Completing Your Family Court Form Financial Statement
By DOUGLAS J. MANNING,
Family Law Department
Introduction
At Burgar Rowe Professional Corporation we strive to provide you with the best
and most accurate advice and representation possible. As
part of our efforts in this regard it is necessary for us
to think of us working with you as part of our team. And
as part of our team we will rely on you to make your best
efforts to provide us with the most accurate information
and documentation in order that we might give you the best
advice possible.
As part of the resolution of the property issues and support
issues between spouses that arise upon separation you will
most likely be asked to complete a Financial Statement.
The Financial Statement is an affidavit. You will swear
to the truth of its contents. You must therefore take time
to complete it without omission or exaggeration. If it contains
mistakes, however innocent, someone may use them to criticize
your honesty or competence. It will not be an answer for
you to say, "My lawyer put those in". Your lawyer
or legal assistant will be reviewing the statement in detail
with you before it is put into final form and eventually
sworn.
The Financial Statement has four main sections –
Income, Expenses, Assets, and Debts. The Income and Expenses
sections assist us in giving you advice on the issues of
Child and Spousal Support. The Assets and Debts sections
provide information that will help in the appropriate determination
of your property division and entitlement.
Income
You will see that the form is set up with columns for monthly
amounts for income and expenses. If you are paid weekly
multiply your weekly salary by 4.33 (as there are 4.33 weeks
in the average month). If you are paid bi-weekly take the
amount and multiply by 26 then take that number and divide
by 12 months to come to a monthly figure. For the expense
categories follow the same process. If you pay your mortgage
monthly, put the monthly amount in the column. If you pay
the mortgage bi-weekly go through the process above.
If any item you fill in is not an accurate or exact figure,
add the letters "est." to signify that you are
making your best estimate.
It is helpful to prepare notes or footnotes to be read
in conjunction with and attached to the financial statement.
Footnotes should be used where an item requires explanation.
For example, if your income this year includes a sizeable
bonus which will not be repeated next year, then put a number
next to the amount you have inserted and on a separate sheet,
list the footnotes with the explanation. Feel free to use
as many footnotes as necessary in order to properly explain
your financial circumstances.
All Income and Money Received (page 4)
Here, the emphasis is on all income. You must list income
from all sources, including Child Tax Credit, interest and
even income which you did not report on your income tax
return. You can omit interest on your RRSP, however.
Show your current income, not what shows on your last year's
financial statement or last year's income tax return. If
you have had a major change in income (e.g., a big raise
or a dismissal) in the last year, bring it to the attention
of your lawyer to deal with so the figures will not be perplexing
on an annual basis. Your income from employment should be
your gross income, i.e., your income before deductions for
income tax, Canada Pension and so on. If your income fluctuates,
then indicate that on the statement and estimate your average
monthly income.
You should give us your most up-to-date paystub from your
place of employment or other document to show your earnings
for the year to date.
Other Benefits (page 4)
"Other Benefits" include such things as a dental
plan, life insurance, car expenses beyond reimbursement
for mileage, leasehold inducements and any other related
benefits you receive through business or employment. Although
they are not directly income, they are a financial benefit
to you and must be disclosed.
If you are not taxed on the benefit and do not know its
value, then please make inquiries and give your honest estimate
of the worth of the benefit.
Other Income Earners in the Home (page 4)
The section is designed to determine if you are in a relationship
and sharing living expenses with that person. Please answer
the questions to the best of your knowledge. Estimate the
percentage of the household expenses that this other person
is paying for.
Total Expenses (pages 5 to 6)
Once again your estimates are to be based on monthly amounts.
If you pay an expense on a weekly basis then multiply this
expense by 4.33 in order to come to a monthly calculation.
It is usual to use the last twelve-month period, but if
there have been dramatic changes such as the birth of a
child, a move to a new city or a recent separation, it may
be more helpful to use a shorter period. The expenses you
show should reflect your current standard of living even
though it may not be the standard of living you enjoyed
during cohabitation or what you hope to enjoy when the matter
is resolved.
General Comments Regarding Expenses:
If your spouse is currently paying some of your expenses,
then indicate this either with a footnote or with an asterisk
beside those expenses. Similarly, if you are paying some
or all of the costs of two residences (as sometimes happens
after separation), then insert all of the expenses you are
making and give the explanation by way of footnote.
