Do I Have to Disclose All My Finances During a Divorce?
In New Mexico, divorce is legally recognized as the “dissolution of marriage.” When a marriage dissolves, financial implications must be settled before completing the process.
Depending on your circumstances, you may wonder if you must disclose all your finances during a divorce. The short answer is yes; however, financial disclosures and protecting your assets are significantly more complicated than a simple yes. While it is true that you must disclose all personal holdings in good faith, you may also have certain assets and investments that may not count as community property. Always err on the side of caution, though, as misrepresenting your finances can land you in legal trouble.
If you are seeking legal advice regarding divorce proceedings, a New Mexico divorce attorney from New Mexico Financial & Family Law is here to help.
Financial Disclosures and Divorce Proceedings in New Mexico
When filing for divorce in New Mexico or responding to a petition, it is crucial to be prepared to disclose all of your financial information. This due diligence ensures the court can go through the legal process to determine how shared property will be divided.
The finances you will disclose include financial assets, other assets, and debts. Specific examples include the following:
- Financial Assets
- Salary (including earnings from a small business or freelance work)
- Checking account total
- Personal savings
- Retirement savings
- Other Assets
- Houses and other physical properties
- Personal property
- Health insurance and life insurance plans
- Other items of considerable value
- Mortgage or rent payments
- Credit card debt
- Student loans
- Major purchase payments
- Additional debts
Your lawyer will ensure you have all the necessary paperwork for disclosing your finances.
While your requirements could vary, documents typically required include tax documents for the past two years, at least two recent paystubs, bank statements, credit card usage documentation, and other paperwork related to your financial circumstances.
How Are Finances Split in a Divorce?
Once both spouses have provided the necessary financial documentation, the court will begin dividing assets and debts. While a 50/50 split is standard in New Mexico, it is not the only way assets are divided. Let’s look at factors that could impact how finances are split in a divorce.
No-Fault vs. At-Fault
No-fault divorces are those that are typically ended on the grounds of irreconcilable grievances. An at-fault divorce is an option when one spouse is responsible for the disunion, like infidelity or substance abuse. No-fault divorces are often considerably more amicable, and, sometimes, community property can be divided without issue. At-fault divorce proceedings are typically more complex.
Community Property vs. Separate Property
New Mexico is a community property state. This means that all property belonging to a marriage must be split equally between spouses in the event of a divorce — including homes, jewelry, clothing, income, dividends, benefits, and more. The same goes for all debts incurred during the marriage, except for gambling debts.
There may be property that was acquired before or after a divorce, which is considered separate property. Separate property also includes gifts or inheritance received while still married, as well as property identified explicitly as separate in the court agreement.
Once a divorce petition is filed, parties must disclose financial information, including what is considered separate property and community property. The court will divide only the community property. Either spouse has the right to request property be excluded from the division; however, they must be able to prove by a preponderance of evidence that it is separate property.
Child Support and Alimony
Child support and alimony (also referred to as spousal maintenance) are separate matters from the division of assets. These factors may or may not apply, depending on your specific circumstances.
Child support is often a complicated matter, as the court needs to consider each spouse’s employment status, ability to provide, and what is best for any children under the age of 19. Spousal maintenance refers to scheduled payments that one spouse pays to the other after a divorce.
Are Business Assets Considered Community Property?
The answer to this question depends entirely on the circumstances of the business. Put in the most simple terms: if you own a business (or an equity share in a partnership), then the amount of money invested in the business through household finances will determine whether or not the business’s value counts as a shared asset.
If you paid yourself a competitive salary and did not intermingle personal finances with business investments or finances, chances are that your business will count as a financial entity separate from yourself and your household.
If, on the other hand, you barely took any personal income from the business and instead reinvested most of your earnings, then your spouse could argue that household income was used to support the growth and longevity of the business. Similarly, if your spouse played a direct role in the business’s operations, such as if they helped you prepare your taxes every year, then it is equally likely that they can successfully petition for partial ownership of the business (or an equivalent value of assets).
The best way to protect your business assets during a divorce is to keep business operations and finances away from household affairs. Do your best to work a regular 9-5 schedule and pay yourself a competitive salary as if you were any other employee. Avoid taking home profits or setting aside what would be your personal pay to reinvest in the business.
A prenuptial agreement can also help keep certain assets distinct, but note that if your spouse becomes involved in the business past your wedding date, you may venture into joint ownership territory once more.
How to Protect Your Finances During a Divorce
Protecting your financial health amid a divorce is essential. To move forward as smoothly as possible, consider the following tips:
- Hire a divorce attorney. No matter how amicable your divorce may seem, it is best to hire a divorce lawyer. Not only can they ensure that everything is filed correctly, but they will also ensure your best interests are kept in mind.
- Do not conceal assets. Any attempt to hide assets can result in severe consequences. Not only does the person who attempted to hide financial information lose credibility with the New Mexico court, but the judge may consider the act a mark against you when determining how to divide property. You may also face contempt of court or other penalties.
- Know what you own. Knowing the value of what you own is crucial. Avoid guessing the value of your assets, especially for costly items like homes and vehicles. Instead, work with your attorney and a financial planner to carefully map out what you own separately and what is considered dually held.
- Check your credit score. If you possess any joint credit card accounts at the time of divorce, you will want to close that account and open one in your own name. Depending on how long you’ve been married, your credit may be strongly tied to your spouse and those community assets. You want to take proactive steps to strengthen your personal credit score, especially if you have any amount of joint debt.
- Change your beneficiaries. In the event you have estate plans drawn up prior to your divorce, you will (likely) want to ensure you switch the beneficiary on any plan you named your spouse the recipient of. This includes retirement accounts, investment accounts, life insurance policies, and more.
Learn More From a New Mexico Divorce Attorney
At New Mexico Financial & Family Law, we understand how distressing divorce can seem. It is essential to feel supported, organized, and prepared throughout the entire process.
When you seek representation from a New Mexico divorce attorney, you can rest assured your case is in good hands. We will thoroughly review your circumstances and help you determine how best to proceed based on your unique circumstances. Schedule a no-obligation online consultation today or call us at (505) 503-1637.