08 Oct The role of forensic accountants in divorce – Part 2: asset valuation
When couples with significant assets separate, financial separation is a crucial part of the process. But what quickly becomes clear is that this is about more than just splitting bank accounts. And in high-value property settlements, splitting all the assets can be quite complicated. That’s where forensic accountants come in.
Our recent article on the role of forensic accountants in high-value property settlements, introduced what a forensic accountant is and their roles in divorce. We then focused on their role as investigators, engaged by one party to investigate financial records, uncover hidden assets and make sure all disclosures are accurate.
But forensic accountants don’t just act as investigators. They also play a vital role as independent experts, providing impartial valuations of assets when parties can’t agree or the asset is a challenge to value.
This is important because a fair and legally sound property settlement simply can’t happen unless every asset – whether it’s a family trust, business interest, overseas property or cryptocurrency – is properly valued.
In this part two article about forensic accountants, we’ll focus on this second asset valuation role, and how their expertise helps keep financial settlements moving forward.
In this Part 2 article:
- The role of a forensic accountant to provide asset valuations in a divorce
- How a forensic accountant can help
- Benefits of a forensic accountant providing asset valuations
- Valuing business interests
- How forensic accountants work with your family lawyer
The role of a forensic accountant is to provide asset valuations in a divorce
When a couple goes through the property settlement process, one of the first steps they need to take is identify and value all their assets and liabilities to be included in their asset pool. It‘s only once this is completed that they can begin the process of dividing up the property.
In a high-value divorce, there are often a large number of complex assets. Some of these assets might be:
- A primary residential home
- Secondary holiday homes
- Business or commercial properties
- Investment properties
- Land
- Vehicles
- Bank accounts
- Mortgages
- Credit card debts
- Other loans
- Business assets, including stock and equipment
- Family rusts
- Shares
- Superannuation
- Digital currency, such as cryptocurrency
- International assets, including property or bank accounts
- Personal items such as jewellery, artwork, furniture
- Inheritances
Problems can arise when the two parties disagree on the value of certain assets or liabilities, or there is simply difficulty valuing them. It’s not always easy to put a price on things. Some things are straightforward – like checking financial records or getting a current market value – but others can be far less clear.
And of course, the property settlement process will be at a stalemate until the value of all assets and liabilities can be determined.
How a forensic accountant can help
When a forensic accountant is needed to value one or more assets, they’re typically engaged as an independent and impartial expert acting on behalf of both parties. (This is different to when they act in their investigatory capacity when they’ll be engaged by only one party.) In their role as a valuer, they’ll search out relevant data and information, and investigate and evaluate all of the information available to arrive at a value for the specific asset.
The forensic accountant will then provide a report setting out their valuation to their clients. This single expert valuation can be presented as expert testimony during mediation or even in court proceedings. It carries significant weight during the legal process.
Benefits of a forensic accountant providing asset valuations
There are a lot of benefits to using a forensic accountant when you need an asset valuation.
- Both parties can feel confident that the accountant acted impartially
- The court can be satisfied that the expert valuation is true and accurate
- It enables the property settlement process to move forward
- It can assist with the division of assets or the selling of assets between parties
- A single joint valuation saves time, rather than having to decide between two competing valuations
- It’s more cost-effective than hiring two separate valuers
- Full transparency is provided in the form of a comprehensive report
Forensic accountants are particularly useful in high-value divorces when complicated financial structures can make clear asset valuations even more difficult.
Valuing business interests
One of the most important valuations forensic accountants often perform are for business interests. Knowing the inherent value of your business or your interest in a business is a fundamental step in your financial separation. But because every business is unique, it takes a really deep dive into the business to get a fair value.
A forensic accountant will do a deep dive into the business taking into account the operational structure, size and industry as well as the nature of the business. They’ll also look at long-term plans and growth prospects.
This is a complex process. So having an expert give you an independent and impartial view of any business that’s included in the shared asset pool is hugely beneficial.
How forensic accountants work with your family lawyer
Family lawyers regularly work alongside forensic accountants to seek independent valuations in property settlement cases. This means every party can be confident there is fairness and transparency in the final valuation. This is the most efficient and cost-effective way to keep the property settlement moving forward.
If you’d like expert legal support and advice during your property settlement, please get in touch with Toomey Family Law today. Our team can guide you through the process and appoint independent forensic accounting experts to support your case. Reach out today.