If you are unsure of expenses, then start keeping track
on a daily basis of your bills for all items, including
groceries, toiletries, items paid for by cash and so on.
You will be surprised at how quickly expenses add up.
Be careful not to double-count your expenses. For example,
if you purchase clothes on a credit card, this item should
be reflected under the clothing section (items 63 and 65)
and not under the debt payments section (items 101 to 102).
Likewise, if you buy your general household supplies (item
59) at the grocery store, do not duplicate that cost in
your groceries expense (item 57).
If the children are living with you, your expenses will
include costs for them.
Some items will be difficult to estimate. For example,
you have probably not kept track of your car maintenance
(item 71) over the last year. Please think back carefully,
review your bills and estimate your actual costs where you
are not sure of the exact amount.
If you are covered by a medical, dental or drug plan (items
75 to 78), then list only the portion of the expense that
you personally have to pay. Use a footnote to explain that
the balance is covered by a plan. This is important, for
if the coverage is by reason of your spouse's plan, it may
not continue in full (at least for your expenses) after
divorce.
Make sure your income tax figure (items 37 and 41) states
the actual amount payable. Adjust the figures if you expect
a refund or put in a footnote to explain. Note that there
will be a big adjustment in your present tax level when
spousal support is taken into account. If you are currently
paying or receiving spousal support pursuant to a court
order or written agreement, be sure your current figures
reflect the fact that the payments will be included in the
income of the recipient spouse and deducted from the income
of the paying spouse. If support has not yet been determined
or is being paid on a voluntary basis, then indicate this
with a footnote and we will assist you in calculating your
proposed expense for tax.
Please refer to your pay stubs or income tax returns to
establish the figures for the deductions from your income
(items 38 to 43).
There is an obvious overlap in the Entertainment and Recreation
(item 85). Our general distinction is that entertainment
refers to passive activities such as going to the theatre
or to movies. Recreation refers to more active activities
such as skiing, bowling, boating and so on. The important
factor, however, is that you know what you have included.
Again, use a footnote if necessary.
Debt payments (item 101 and 102) should include only the
regular payments you are, in fact, making, not what you
owe or should be making. There is a provision for the listing
of debts (Part 12) later in the statement.
Show an expense for RRSP contributions only if you are
currently making them or have done so within the time frame
you established at the beginning of the budget section of
the statement.
Summary of Income and Expenses (page 6)
The summary of income and expenses is very important. When
completing this section, if you show a deficit of over $100,
please re-examine your figures to ensure that the deficit
can be explained to us. If you are running a deficit, you
must show how this is being financed. There are generally
five ways in which a deficit can be explained:
(1) you borrowed money;
(2) you spent savings;
(3) you have not listed all your income or you have had
a recent drop in income;
(4) you are exaggerating your expenses;
(5) you have not paid certain annual expenses, such as realty
taxes, yet.
There is a good way to check that your figures are consistent
with each other. Add to your "Total Expenses"
total any increases in your savings plus any reduction in
your debts in that same time. In a separate calculation,
add your gross income in that same time plus the amount
by which your debts increased plus the amount by which you
reduced your savings. If the totals are not very similar,
something is probably wrong. If your time period is separation
to the present, you get the savings and debt differences
in Parts 11(c) and 12.
The same reconciliation must take place in reverse if
you are showing a surplus but, in fact, you are not saving
any money.
Assets (Parts 11(a) to (h))
Please go through each category and be sure that all of
the property you had for the following dates:
(a) the date of marriage;
(b) the valuation date (see below);
(c) the date of the statement -- this is the day you are
completing the financial statement form.
The valuation date is an important date. That is the date
that you and your spouse separated without a reasonable
prospect of resuming cohabitation. Sometimes this date is
obvious, but often it is not. Before completing this document,
please be sure you have discussed with me the valuation
date to be used.
While the form requires you to list all assets owned on
the valuation date, you should include (either by way of
footnote or under the heading "Date of Statement")
all your current assets, even if acquired after valuation
date. The disclosure may not be needed to determine the
equalization payment, but it will be relevant if spousal
or child support is an issue in your case.
You should use "fair market value". Fair market
value is the price a willing buyer would pay to a willing
seller in an arm's length transaction on the open market.
When your lawyer reviews your financial statement with you
he or she will discuss whether another value is more appropriate
in the circumstances (such as "book value").
