Maybe, and we have one in house.
When most divorce attorneys realize a CPA is needed to assist in a divorce, they engage one. However, at TLC Law, we can keep it all in house. Our divorce attorney, Ty, is experienced in all areas of family law, including divorce and custody suits, and our tax attorney, Kacie, is not merely an attorney specializing in tax law and business planning issues, she is also a CPA. Her knowledge is thus invaluable in many divorces. But many clients wonder, why would I need a CPA or an attorney with a CPA?
For some divorces, a CPA is not necessary. If there is no dispute involving children (or no children at all born to the marriage) and very little property, a CPA adds no real value.
However, many people have significant property acquired at all different times in their lives. Divorce lawyers are an essential part of the divorce process, and most people could not successfully obtain a divorce without one, but what about CPAs? CPAs can be a significant aid in the divorce process, in several respects:
- The most common way CPAs assist in divorce is tracking separate versus community property. Separate property generally includes property acquired prior to marriage, as well as gifts, and inheritance acquired at any time. Community property is basically everything else. But what about more murky items of income like royalties, dividends, capital gain, restricted stock options, etc., and what if the separate property has become commingled with the community? These rules can be complex. CPAs can assist attorneys to “follow the money” so-to-speak by tracking accounts and fund movements to help determine what is truly separate and truly community.
- CPAs are also indispensable as forensic accountants. CPAs can analyze trends in accounts, financials, or tax returns to help discover irregularities. These irregularities could indicate fraud or discover hidden income or assets.
- Another common use of CPAs is valuation. It can be tricky to provide valuations on some property, especially regarding family businesses. If the assets cannot be valued, how can they be fairly distributed in a divorce?
- Family businesses also create additional problems in a divorce. Bifurcation can prove tricky for many reasons. First, legally, the business may be subject to a partnership or operating agreement that governs share or asset distribution in a divorce. Second, bifurcating a business as part of a divorce can create adverse tax consequences. Third, dividing a business can be challenging to many operating and accounting functions such as closing the books properly, paying vendors, determining new roles, etc. A CPA can jointly work with your attorney to ensure that division of a family business in a divorce is done as seamlessly and as tax efficient as possible.
- Lastly, most divorce attorneys have a paragraph in their engagement letter that expressly disclaims any tax advice. However, many divorces are fraught with tax questions: What tax filing status do we use during the year of separation? Who claims the kids? Who gets the stimulus check? If there are jointly held tax obligations the questions get even more hairy. Who takes the tax liability? Will the IRS allow separation? How do we get the IRS to answer the freakin’ phone? CPAs can help.