5 Important Things Accountants Need to Know about Family Law
It is essential for accountants to have a grasp of family lawyer handle cases of divorce and separation.
Although an accountant should never give legal advice to a client about settlements, it is certainly beneficial for them to have a fundamental understanding of family law principles. For advice on family-related legal concerns, it is recommended that you hire the best family lawyer available.
Let us discuss the basics of family law that will be helpful for an accountant to learn.
The Four-Step Test
The Four-Step Test applied by the Court assesses applications for property division.
Asset Count
The Court needs to ascertain the pool of assets and their values. Keep in mind the parties may not agree. This category includes items such as jewellery, cash, furniture, shareholdings, and the value of insurance policies, in addition to assets held jointly by the couple. An accountant’s role is relevant to more complex entities such as family trusts, businesses, companies and offshore accounts that may need to be taken into account as well as GST and CGT implications on disposal of an asset.
In-depth expertise and experience in advising on superannuation, early release plans, and self-managed superannuation funds (SMSFs), as well as each fund’s compliance needs, are all areas where accountants with family law knowledge can assist.
However, when it comes to asset division through court proceedings, getting legal help from family lawyers in Sydney is the ideal solution.
Contribution to the Asset Pool
The court will assess how much each spouse contributed financially and non financially during their marriage and weigh them up in percentage terms.
This will include examining both direct contributions, such as those made in the form of contributions from income, as well as indirect contributions, such as those made in the form of gifts or inheritances obtained during the marriage.
The importance of non-financial contributions to the couple’s asset base, such as those made in renovation work, parenting or home management, will also be taken into account by the courts.
Future Needs of Both Parties
The family court system will carefully examine factors such as the age of each spouse, their physical and mental health, their ability to work, their financial resources, their obligation to support others and their current and future income to make a decision about the future needs of both parties involved.
If one spouse has extensive childcare duties that may prohibit them from working full-time, the courts will take this factor into consideration. Moreover, the courts will also take into account a history of domestic violence if it has prevented one partner from working.
For domestic violence and family disputes, it is recommended to contact the best family lawyer for fair asset distribution.
Fair Asset Division
The courts will determine whether the above-described stages resulted in a reasonable and equitable resolution for both parties and make a further adjustment if required to receive an outcome that is just and equitable in all of the circumstances.
The accountant has a useful role in ensuring tax returns and financial data for all trading, corporate and other entities are up to date as this goes to the current value of those entities
For asset division related to family-owned businesses, it is recommended that you involve a business lawyer in Australia for appropriate legal advice.
Considering the Time Limits
Many accountants are unaware that property settlement discussions in family court disputes can start as soon as a couple separates.
Moreover, when a couple decides to split, their primary and immediate obligation is to disclose relevant financial matters.
Maintaining Disclosure
Each party in a property settlement must disclose their financial position to each other and to the court, and qualified accountants may help with these disclosure requirements. As such, listing all assets, income sources received by each party and all liabilities is considered “full and frank disclosure” under the Rules.
Any assets including trust funds, properties, bank balance that were disposed of after separation, and financial agreements affecting matrimonial assets all need to be disclosed. The three most recent income tax returns, balance sheets, and profit and loss statements must be disclosed.
Changes in the Value of Assets during the Divorce Process
It is also important to note that the value of the assets owned by both parties is not established at the moment of separation but as at the date of hearing.
The asset worth may vary significantly between the separation date and the settlement agreement or date of hearing.
Wrapping Up
When dealing with family law, it is important to help your client realise there is no getting out of their disclosure requirements. In addition, an accountant has a role to play in dealing with more complex financial issues.
Remind your client that there are dangers and unanticipated consequences to litigation. The results are not predictable. Judges in the Family Law Courts have the authority to report any possible fraudulent activity to the appropriate authorities and other powers to penalise a non compliant party.
By familiarising yourself with family law and seeking the help of legal experts, you will be better prepared to help your client acquire the assistance they require and will be aware of any requirements placed on you during the process.
