So, your lawyer gave you a Financial Statement to fill out. Most of it is pretty straightforward once you learn that date of separation and date of valuation are the same thing. However, you would be surprised how common mistakes are when completing these.
Mistakes that even lawyers frequently make. To make your life easier and avoid costly consequences as you navigate your way through the family law system, here are some common mistakes to keep in mind when completing your financial statement:
1. Not filing your taxes on time.
If you are one of those people who has put this off for years, now is the time to file your taxes. In almost all cases, you will have to disclose your income and provide backup documentation for the past 3 years. In fact, neither Ontario nor Superior Courts in Ontario will accept a Financial Statement being filed without your last 3 years’ Notices of Assessment. Most cases require you to file a Financial Statement with your Application. This means that until your taxes are complete, in most cases, you cannot start a Court Application. As it takes some time for the Notices to be processed, it is best to complete your taxes as soon as possible.
2. Putting “estimates” instead of accurate values.
When completing your monthly budget, estimates are the way to go for most of the items that you spend your money on as the figures tend to fluctuate month to month. However, when you are filling in the figures for your bank accounts, they have to be accurate to the penny. In a lot of cases, you will be asked for backup documentation to prove the figures. Not only will it look bad on you to have the wrong sums, but it also effects the total equalization payment you may owe or that of which may be owed to you.
3. Missing or intentionally not adding accounts you want to remain private.
Even if you have an account that your spouse knew nothing about during the marriage, or you opened one after you separated, you absolutely must disclose it and the values associated with it. Sooner or later this hidden account will come out and you do not want to look like you were trying to deceive anyone.
4. Listing an RESP as your asset.
An RESP must be disclosed on your financial statement, however people tend to make the mistake of placing the value of it in the corresponding columns. This results in an inflated net worth despite these funds never really being available to you. An RESP is there for your child only. The value should be listed in the description but not in the columns requesting the date of marriage, date of valuation, and today’s date values.
5. Crediting 100% of a joint asset or bank account to yourself.
Any asset you hold jointly with another person, either a spouse, a parent, or a friend, must be reflected accordingly. If you and your spouse held an account jointly, your financial statement should reflect 50% of the full value.
6. Listing every household item.
Some people get carried away listing every chair, couch, and tv in the home. In most cases, these items will be divided by the parties on their own and would not be cost effective to have lawyers sort through them. Items with significant value such as vehicles and jewelry collections should be listed. Keep in mind, you may be asked to provide backup documentation such as appraisals for every item listed in your financial statement.
7. Forgetting Disposition Costs.
This is probably the most common mistake you will see on financial statements. Disposition costs are fees associated with a specific account or property in order to obtain the funds. A home will have disposition costs in the form of real estate commission fees and legal fees. RRSP’s and pensions have tax consequences for withdrawing the funds, essentially making the actual value of the asset worth less. Your lawyer will be able to assist you with calculating these fees and what percentage to use when doing so.
8. Confusing “Face Amount” and “Cash Surrender value” of a Life Insurance Policy.
The face amount of a life insurance policy is the full amount that will be paid out to the beneficiary upon your death. A cash surrender value is a significantly lower amount that is reimbursed to you should you cancel your policy. This is typically associated with “life” terms only and not term life policies such as 10-, 20-, or 30-year policies. To obtain this value, you should contact your life insurance provider.
9. Listing a gift or inheritance only in the excluded property section.
A financial statement has a section to exclude items such as gifts, inheritance, insurance payouts, etc. This section is used to exclude a value from your net worth so as to not arbitrarily inflate it. However, you absolutely must have this asset listed earlier on in the respective column, as well as the excluded property section. For example, you may list jewelry under household items with the full value associated with it, and then list it again under excluded property with the full value to then exclude It from the calculation. This way you are honest and transparent with your assets without making the mistake of inflating your net worth.
Your lawyer or their law clerk will be able to assist you with completing your financial statement and answer any questions you may have to ensure it is as accurate as possible.
Senior Law Clerk at Townsend Family Law