By Jeff J. Horn – Divorce Attorney
Counting the Money
Financial reviews of you and your divorcing spouse are essential to ensure an equitable division of resources. Counting the money can seem intrusive, but it can also be beneficial to your case. Accountants have various roles in your divorce. They can exacerbate the case, or they can help you understand the financial picture from the perspective of an expert. How does the process work? An accountant will require a financial retainer and make an initial document request. This is when the games begin.
Accountants may assume that they are being misled, which can cost you more money. Accountants can provide insight about the taxability of certain transactions, the impact of the distribution of debts, assets, and income on income taxation, and help you understand the relationship between family cash flow and debts and assets. Furthermore, an accountant can help you find hidden money. At the end of the day, two accountants can come to different opinions of valuation based on the same financial data.
Counting the Money
Financial reviews of you and your divorcing spouse are very likely to happen in order to ensure a fair division of resources. Counting the money can seem intrusive, but can also be very helpful to your case.
Accountants
Accountants can serve several roles in your divorce. Again, you can utilize the accountant to exacerbate the case and increase the other spouse’s process anger, or you can utilize the accountant to understand the financial picture through the eyes of the expert as it would be presented to the judge. Experts shape the judge’s thinking in ways different from your lawyer’s advocacy.
How Does it Work?
The accountant will demand a financial retainer and make an initial document request. This is when the games begin. No one ever has the documents, or, if they have the documents, no one ever hands them all over. All of this fooling around costs you big money. Accountants will always assume that they are being misled slightly by one or both parties. They can live with that, and the analytical tools they utilize adjust for uncertainty. When a party purposefully obstructs the turnover of documents, additional suspicions will be raised, more documents will be demanded, more depositions will be taken, more customers, bank officers, vendors, and creditors will be called, and the entire process will take longer, cost more, erode goodwill between the parties, and increase both parties’ anger over the process.
The Accountant’s Role
Accountants should serve as advisors about the taxability of certain transactions, the impact of the distribution of debts, assets, and income on income taxation, and provide assistance in understanding the relationship between family cash flow and debts and assets. An analysis of cash flow is the starting point for the search for missing assets. If your income exceeds your expenses, you will have savings. If you have no savings and your income exceeds your expenses, there may well be hidden money. An accountant can help find cash flow and point to missing assets. Those tasks apply to any case where there is the issue of alimony, child support, or the distribution of substantial financial assets.
Accountants analyze the valuation of closely held businesses and a spouse’s ownership interest and cash flow. Volumes have been written on methodologies for valuing closely held businesses. Most closely held businesses have limited capital assets other than goodwill and are valued based upon an analysis of so-called excess earnings. In simplistic terms, this is the amount of overall cash flow that a spouse receives from the operation of a closely held corporation, which exceeds the compensation reasonably expected by an employee, employed in the same capacity as a non-owner. It is a rough measure of the overall value enjoyed by an owner of a closely held corporation.
In the End
Two totally competent, honest, and thorough accountants can be given the exact same financial data and come to different opinions of valuation. The conclusions will likely be close and if pressed into offering a range of opinions, the ranges will very likely intersect.
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Thanks to Horn Law Group, LLC intern Noah Hilsdorf.