How Divorce Attorneys Rely on Accountants
Accountants frequently encounter clients who are dealing with sensitive family law matters. In addition to serving their clients’ financial interests, accountants can also play an important role in assisting family law attorneys with the following accounting services.
During a divorce case, spousal and child support is calculated and negotiated between each party. Calculations are based upon “income available” deemed by the courts. This amount can differ greatly from an individual’s taxable income and is not always straight forward. Divorce attorneys work directly with their clients’ accountants to determine exactly what calculations are appropriate and collect documentation to be submitted to the judge.
Business valuation is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business. Accountants are called upon to provide these estimates when one or both spouses are owners of a business. Divorce attorneys also work with accountants to calculate discounts and potential future transaction costs in an effort to maintain a fair economic impact. Two different approaches can be used for business valuation: 1) Earning Value Approach (future expectation of economic earnings) and 2) Market Value Approach (signs from the real market place to determine what a business is worth).
When the court is questioning financial calculations or when calculations aren’t clear cut, accountants are called upon to perform forensic accounting services. These services are employed when the courts feel there is a need to:
- Determine a spouse’s true income
- Classify which assets are marital or separate property or both and their values in each category
- Examine both personal and business financial records with an eye not only for what they show, but for what is being withheld
It is important for divorce and family law clients to understand the different tax implications of their divorce proceedings. Accountants can help clients to understand the tax-related issues arising from the division of assets and responsibilities including alimony pendent lite, property division, stocks and mutual funds, business investments, filing status, and dependency exceptions.
Accountants are frequently called upon in high-asset cases to assist clients in identifying any tax traps that may exist when calculating support, alimony, and settlement. There are benefits to different approaches mattering on the client’s financial situation.
Equitable distribution is the process of dividing marital assets and debts. It is important to note that the courts recognize “fair” over “equal” in divorce cases. This can mean that assets aren’t necessarily divided straight down the middle. Divorce attorneys work with accountants to characterize property in a divorce, identifying marital property, marital assets, and marital debts.
The process of equitable distribution includes identifying assets subject to distribution, valuing the assets and debts, and then devising a plan to divide the assets and debts. It is important to consider the future transaction costs for business owners.
If you are an accountant looking to build a relationship with legal counsel to provide one or more of the above services, contact Gross McGinley at 610.820.5450 to speak with one of our family law attorneys.
Attorneys Allen I. Tullar and Constance K. Nelson are members of Gross McGinley’s Family Law Group, providing assistance to Lehigh valley families in divorce, custody, adoption, and other family law matters.