Reaching a financial settlement in divorce can be one of the most arduous issues to resolve and, in many cases, requires support from a range of professionals. Below, we look at whether you need an accountant for your divorce, and if so, why their expertise is so crucial.
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Why use an accountant for divorce proceedings?
Divorce law states that divorcing couples must be open and honest about their finances. If you have concerns that this is not the case with your ex-spouse, then a forensic accountant can review their finances and uncover any concealed assets so that the division of the matrimonial pot is fair. It is not uncommon for information to be withheld or assets hidden by one party in order to obtain a preferable financial settlement.
If you or your ex-partner has a business, whether or not this is owned in one person’s name or jointly, or either of you are self-employed, it may be sensible to employ the services of an accountant. Chartered accountants are financial experts and can identify anomalies and ensure the full facts are being disclosed. They can also ensure that your solicitor asks the right questions based on the figures disclosed.
Most divorcing couples reach a financial settlement without having to employ the services of an accountant. However, this decision is generally down to personal choice, circumstances of the case, necessity, and costs, rather than it being mandatory.
Do both parties need an accountant?
It is not necessary for both parties to have an accountant, and if they have a civil and respectful relationship, there may be no need for one at all. However, if there is mistrust between the parties, then they could chose to employ their own accountant.
In some cases, accountants are required to act as single joint experts, and this can offer cost-saving benefits. It may also create a more collegiate response which leads to a smoother process than might otherwise be possible. In acrimonious proceedings, their input might be even more important to ensuring a fair distribution of matrimonial assets.
How can accountant help in divorce proceedings?
During the divorce process, both parties will have to complete a Form E financial statement giving full disclosure of their personal and matrimonial finances. Gathering information may sound simple, and most people manage it without the help of an accountant, but if you have a large investment portfolio or business interests, then using an accountant could make it easier to assimilate the documentation.
After the financial information has been sent to the other party, it may be clear that some details have been left out. This could be because a box has been left blank, or because one party is aware of an asset that hasn’t been included. In cases where omissions are unclear or one party has little knowledge of the other’s finances or business interests, an accountant can spot subtle gaps or inconsistencies.
If one party has drowned the other in paperwork, this also suggests they have something to hide, and are hoping this is missed in the volume of documentation supplied. Accountants are good at homing in on even the smallest sign that something is amiss.
An accountants role can also include:
- Providing professional valuations of matrimonial assets, including pensions, property, and businesses. This can be on the basis of a joint instruction or they may represent one party alone.
- Advising on the tax implications on the sale or other disposal of matrimonial and business assets
- Acting as a trusted expert witness in court if needed
Can an accountant trace assets?
Accountants can trace missing assets, although if an individual is not forthcoming with these details, asset tracing can be more complicated. They have a range of tools available at their disposal to locate financial data, which someone is attempting to conceal. This might be a separate and new business that has been set up to hide assets, undervaluing work in progress or overstating liabilities. An accountant will look through all the information to identify any inconsistencies and find where the assets are being hidden.
Can an accountant track my ex’s reckless spending?
If one party is attempting to financially manipulate the other, they may spend more than usual, have a strategy to pressurise the other party into racking up legal costs or remove them from accessing funds in a bid to force them into an unfair settlement.
If excessive spending from a joint account persists, it will lower the finances available for division. Accountants can identify deliberate overspending even if there is no obvious audit trail. This can result in applications to court to freeze assets until the financial process has run its course.
Can accountants carry out a business valuation?
If you and your ex have a business, whether it is owned in one name or both, to reach a fair settlement, it is essential that the business is accurately valued. An accountant will delve into the accounts of the business to reach a fair valuation and consider things such as past performance, projected earnings, and asset holdings. They will also typically look at data available from comparable competitors and provide insight into the accuracy of the figures given by the other side.
An accountant may also be able to advise whether, and how, the business could be restructured to release funds when the divorce settlement is finalised.
Can an accountant advise about tax issues?
Capital Gains Tax (CGT) is a key issue in the disposal of matrimonial assets, and can have a significant effect if it is not minimised as much as possible. A substantial tax bill can arise when the transfer of assets or removal of cash has not been efficiently planned for. An accountant can plan and help parties avoid or minimise their CGT liability.
Even if you haven’t yet sought advice from a solicitor about separation or divorce, and are just looking at the potential value of your assets, taking advantage of an accountant’s expertise and technical knowledge, may pave the way for a smoother financial settlement further down the line.
The information on this website is to be considered a guide and is therefore not legal advice. You use this information with the understanding that Wiselaw does not accept liability for any direct or indirect losses as a result of anyone relying on or acting upon the information on this website. Whilst we endeavour to provide accurate information, Wiselaw does not accept liability for any errors or omissions on this website.