Here’s a typical scenario: a spouse who owns a business walks into a family law attorney’s office looking for legal assistance for a divorce. The atmosphere is charged with emotion — mostly anger — and the discussion inevitably works its way to the issue of finances.
This leads to the big (sometimes multi-million dollar) question: How do I protect assets so my spouse gets as little as possible?
It’s likely that “protect” is nothing more than a code word for “hide,” and it’s up to the attorney to make two clear and unequivocal statements:
-
We can’t hide or protect assets — the best we can do is to maximize results
-
It’s time to call in a forensic accountant experienced in disputes over assets
Maximizing Results to Minimize Asset Allocation Mistakes
The key to maximizing results to minimize asset allocation mistakes starts with knowing what a business owning spouse can do, according to state law, about classifying separate versus marital assets prior to the divorce.
Here are few guidelines that we give attorneys to maximize their clients’ results. Note that these pertain to Commonwealth of Virginia laws, but are common in many other states:
-
Emphasize to your client that they should not try to hide or game asset. A good forensic accountant will be tenacious in their quest to find everything from hidden accounts to improper spending patterns.
-
Prior to the divorce, have your client open a bank account that’s not part of the marital estate and contribute post separation earnings.
-
Prior to the divorce, have your client separate marital assets from non-marital assets, which ultimately will make it easier for the judge to make a ruling. Get counsel from a CPA to help in making this separation.
It’s this last point that can be particularly complex for the business-owning spouse, especially if they own a substantial business that issues stock or stock options. You’ll need to present a convincing case to the court about business assets that should not be on the table.
This can easily become a major point of contention, especially when adding things like retirement accounts, the non-owning spouse’s tangible and intangible contributions to the business’s growth, intellectual assets, and the discovery of any underhanded attempts at hiding or protecting assets into the forensic mix.
When to Call In an Accountant With the Right Expertise
The best time for an attorney to bring a forensic accountant into the fray is as soon as possible. At that time, you’ll want them to do a deep dive on the assets your client owns, and make recommendations based on their experience and knowledge of state law on what can be considered separate versus marital assets.
Their role is to help you maximize your client’s position. Getting to that position requires experience, honesty and integrity combined with a deep understanding of the field of forensic accounting and divorce.
Need Help?
Our Forensic, Valuation & Litigation Support Group can help. Contact us online or call 800.899.4623.
