How To Get Your Financial Information In Order Without A Forensic Accountant

Note: Our Podcast, “A Year and a Day: Divorce Without Destruction”, was created to be heard, but we provide text transcripts to make this information accessible to everyone. All transcripts on our website are created using a combination of speech recognition software and human transcribers and could contain errors.

Jaime: Welcome to A Year and a Day. I’m Jaime Davis, board certified family law attorney at Gailor Hunt. On this show, I talk with lawyers, psychologists, and other experts with the goal of helping you navigate divorce without destruction. Last episode, I talked with Robert Nordlander, a forensic accountant who helps his clients achieve the best financial outcomes in divorce proceedings. In this episode, I’m talking with Gabrielle Clemens, certified divorce financial analyst. Gabrielle and I are going to discuss how you can get your financial information in order on your own, if your divorce doesn’t require a forensic accountant or if you can’t afford one. Thanks for joining me, Gabrielle.

Gabrielle: Thanks for letting me be here, Jaime. Good to be here.

Jaime: So, tell us a little bit about yourself, your career, and why you became a divorce financial analyst.

Gabrielle: Sure. Well, I was a divorce attorney and tax attorney prior to transitioning to financial services. So I really like the practice of law. I have a master’s in tax. I did trust in estates. And you never know what’s going to happen in the law and you never know what’s going to happen when you go to court. And I worked a lot in the family law arena. However, when I had my first son, who is now 25, going on 26, I decided to transition to a reasonable work schedule, and I wasn’t at the mercy of court dates and deadlines and things like that. So now I started out by helping women go through the process of divorce and understanding what their divorce agreement was really saying and running the numbers with them to make sure that the agreement that they were signing was actually sustainable and viable to them and their lifestyle, and also just to make sure that they understood it. Back when alimony was taxable, this was a big issue for people. I had many people stating that they never realized that their alimony was going to be taxable. They were adamant that it wasn’t. And sometimes it was in the agreement and sometimes it wasn’t. So whether it’s in the agreement or not doesn’t matter. The IRS wanted their money back then, so we just wanted to make sure that they understood everything. And that’s how I started, and now I help men and women go through the process.

Jaime: That’s wonderful. And you’ve also written a book, Marriage is about love, divorce is about money. Tell us about your book.

Gabrielle: Here it is. Marriage is About Love Divorce Is About Money. It is my registered trademark. And it’s just sort of true. I mean, when you have children and you’re working out the parenting schedule, a lot of money flows. It flows to your household, it flows to your lifestyle, it flows to taking care of the kids, the medical expenses, the extracurriculars, the college. Everything about splitting a family is really about money, and it’s something that people need to understand and approach that way. Put on your business hat as you approach this settlement and understand that this is probably the second biggest financial decision that you’re going to make in your lifetime besides purchase of a home. So it’s important that people understand what the decisions that they’re making today, what the long term impact is for their success in their financial future.

Jaime: Absolutely. In my practice as a family law attorney, I found that folks can tend to get a little short sighted, right? Like they’re so concerned with just getting through it that they’re not really thinking about making sure they have enough money to take care of themselves and their children for the long run.

Gabrielle: Exactly. And in my practice, what I do for attorneys like you is we run the numbers, we do the financial plan, we run the numbers and we say, is this sustainable? How are you going to know whether or not you have a good settlement or if it’s good or bad or better or worse than the last settlement proposal if you’re not running the numbers and seeing how this is actually going to play out in the future?

Jaime: So for someone facing divorce, what should you do first to get your financial information in order?

Gabrielle: Well, what I recommend is you start with the financial affidavit or the financial statement that’s required in your case. So whether you’re mediating or arbitrating or litigating you’re going to need this document in order to move forward through the court process and ultimately get your divorce. Now what this financial affidavit does is it walks you through how much is your mortgage, how much is your brand, how much is your insurance and it forces you to think about these line items and what it really costs to be you. What does it cost to be you in your house with your kids or for college or your car and what is your lifestyle and you quantify that. So the first thing they need to do is really get control of your cash flow. What’s coming in, what’s going out, where is it going. And assets and liabilities are relatively typically somewhat stable and they’re easier to pinpoint at different stages. Obviously, if you’re paying down principal in your mortgage it’s going to fluctuate in value a little bit. But for the most part your cash flow is what your support, your child support and alimony is going to be based on. So the first thing to do is get control of your cash flow and your lifestyle expenses and then go into quantify what your assets and liabilities are.

