How can a forensic accountant help with divorce and matrimonial issues?
Forensic accounting can play a crucial part in the equitable distribution of assets during separation or divorce proceedings. The valuation of such assets including property and business interests is a complex process, and the expertise of a forensic accountant can be of huge benefit to all involved.
This professional input helps to ensure reliable figures are used for the distribution of funds, helping to clarify the best way forward. So how, in practice, does a forensic accountant assist with divorce cases and matrimonial issues?
A forensic accountant can play a vital role in establishing the full extent and value of asset-holdings when couples experience matrimonial issues, or intend to divorce. Their role can include:
Providing professional valuations of matrimonial assets, including pensions, property and businesses, either on the basis of a joint instruction or representing one party singularly
Advising on the tax implications on the disposal of these assets
Asset tracing and achieving full financial disclosure when one or both parties believe that assets may have been hidden by the other, in order to avoid being included in a divorce settlement
Acting as a trusted expert witness in court where applicable
Even if a couple haven’t yet sought formal legal assistance in relation to separation or divorce, and are merely discussing the potential value of their assets, securing the help of a forensic accountant and taking advantage of this expertise and technical knowledge, can pave the way for a smoother legal process at a later date.
So let’s look at the role of a divorce forensic accountant in more detail.
Valuation of business interests
When valuing a business, a forensic accountant may use a number of factors as a basis for their valuation. These include the past performance of the business, potential projected earnings/profit levels, asset holdings, and market data on competitors with a similar operational makeup.
A specialist in divorce financial investigations may also be able to advise whether, and how, the business could be restructured to facilitate the extraction of funds when the divorce settlement is finalised.
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Capital Gains Tax (CGT) is a key issue in the disposal of assets in divorce proceedings, and can have a significant impact if not minimised as far as possible. A substantial tax bill can be the result where the transfer of assets or extraction of cash hasn’t been efficiently planned, and could have been avoided had this important aspect been afforded greater consideration.
If one party is suspected of hiding assets or providing misleading financial information on their income, forensic accounting and auditing techniques, and analysis of financial documents, can uncover these assets and ensure a fair financial distribution in divorce.
It has been known for seemingly unrelated businesses to be set up solely to conceal assets or income, for liabilities to be overstated, or work-in-progress to be understated. In these cases a forensic accountant can raise questions as a result of their investigations, which can be followed up by lawyers to uncover the trail and expose hidden assets.
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If divorce proceedings are contested in court, forensic accountants can appear as expert witnesses, providing evidence that either proves or disproves the issue in question.
Acting for one or both parties
In some instances, forensic accountants are requested to act as Single Joint Expert (SJE) for both parties in a divorce case. This can offer cost-saving benefits, whilst creating a more co-operative scenario and potentially facilitating a smoother process than might otherwise be possible.
Conversely, if proceedings are acrimonious, a forensic accountant’s appointment and input could be considered even more important in ensuring a fair distribution of matrimonial wealth.
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For more information on forensic accounting for divorce proceedings, contact our experts at Real Business Rescue. Our forensic accountants will provide professional valuations of your business assets, and establish your financial position going forward.
We are a major part of Begbies Traynor, the UK’s largest professional services consultancy, Our extensive office network comprises of locations across the nation. with a partner-led service offering immediate director advice and support. Call one of our team of specialist divorce forensic accountants for a same-day consultation free-of-charge.
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