How Accountants Can Help Clients Plan Their Finances After a Divorce

One of the biggest challenges faced by accountants is to help a client with their finances through their divorce proceedings. CPAs are always at a loss when it comes to offering financial advice or guidance to clients who are on the verge of divorce.

It’s very difficult, for example, to offer financial advice to a woman who has been divorced by her husband after 25 years of marriage and has no way of returning back to the workforce or earning an income after so many years as a homemaker.

As accountants, you will want the best for your clients, and you will want to avoid conflict of interest if you were advising both the husband and wife prior to the split. You may require a disclosure or a waiver. Divorce is always very complicated, with legal, emotional and financial ramifications. Let’s talk about the right way for CPAs to handle a divorce proceeding.

#1: Address the legal issues related to the divorce first. The first thing you should tell your client is to hire a lawyer, to handle the legal complexities related to the divorce. A lawyer’s help is needed if the estate is very complex. Discuss the pros and cons of hiring a divorce lawyer with your client and offer a recommendation.

#2: The next step is to handle the emotional issues pertaining to the divorce. Divorce is the most stressful event in any individual’s life. If your client has been struggling very badly with the divorce, ask him or her to seek counseling from a trained therapist. Offer a recommendation as well.

#3: Next, it’s time to address the financial issues related to the divorce. Your technical background as an accountant is very important here and it can make all the difference to how much your client will get following the divorce. How successful you are at getting an agreeable outcome will depend on the willingness of both sides to collaborate. If the other side to the dispute is being deceitful or withholding information, then you will have to take recourse to other means, such as hiring a forensic specialist or a private investigator.

Your role will consist of the following…

Identifying all the assets – This could be cash and bank accounts, real estate and retirement accounts.

Mapping out the living expenses – You will have to map out the client’s living expenses by taking into consideration their one to three year history and then projecting those numbers into the future.

You will need to consider expenses such as having to buy a new residence, buying a new car or being able to fund for the children’s educational expenses. Also, you will need to consider the healthcare coverage and provide for any increase in insurance premiums. Finally, you will need to help your client set up an emergency fund.

Mapping out real estate - Finally, you will need to map out the real estate division. The specific issues related to the asset division are left to the client, but it’s your job to help them through the crisis and guide them with the right information.

Our Hosting and Cloud Services provides cloud accounting solutions such as Drake Tax Hosting, QuickBooks Hosting, ATX TaxSoftware Hosting, Quicken Hosting, ProSeries Tax software Hosting and LacerteTax Software Hosting. Contact us to know more about our Hosting plans.