Jaime: So it’s really just having a greater understanding of what your monthly budget is. I know a lot of folks, they think of the mortgage and the utilities but they tend to forget those smaller things, right? Like eating out school supplies for their children, the field trip costs, all of those things. And you’re right, the financial affidavit is a great way to make sure that they’re thinking about all of their expenses in total?

Gabrielle: Yes, absolutely. And we have a new term that we put into our financial statements and it’s called self care. The manicures, the pedicures, the botox, all those things. Just wrap that into self care. You don’t need to tell the judge exactly what you’re spending on and what that, because these are like some privacy. But that’s really important. And add that to your spreadsheet, add that to your financial affidavit because that is money that you’re spending. And don’t feel bad about it, just recharacterize it and call it self care.

Jaime: Right. If it was part of your lifestyle when you were married, it gets to be part of your lifestyle when you’re separated too.

Gabrielle: Exactly. Even more so you’re going to need more self care and more stress management techniques and strategies than you did before. Potentially.

Jaime: Absolutely. So we’ve determined the budget. What are some of the documents that folks need to find when they’re first getting started in this process?

Gabrielle: Mortgage statement is very important. So a copy of your mortgage statement that says what the interest rate is, what the term is, and what the monthly payment is, and what the current principal is, your pay stub, your tax returns, your spouse’s pay stub is very important. Your health care documents, if you’re on a particular health care plan through work, getting some of that information will be very important. To know what your benefits are. Your Social Security statement, go enroll if you haven’t already onto Ssascurityadministration.com. Get a copy of your Social Security administration benefit statement. They don’t send them out anymore, so you have to go online and get them enroll in there and get that. So your tax returns are very important, as I said, the last three years of tax returns, very important. Very helpful. Any life insurance policies potentially with cash value. So if you have permanent or even term life insurance policies, those are important to get a copy of the whole policy. Not just the coverage, but the whole policy. So anything and everything that goes on your financial statement is something that you should be able to get a document and a file put together to back up to corroborate and to support those expenses. So anything you’re putting on a financial statement, you should be able to get a corresponding document to show that.

Jaime: So what do you do if you’re the spouse who doesn’t have access to the financial information?

Gabrielle: Well, one thing I would not do is I would not think about what the number should be and put it on your financial statement. I would put one dollar on your financial statement as a ticker just to tell you I don’t have that information. We’re going to need to get that information and you may need to subpoena the information if your spouse isn’t giving it up. Or you’re just going to have to come back to that, and your spouse is going to have to produce that information. But just don’t put in any number thinking that it’s correct, because that could be a grave mistake in front of a judge or to the other side, to your opposing counsel saying that you can’t document this number. Where did you come up with it? And it just leaves you open to scrutiny when you’re really just trying to be helpful by putting in information that you don’t have. So I would just put maybe a dollar there just to show that you don’t know that number and ask your spouse. And if your spouse isn’t going to give it or you don’t know where to find it, you can ask the opposing counsel for that information. Or worst case, you can subpoena it from the institution, the company that you’re trying to gather it from.

Jaime: Yeah, a lot of times in these cases, when we’re trying to keep them out of court, but my client doesn’t necessarily have all the financial documents. If the other side has a lawyer, which hopefully they do, we reach out to that other lawyer and we suggest, hey, let’s participate in a voluntary document exchange. I’ll give you my client’s documents, you give me yours. And that way everybody has a complete picture of the couple’s finances so that everybody can make an informed decision about how those should be divided.

Gabrielle: Right, but you’re not always going to get that cooperation. So for the less cooperative couple, a little bit more high conflict. There are ways to get that if they’re not voluntary. I work with clients who have complicated executive compensation plans, and we can’t always get the stock option schedule, and we just have to subpoena the employer for it if someone’s not going to give it up.

Jaime: Yeah, absolutely. If the case is in litigation, serving subpoenas or conducting discovery is a wonderful way to get the information. And back to the financial affidavit you had mentioned, it was very important not to just guess at numbers and to make sure that you really do have the backup documentation. I was just going to add that when we’re in court and we see lots of round numbers on that financial affidavit, we know that there’s probably not a lot of backup documentation to support those numbers.

Gabrielle: Yes, I agree. And so what do you do at that point? Do you ask opposing counsel or do you just accept it? I mean, what’s your strategy when you see that?

