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When Is A Personal Financial Statement Needed In A Divorce?

High-asset divorce cases can involve complicated financial issues. In these situations, a personal financial statement can be an integral tool for understanding each party’s position and solving complex problems. A personal financial statement lists all of an individual’s assets and liabilities, and provides balances or value estimates for each item.

Personal financial statements include information about bank accounts, real estate, businesses, retirement accounts, investment accounts, etc. Personal property, such as furniture or household items, is usually not included unless it has considerable value. If personal property is included, it is most likely art, jewelry, or collectibles. Personal financial statements also do not include leased or rented property because the party does not have an ownership interest.

Determining the value of assets can be both straightforward and confusing. Usually, for liquid assets, the most recent account statement can be used to determine value. For real estate, value can be established in multiple ways, e.g., based on the amount of property tax assessed, by obtaining an appraisal, or from a website. Businesses are trickier due to their non-liquidity; there are multiple approaches for estimating a business’s worth, each of which could potentially come up with a different number.

Personal financial statements allow each party to understand the other’s financial situation. They can cut down on surprises and, when used in conjunction with other financial documents, can present a clear picture of the issues at stake. At the same time, some attorneys have reservations about their use. They are not created or reviewed by a neutral third party and rely on self-reporting. This begs the question: how much should attorneys rely on personal financial statements, and at what point should they obtain outside information – for example, a third-party valuation or appraisal? However, despite any potential shortcomings, personal financial statements can be extremely useful for solving the complex problems that arise in high-asset divorce cases.


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