The third installment of our common divorce mistakes series concerns the lack of good record keeping during the marriage.
Previously, in Parts I and II of Divorce Mistakes, we’ve addressed what the most common mistakes people make include; 1. Not knowing the value of what you currently have, and 2. not knowing the value of what you had. The next most common mistake I encounter in my practice is a lack of recordkeeping.
The records I am referring to may include records pertaining to the original purchase price of homes, businesses or buildings, the values of retirement accounts (just before and during the marriage), stock value, or loans made to others or taken by one spouse or the other.
Idaho is a community property state and that generally means an equitable division of assets, property and debt. But it does not mean assets are valued at what the soon to be former spouse says things are worth. People also often forget that values of businesses, including big equipment, are assets that should be properly valued and divided during a divorce, and records can help establish the value of the assets to be distributed.
Additionally, throughout the marriage family members often give gifts or make family loans. If it’s a loan, did you get a promissory note and keep a copy of that? If something was a gift, who was the gift to — the couple or the individual? If it’s not documented, the court will have no way of knowing and it could give half of its value to your former spouse. More often than not the court will presume the car or boat was given to the “couple” as a gift unless you can document otherwise.
Family heirlooms without proper documentation, are another area that people don’t realize should be documented. If you inherit something from a loved one, it’s important to prove who it belongs to through documentation or the court could award it to the other spouse, or order it sold and the proceeds divided.
No one goes into a marriage thinking they have to keep records for 10, 20, 30 years, but it can make the difference between an equitable division of assets and an unfair one. I’ve encountered many situations in my 20 years of practicing law that have had different outcomes because we were able to find important records.
For example, one of my clients was able to obtain a much better settlement to support her later in life — about $500,000 more than what was originally offered by her soon to be former spouse. That doesn’t happen every time, but because we were able to obtain and review older business records — we were able to secure those funds for her.
To avoid such mistakes, transparency is essential to the process. In an ideal world, a soon to be husband and wife would sit down with attorneys and financial advisers to devise a financial plan that benefits the couple, even in the event the marriage ends. Both the husband’s and wife’s records would be openly shared to come up with a plan. Issues that we can address include: Do you need a prenuptial agreement? Or a property agreement? Do you want or need a trust? Again as in Divorce Mistakes – Part 1 and Part 2, knowledge is power, and if you can back that up with good record keeping practices you can lower both the cost and stress of a divorce.
Call experienced lawyer Merrilee A. Parr at (208) 667-1227. She can help you. Ms. Parr has owned her own law practice in northern Idaho since 1997 after working in the Coeur d’Alene City Attorney’s office in the prosecutor’s office. She has extensive pre-legal experience, which includes working as a caseworker for Child Protective Services and a case manager for the Arizona Supreme Court (Foster Care Review Board).