Jaime: Well, if I’m cross examining the other side, I’m happy for them to have the round numbers. We can poke all the holes in their expenses. I would say that if it’s my client, I would not go into court with a financial affidavit that looked that way. I would make sure that if it was an estimate, that it was noted as an estimate. And sometimes on our affidavits, we even add footnotes that explain how the client arrived at the number. For example, she doesn’t know the cost of her health insurance. So she went on the website and pulled a quote. We’ll say where she got the quote from or things like that to show the reasoning behind a number that may not be that there may not be a document to support.

Gabrielle: Yeah, absolutely. We do footnotes too, in Massachusetts, and it’s great. And we have some practitioners feel as though certain judges don’t really read the footnotes. Other judges do. So it all depends, right? That’s what the first thing I say in my book is. It depends.

Jaime: Absolutely. I find myself saying that all the time in my practice.

Gabrielle:Right.

Jaime: So once you understand what you own and what you owe, what do you do next in the process?

Gabrielle: Well, then you sit down with your attorney and your client and hopefully the opposing party and start to really flesh out what an asset division is going to look like and determine whether or not keeping the house or selling the house makes sense. Can you afford to keep the house? What do you want? In my book, I go through the process for someone facing divorces, which is start from the end and work the other way. Work backwards, work forward so that you can actually envision and develop a perfect day in your post divorce life. What does that look like and how do we get there from where we are now? So if you’re okay with selling the house, then where would you go? Let’s build about what we can tell a little bit what the budget is going to be. Where would that be? Can you stay in town? Do you have kids close to college age? Are they already out of college? Where can you go that you’re going to find a home that’s going to make you comfortable or maybe you rent? I mean, how great is renting for a few years while you sort out where you want to be and where you want to spend your money and your resources. So the next thing is really to look at a proposed settlement or get a guideline or where you’re going to end up and where we can live. What can our lifestyle look like within that framework, within those guidelines of your potential settlement after divorce, and what’s going to make you happy?

Jaime: Do you ever find that you have to have tough conversations with clients who really want to keep that house? They’re very tied to the house, but, you know, financially that is not probably the best choice for them.

Gabrielle: Absolutely. And that’s why we run the numbers. And I don’t say no. It’s not my position to say you can’t do this or you can’t do that, but sure, you can keep the house if you want to put this much strain on your cash flow, or if you want to get a second job, or even a first job if you want to not go on vacation. And we’ll just cut the vacation budget, that’s fine, but you’ll have a house. And then we’ll start turning and they’re thinking, I don’t know, maybe this isn’t such a great idea, but I can’t make the numbers do what they don’t do and I can’t work magic. And especially most people are very risk averse. So when I invest money, then we have to be conservative because we want to preserve those assets. So I have them arrive at their own decisions based on the numbers, but it is something that they have to come to terms with.

Jaime: Can you share a story of someone who didn’t follow the steps you’ve outlined? What happened?

Gabrielle: Well, it can be sad because when you approach your divorce, the financial aspects of your divorce emotionally, then you’re not going to make sound decisions and all you’re going to do is look at the projections in a rose colored glasses and just say, this could never happen to me. I did have a client that she spent so much money on self care, plastic surgery, Botox, new wardrobe, travel, trying to meet her next soulmate. And I kept saying, okay, look at the numbers. Now we’re going into principal. Now we’re starting to really drill down on these assets and you’re going through your money. And she was renting and her rent was going up and she just wouldn’t look at the numbers. She wouldn’t focus on what she had and what she was doing. She was very focused on what was going to securing the next love of her life. And unfortunately, she did fall in very dire circumstances and she didn’t understand what happened to all of her money and she just literally spent it. She went through it. So by not doing a budget and not adhering to some kind of discipline within the guidelines of your assets and your income and not understanding the cash flow and just think things are going to be different and they’re magically going to work out, it’s folly. I mean, it’s just not necessarily going to happen that way. And you have to be disciplined in your approach and pay attention to your finances. And it was very sad. She ended up starting a dog walking business, which was great. It was really wonderful. But as she got older and she couldn’t walk through the streets very easily with six dogs and it was just not what she had been used to. So I think if she had been a little bit more or a lot more fiscally responsible, it wouldn’t have had to be this way.

Jaime: Right. I think it’s really important, especially for folks who are going through a separation, to understand and appreciate the financial reality of their situation. I mean, while they were married, maybe they were able to put their head in the sand and not really worry about the budget or the finances and sort of spend however they wanted. But once you’re separated, you’re in charge of your money and you need to make sure that you’re being responsible so that you can make it last for your life expectancy.