Fill in the estimated market value of your assets without
deduction for any encumbrance. The encumbrance (such as
the mortgage or a debt) will be shown in Part 12 of the
statement under "Debts and Other Liabilities".
List only the property registered in your name. Do not
show the property registered in your spouse's name. Provide
us with a separate list of the property that is in your
spouse's name, even if you have possession of it, use it
regularly or are making a claim to it.
If you own property jointly with another person, whether
or not it is your spouse, then include only your interest
in the property. For example, if you own the matrimonial
home jointly with your spouse, include only one-half of
the estimated value. If you own property through a partnership,
then include only your percentage interest in the property.
Land (Part 11(a))
List all of the land you owned at the valuation date (or,
if support is in issue, that you now own) in accordance
with the instructions above. Show your percentage interest
in the property. Include the approximate or expected selling
price of the land without deduction for mortgages or other
encumbrances. Those will be included later under "Debts
and Other Liabilities".
General Household Items and Vehicles (Part 11(b))
The value which should be stated in these columns is the
resale value of the item and not the replacement or insurance
value. Look in the newspaper or consult a dealer with respect
to the value of your car.
Generally, the value of household items (unless the asset
is an antique and appreciating) would be around one-quarter
of the replacement value. This will change, of course, if
the item was recently purchased, or if it has a high resale
value. If you have special works of art or jewelry, they
should be listed in Part 11(b) as a separate category. Jewelry
is generally worth 35% of the replacement value.
List only your share of the furniture and appliances.
If an item was owned by you prior to your marriage, then
list the entire value. If it was owned by your spouse prior
to the marriage or is clearly owned by your spouse now,
then do not list it. You may need to separate all of this
out on a schedule attached to the financial statement.
It is difficult to estimate the value of your household
contents, but you should give it your best effort. Do not
list every single knife and fork. It is usually good enough
to say "typical household contents of no special value".
Alternatively, you could list items of particular value
like the dining room suite, master bedroom furniture, etc.,
and leave the rest as "miscellaneous".
If you and your spouse have already agreed on an equal
division of the contents of the house and vehicles and you
are satisfied with the division, then there is no need to
complete this section. Be sure, however, that you are, in
fact, satisfied with the division and that it has taken
into account personal items of special value.
Bank Accounts and Savings (Part 11(c))
List every bank account you have, even if the balance is
zero. List accounts registered in your name or in your name
jointly with another person (whether or not that person
is your spouse) and money held for you in someone else's
account. If you are holding money in trust for someone else
(such as a parent or a child), include the money but show
the explanation in a footnote.
Registered Retirement Savings Plans (RRSPs) should be listed
at the gross value without reduction for tax consequences.
We will discuss with you whether or not a tax deduction
is appropriate and, if so, we will assist you in calculating
the amount which will be included under "Debts and
Other Liabilities" in Part 12.
If you are the owner of a pension from which you are or
will be entitled to receive payments, you should write immediately
to the Pension Fund Administrator and obtain a written statement
as of the date of marriage, the valuation date and the date
of statement with respect to the pension amounts and your
contributions. You should obtain and provide us with your
pension booklet and any other documents pertaining to the
pension benefits so that we can retain an expert to determine
the value of your pension. Note that the valuation usually
costs about $500 and somewhat more if a valuation is required
both at marriage and at separation.
Securities (Part 11(d))
Under "Securities", you should include Mutual
Funds, Canada Savings Bonds (even if they are held for the
children), stocks, mortgages, etc. Obtain your most recent
statement or consult your broker.
Life and Disability Insurance (Part 11(e))
Include only the insurance plans of which you are the owner.
Do not include your spouse's plans, even though you may
be a beneficiary. The "cash surrender value" is
not the amount you will eventually receive if benefits are
paid out but rather the amount you could "cash in"
your policy for now. A "term" insurance policy
has no cash surrender value.
Business Interests (Part 11(f))
"Business Interests" may be extremely complicated.
If you own a business, it may be necessary to retain a business
valuator. For the time being, list the book value of your
business and give us supporting documentation from your
accountants. Let us know of assets worth more than the book
value so we can make preliminary adjustments. You can include
your interest in an incorporated company either here or
under "Securities" in Part 11(d).
Money Owed to You (Part 11(g))
Please include any money owing to you by way of loan, unpaid
invoices, tax refunds and so on.
