Rule 1-123 Financial Disclosures
In New Mexico, divorcing spouses must provide each other with certain financial information at the beginning of their case, often termed “Rule 1-123 disclosures,” after the New Mexico Court rule that requires this exchange.
In order to begin gathering this information, we use interviews and questionnaires to compose a financial snapshot of your life. However, to fill in the finer details and comply with the Court’s rule, your attorney needs certain records such as the following:
- Bank statements (including any types of crypto-currency (Bitcoin and the like), and crypto-accounts (CashApp, Venmo, Paypal, etc.)
- Credit card statements, regardless of whether or not you pay your bill in full each month
- Utility bills
- Mortgage statements for all properties (including timeshare information)
- Pension plan descriptions
- Retirement account statements
- Insurance information, including policy numbers and premium costs
- W-2s or pay stubs
- Tax returns
Many people are hesitant to hand over personal information, even to an attorney’s office. However, attorneys are held to high standards of attorney-client confidentiality and their continued licensure depends on appropriately handling their client’s personal information. It is important to recognize that your attorney cannot advocate for your best interests if they do not have all the information needed to do so. Terry & deGraauw, P.C. utilizes a secure portal for clients to provide documents to their legal team. Keep in mind that sensitive information, such as social security numbers or full account numbers are redacted before documents are disclosed to necessary recipients.
Some individuals are reluctant to spend the time and energy it takes to gather voluminous financial disclosures. However, information that is discoverable under the Court’s rules must be disclosed in order to prevent undesirable consequences such as increased legal fees or monetary penalties. Most of these documents are easily accessible online, which makes the process of obtaining the information less burdensome for our clients.
It is in your best interests to provide all information requested by your attorney early in the process. Part of your attorney’s job is to review your overall financial situation so he or she can give you appropriate and advantageous advice on the division of your assets and debts. Your attorney can help you identify and prioritize between liquid assets (like bank accounts) and other assets that may not be immediately accessible (like home equity, pension benefits, or retirement assets). Gathering financial information as early as possible arms you and your attorney with the information necessary to ensure you have the best financial outcome in your life after divorce, and allows you to move quickly through the disclosure process.
Inventory Your Assets
Take inventory of all property and belongings you have and make copies of all documentation in your possession regarding these assets:
- Wages, salaries, and other income, such as disability or public assistance
- Cash
- Bank accounts, such as checking and savings
- Retirement accounts
- Pensions
- Security or other deposits placed on a rental
- Home and land appraisals
- Investment property income
- Vehicle appraisals and titles
- Business assets and income
- Patents
- Stocks, bonds, CDs, and other investments
- Antiques, jewelry, and furniture
- Insurance plans for property, vehicles, and personal items
- Life insurance that has cash value (also known as whole life policies), and
- Any other assets you or your spouse own, including inheritances, pets or livestock.
In addition to gathering information for the assets above, if you have children and they have a trust or custodial account (such as a Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account), make sure you have all those details handy.
Inventory Your Debts
Before the Court can divide your marital estate, the judge must have a complete picture of your debts as well as your assets. In most cases, if you and your spouse took on debt during your marriage, the Court will evaluate it alongside your assets and assign it as required by state law. In general, when a spouse has a debt that is considered separate or unique to that spouse, such as a student loan, the court will often assign it to the spouse who acquired it.
When inventorying your debts, gather information about the following, even if the debt is in your or your spouse’s name alone:
- Mortgages, including documents relating to lines of credit and second mortgages
- Property liens
- Credit cards
- Other lines of credit or installment payments
- Vehicle loans
- Personal loans
- Student loans
- Rent obligations
- Tax debts and liens, and
- Any other debt acquired by you or your spouse during the marriage.
One of the easiest ways to obtain information about your debts is to pull your credit report. You can access a free report from each of the three major credit reporting agencies at https://www.annualcreditreport.com/index.action every year. Once you receive the reports, it’s essential to review each account to ensure accuracy, amounts, and payment history. You should dispute inaccurate information immediately. If necessary, you can submit a copy of your credit report to the Court for evidence of joint debts acquired during your marriage.
If you pay child support to a child from a former relationship or spousal support to a former spouse, you should include the Court-ordered information with your financial disclosures to your attorney, as those payments could impact your final “gross” income for current child or spousal support payments.
Inventory Your Expenses
One of the most challenging parts of assessing your expenses is the fact that expenses change. For example, one month your vehicle-related expenses might consist of only your car payment and fuel. The next month, you might have hundreds of dollars in repairs when your battery dies. Don’t worry: it’s okay to estimate expenses to the best of your ability.
Whenever possible, provide exact amounts for your expenses. When that’s not possible, take a look at the past twelve months and get an idea of your average monthly costs. When you record the expense, note whether it is exact or estimated.
To prepare for your divorce and plan your future budget, use this checklist of some common expenses you need to track:
- Rent or mortgage (if mortgage, break out your principal and interest payments)
- Real property taxes
- Homeowner’s or renter’s insurance
- Home maintenance and repair
- Healthcare costs that aren’t paid by insurance
- Medical insurance
- Childcare and other expenses for children (extracurricular activities, lessons, tutoring, memberships, allowance)
- Groceries and household supplies
- Eating out
- Utilities (for example, gas, electric, water, trash, and Internet)
- Cell phone
- Laundry and cleaning
- Clothes
- Education and tuition
- Entertainment, gifts, and vacation
- Auto and transportation expenses (for example, insurance, gas, repairs, bus, and train)
- Life insurance
- Savings and investments
- Charitable contributions, and
- Other installment payments.
If any of these expenses are paid by others—for example, if your parents help with your house payment—make note of the amount of and frequency of those third-party contributions.
Some other ways to pin down your financial information include:
- Checking all financial statements and bills that arrive in the mail
- Reviewing your credit card statements for any automatic payments, and
- Inspecting past tax returns.
Final Takeaways
If you have a financial advisor, authorizing direct communication between him or her and your attorney allows them to work collectively to make the most of your share of the marital estate. They can also help you compile your financial information.
It is important to work with your legal team to accomplish your shared goals: protecting your best interests during the divorce and ensuring your best outcome afterward. Terry & deGraauw, P.C. employs an experienced team of professionals to help you navigate through divorce and comply with all mandatory rules and procedures along the way. Our paralegals are trained to assist clients during this information-gathering stage of their case, and organize disclosures thoroughly and cost effectively. If you have any questions or would like more information, our team is ready to help.
Raesha de Ruiter Zylker, Paralegal, Terry & deGraauw, P.C.
February 2024