Gabrielle: Exactly. And you can do that. We were running the numbers, she just didn’t want to pay attention. But to run the numbers, pay attention, and understand how this is all going to play out and revisit it every year, every month, twice a year. This is your responsibility now. And it’s important. If you’ve made this agreement, it’s really hard to go back to modify it just because you spent too much money. So life is always going to throw us a curveball here and there. So you want to make sure that you have money set aside for emergencies. And beyond that, you can live a nice life, I’m sure, with what you have, or get a job, or get a better paying job or a second job. And you can move forward, but you have to at least keep your eye on the ball.

Jaime: Absolutely. If you could only share one piece of advice with someone going through a divorce, what would it be?

Gabrielle: Well, it begins with the attorneys. And as you’re hiring an attorney and you’re working with your attorney, I would just ask, do you have time for my case right now? I know in the New England area, attorneys, family law attorneys are so busy, they’re taking on cases. A lot of them are with large firms. They want to take in cases, but then they don’t really have time to give to your case. So one of the first questions I would ask when you’re hiring an attorney, I would ask them, do you have time for my case? What is your response time? Will I expect if I send you an email or a phone call? How soon will I hear back from you? This is really important and this is a critical relationship between you and your attorney and you understanding how they operate and how they work and where you fit into that and where they fit into your life. This is your one attorney. Your attorney has 6100 cases, I don’t know how many. And you want to understand that they do have time to focus on your case. And it’s okay if they don’t have time. It’s okay if they say, you know what, I’m not going to be able to focus on this. I’m not going to get back to you in 6 hours with your six page email asking me to reiterate the law on child support. It’s okay. But it’s a relationship that you have to be comfortable with and how they operate and how you operate, what your needs are. And this happens throughout the divorce process. So you can stay in sync with your attorney because it’s really expensive and time consuming to change attorneys mid case. And we try really to stay away from that by making the right choice first. And part of the right choice is knowing you’re going to get the service and the attention that your case deserves.

Jaime: I think that is a wonderful piece of advice. And I will tell you that is one of the reasons why my law firm uses a team approach to cases. We have at least two lawyers assigned to every case in our office. That way, if the client calls, there is someone there who knows who they are, knows something about their case, and can help them if the lead lawyer is in court or mediation or wherever else they might be. So I could not agree with you more on that point.

Gabrielle: Yeah, that’s great case management. And, Jaime, not everybody does that. Not all law firms do it. And it’s difficult for a client when they call and they’re talking to different people all the time, trying to explain, and then that person, that new person has to pull the file, go through the file, get up to date, and answer the question. Because you can’t just answer a question without knowing the circumstances, how law works. That’s not how family law works. So I like that about your firm and you and your practice, and I think your clients are very fortunate to have that because that’s not always the case.

Jaime: Well, thank you. If one of our listeners is looking for help from you and their divorce, what is the best way for them to get in touch with you?

Gabrielle: They can call me. My number is 781-910-4770. You can Google me. I’m in Boston. You can Google me and call me at the numbers placed there. You can look at my book. There’s a website, www.gabrielleclemens.com. But start with my book. It’s a great little book. It’s a guide. It’s formatted to approach your issues before, during, and after divorce, because there are a lot as you know, Jaime, there are a lot of post divorce issues. Estate planning you have to do, how to file your first tax return as a single person or a head of household is a big deal and a lot of nuggets in there.

Jaime: Well, your book sounds like a wonderful resource for people. Thank you for sharing that with us.

Gabrielle: Thank you. Thank you Jaime.

Jaime: And Gabrielle, thank you for joining us. This has been wonderful.

Gabrielle: Well, I appreciate it. Thank you. Good to see you, and best of luck to everybody.

Jaime: Thanks, Gabrielle, for joining us. And thank you for listening. If you like this episode, be sure to follow the show wherever you get your podcast so you don’t miss the next one. While this information is intended to provide you with general information to navigate divorce without destruction, this podcast is not legal advice. This information is specific to the law in North Carolina. If you have any questions before taking action, consult an attorney who is licensed in your state. If you are in need of assistance in North Carolina, contact us at Gailor Hunt by visiting divorceistough.com. I’m Jaime Davis, and I’ll talk with you. Next time on A Year and a Day.