The role of forensic accountancy in divorce
The link between divorce and accountancy is, understandably, not as obvious for many as that between divorce and the legal profession. However, the unravelling of financial circumstances – in order to give an accurate indication of the parties true wealth in Ancillary Relief proceedings – is often at the core of proceedings, notably when an agreement cannot be reached with regards to the value of assets – often a business owned by one of the parties.
A certain degree of ‘detective work’, known in the profession as ‘forensic accounting’, is required, for example determining what the assets actually are, tracing hidden assets, assessing how much money can be taken out of a business and looking at how any capital gains tax may affect a settlement. Division of earnings and pension rights also play a huge part, especially as the pension can often be the biggest asset in divorce after the family home.
The overriding aim is to assist in a fair settlement being reached. Accountants working in this area can also advise on a variety of other issues, for example reviewing Form E’s and considering the supporting financial information provided; valuing shares held in private companies and businesses; considering the most tax efficient way for maintenance to be paid; as well as Duxbury calculations (a formula for working out the lump sum that would be needed to provide an amount of maintenance for a certain number of years in order that a clean break can be made).
As indicated above, the issue of finances and divorce are inter-twined, hence the need for the services of not only lawyers, but often accountants too. We are happy to assist individuals and lawyers in such matters and offer a free no, obligation consultation.