Getting Divorced? Meet Your New Best Friend – Your CPABy DADvocacy™ | October 5, 2023
You or your soon-to-be-ex-spouse filed for divorce. You now face the loss of assets while assuming marital debt as you move out on your own. Additionally, in Florida, you face the unique liability of having your spouse’s educational debt as a marital debt that you will be paying off over the next years on top of paying alimony and child support. Let’s not forget the cost of court fees and attorneys’ fees.
And definitely don’t forget that your best helper is already in your corner: your CPA, who has been handling your finances and filing your taxes for some years. When you rely on your CPA, you are capitalizing not only on the CPA’s tax knowledge and ability to value assets properly, but you are also calling upon someone who has been acting as your advocate each tax year.
In Florida, your CPA is even more of a best friend to you: Florida’s evidentiary code permits accountant-client privilege so that your disclosures to your CPA remain confidential. Now that’s a best friend.
Many litigants in divorce cases forget that their CPAs can help them to bypass attorneys and attorneys’ fees. CPAs can help you to settle without involving divorce attorneys and without litigation. CPAs not only know what your assets are, but also how your assets work with regard to the assets’ taxability and whether the assets are growing or depreciating. Here’s how that latter fact is critical: imagine a divorce case in which the ex-spouse will receive 50% of a checking account, which isn’t complicated, but the ex-spouse is also asking for 50% of the retirement account: in taking money out of the retirement account before the age of 65, there’s a 35% tax hit. What is the actual dollar amount that both ex-partners should receive? CPAs can identify these value issues and help with reaching a settlement.
Consider a related example in which the CPA helps with handling an asset: the marital home is worth $300,000, and the soon-to-be-ex-spouse offers to buy out the other litigant for $150,000. Both litigants in this scenario avoid realtor fees and attorneys’ fees through allowing the CPA to facilitate the buy-out.
There’s more to what a CPA’s expertise can provide. Imagine that two soon-to-be-ex-spouses agree that one person can keep the car, and one can keep the house. Sound fair and agreeable? That’s not a great deal. Why? Look at the relative values into the future: one person has an asset that will appreciate considerably, and the other person has an asset that will depreciate quickly. What’s more is that the house affords the owner tax deductions for years into the future, and the car owner does not receive anything commensurate in value for car-related tax deductions, if there are any. CPAs can help you to understand what is truly an equal split.
CPAs offer a protective advantage to small business owners in particular. The CPA can hold confidences as to communications regarding tax goals and all the details of the business(es).
CPAs can coach divorce litigants in completing the mandatory financial disclosure form required in divorce proceedings – the family law financial affidavit, and the same confidentiality and privilege applies to this assistance as well. Even if you do decide to retain a divorce attorney, you are making a solid choice in opting for your CPA to complete your financial affidavit, which you should complete on your own before turning it over to your CPA. Here’s a link to the financial affidavit form.
If you choose to involve your CPA in lieu of a divorce attorney, your CPA will come to family court with you, but the CPA will not be allowed to take the witness stand against you to air all your details and dirty laundry.
Even though a CPA can act as essentially a financial mediator between litigants, your CPA can be mindful throughout divorce negotiations to be tax savvy while also creating a post-divorce financial plan tailored to you that includes a budget for divorce-related costs, alimony, child support, savings, and the cost of living.
The critical piece is that you employ a CPA, not simply an accountant, and that there is an ongoing relationship between you and the CPA who grows to know your overall financial picture. Now is the time to start cultivating your long-term relationship with a CPA. If you don’t have a CPA right now in Florida, ask friends and family for suggestions, or use this link or this link to find an accountant.
Not all CPAs are priced the same so that if you need a more budget-friendly option, such as a national chain of tax preparers, ask different locations for their longest-practicing CPA (and not merely an accountant or tax preparer). There are other services to connect you with a CPA who meets your budget.
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