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Like lawyers, there are many times when financial experts become key in family matters.
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When accountants get a seat at the family table
03 January 2024
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11 minute read
Family law involves divorce and separation that often entail property settlements and divisions. During a party’s divorce or separation, accountants and family lawyers may work closely. An accountant is required for a variety of reasons during the property settlement process. Being expert number crunchers, accountants are key players in family law matters, helping to untangle financial knots and making things fair and square.
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This is especially the case where there are businesses involved in the property settlement. An accountant can conduct an independent review of the finances of the business. This is important because each party must make a full and frank disclosure of their assets. This ensures that property settlement can be conducted in a fair and just manner. Accountants can also provide advice on how one can manage their tax liabilities.
Notably, forensic accountants play an especially important role when it comes to the valuation of assets. They can assess the financial aspects related to discretionary trusts. Because discretionary trusts involve complex financial structures, they can have an impact on divorce settlements. Moreover, in some instances, parties may fail to make a frank disclosure of assets. Forensic accountants can then help with locating hidden assets to prevent one party from facing significant disadvantages.
Binding financial agreements
An important consideration in family law matters is a binding financial agreement (BFA). Parties can enter into BFAs when they agree on how their assets should be divided in case of a breakdown of their relationship.
BFAs can be entered into either before, during or after marriage. Accountants play a crucial role during the process of preparing financial agreements. For one, they are responsible for preparing a list of assets that a party owns. Moreover, they are also responsible for the valuation of assets which is an important step for both BFAs as well as property settlement.
Accountants are pros at putting a price tag on businesses. Whether it's a small family business or a big mansion, accountants work out these values so that a fair share can be determined between the parties involved.
Financial advice
Accountants can act as financial guides for their clients. They help individuals understand the financial implications of their decisions. Whether it's about selling an asset or agreeing on a settlement, accountants offer advice based on their expertise, helping their clients make informed choices.
Taxes can be extremely complex, and in family law cases, they can become even more tangled. Accountants have the responsibility of providing insights on tax implications related to:
- Property division
- Spousal support
- Child support
- Sale of shares or units in unit trust
- Transfer of assets including businesses and properties
- All other financial matters in family law
Financial reports
Accountants are experts at organising financial information into reports that everyone can understand. They are often responsible for preparing detailed financial statements that lawyers and judges use to make decisions. These reports paint a clear picture of each party's financial situation, making it easier for everyone to understand what’s what.
In some instances, accountants may act as joint experts and prepare reports. However, if one party is not happy with their report, they can engage a shadow or adversarial expert. The shadow expert can be a forensic accountant who can point out flaws in the joint expert’s report.
Expert witnesses
There are some cases in which accountants might even need to appear in court as expert witnesses. They explain complex financial matters to judges and juries, breaking down intricate details in a way that everyone can understand. During property settlement proceedings, their testimony carries weight because they're the masters of numbers and finances.
Finally, one of the most important roles of accountants in family law matters is to ensure fairness. They work impartially, striving to achieve a fair division of assets and finances between the parties involved. Their goal is to bring transparency to the table, making sure everyone gets what they rightfully deserve.
This is illustrated by the case of Weir v Weir (1993) FLC 92-338, wherein the husband deliberately failed to make a full and frank disclosure of assets. Upon appeal to the court, the court found that the husband did not make a frank disclosure. This resulted in the court ordering the husband to pay half of the undisclosed money to the wife.
When dealing with such matters, lawyers and clients often seek the expertise of accountants. They can identify discrepancies in instances where one party fails to disclose their financial assets.
As we have explored in this article, accountants often act as experts during family law proceedings that involve financial assets. Family lawyers and accountants work on cases together to ensure the fair and just division of assets.
John Bui is the principal solicitor at Sydney law firm JB Solicitors.
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