe it's now half the value. Okay. If the court says, "Well, $25,000 each," you'll get $25,000. But now what if the account is only worth $25,000? So now what the judge just did was give the other party 100% of that asset. So you have to be very careful, and that's where the date becomes important.
Leh Meriwether: Yeah. Very important. You know what else is important?
Todd Orston: Getting more time on these shows.
Leh Meriwether: I know. It just run out of time again. My gosh. There's so much to talk about. Definitely any questions that you may have, you want to talk to your lawyer before you swear under oath to it. Make sure everything's right, and wait til the end. Go through, fill out as much as you can, pull together as many documents to support it, and then talk to your lawyer about it, ask all your questions at the same time, and make sure that that's what your lawyer wants you to put together because maybe there's a strategy. Maybe they want you to do a future Domestic Relations Financial Affidavit as well. So work together with your lawyer in an efficient way, and you will set yourself up for success.
Leh Meriwether: Thanks so much for listening.