Other Property (Part 11(h))
This should include any other property you own that has
not already been included in the financial statement.
Any property that you have a beneficial interest in must
be included, whether or not it is in your name. For example,
if your parents hold property in trust for you, you must
include it either here ("Other Property") or under
the appropriate section ("Land", "Savings
and Savings Plans" and so on).
Debts and Other Liabilities (Part 12)
List the total amount owing on all debts in your name alone.
If you owe money jointly with your spouse (for example,
the mortgage), then list only one-half of the amount owing.
If the debt is in your spouse's name alone, do not list
it. (You may list it in a footnote or separate sheet for
us.) If you guaranteed your spouse's debt, list this as
a contingent liability.
The item people usually forget is tax arrears, especially
professionals with a January year end. If you pay your taxes
by installments, then obtain your statements from Revenue
Canada which are closest to the valuation date and to the
date of the statement.
Speak to us about a suitable tax liability for your pension
and other assets.
Property, Debts and Other Liabilities on Date of Marriage
(Part 13)
Under this section, you should put in the value of your
property and debts which you held at the close of business
on your wedding day. It is probably very difficult for you
to do this in retrospect, but you should fill in your best
estimate. As will be explained to you, you are entitled
to deduct from your net family property the value of all
assets owned at the date of marriage. However, it is your
responsibility to prove any deductions you wish to claim.
You should therefore collect all supporting documentation
for the deduction you claim.
You deduct debts then owing, such as mortgages, income taxes
not yet paid, etc.
If the home you were living in at the date of separation
was owned at the date of marriage, then you are not able
to deduct it from your net family property. It cannot be
listed on the statement under this section. If, however,
you owned another home, then that home is not a matrimonial
home as defined in the Family Law Act, and can be deducted.
Be sure to discuss this with your lawyer if you are in doubt.
This also applies to a cottage or recreational property
which is seasonally used as a home.
Excluded Property (Part 14)
In this column, you must list those assets which you earlier
showed as being owned on valuation date and which are:
(a) property (other than a matrimonial home) that was acquired
by gift or inheritance from a third party after the date
of marriage;
(b) damages for personal injury acquired during marriage;
(c) proceeds of life insurance acquired during marriage;
(d) property (other than a matrimonial home) into which
the above can be traced; or
(e) property which you agreed (by way of domestic contract
or marriage contract) would not be included in your net
family property.
For example, if, during the marriage, you inherited $30,000
from which you spent $10,000 on travel, $10,000 on paying
down the mortgage on the matrimonial home and $10,000 to
buy shares you still owned at valuation date, then include
only the shares at their valuation date value.
If you are in doubt about whether an item is excluded
or not, fill it in with an asterisk or a footnote and discuss
it with your lawyer when they review your statement.
Disposed Property (Part 15)
If your marriage lasted less than two years, list all the
property you sold during the marriage. If the marriage was
longer than two years, list all property sold in the last
two years. Be prepared to show where the proceeds of sale
went.
Calculation of Net Family Property (Part 16)
You do not need to complete this calculation. Your lawyer
will do it for you once the numbers are finalized.
Income Tax Returns:Part 1 Item 10
The form requires the attachment of your most recent three
years’ income tax returns and Notices of Assessment.
Please bring these to your lawyer for completion of the
form.
Summary
The burden of proving items you want credit for (such as
deductions from your net family property) or that you want
excluded (such as gifts) is yours. You must therefore accumulate
all documents which will prove both that you owned the asset
and the value of the asset.
When you have completed this document you will meet with
your lawyer and finalize the document and you will sign
it swearing that it is true.
Caution
We emphasize that responsibility for accuracy is always
yours, even though you persuade your lawyer that your figures
seem to be accurate. Once you swear that it is true, you
cannot excuse an error by saying "This is what my lawyer
wrote down". If there is a mistake, then you, and not
your lawyer, will suffer the criticism of the judge and
opposing lawyer. The financial statement is an affidavit.
It is sworn under oath by you. You are responsible for the
truth of your figures.
Help is Available
If you have difficulty completing the form or need assistance,
please call our office. If your lawyer is not available,
you can speak to our Law Clerk. She is very experienced
in completing financial statements and will assist you either
by telephone or in person, as you prefer.
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The above is not intended to constitute
legal advice. Please contact a lawyer to clarify your
legal rights.
