Financial adjustments accompany virtually all major life changes, from the good to the bad and the joyous to the difficult. Accountants help clients prepare for the financial changes involved in all of the major life changes they go through, and divorce is no exception. Often, your clients aren’t even considering all of the financial changes they’re going to face as a result of a divorce. As their accountant, it will be your responsibility to guide them through these changes and the actions they need to take before, during and after finalizing the divorce, according to Accounting Today.
Help With Dividing Property
Naturally, you’re no divorce lawyer – and your client’s won’t expect you to be. However, knowing the basics of divorce laws in the state where you practice, will give you a good idea how property is divided in the event that a marriage ends.
To begin dividing property, you first have to know what property there is – which means your clients will need to take an inventory of their finances and possessions, particularly those accumulated over the course of the marriage. The task may not be top-of-mind for clients who are going through the emotional challenges associated with the split. As their accountant, you might have to guide them in what to do and how to most accurately accomplish the task.
Before any property is divided, it’s important to attain the most recent account statements and get possessions appraised – another step your client will need to take, but you might need to initiate.
Establishing Financial Independence
If your clients had joint rather than separate savings and checking accounts, they will need to create new accounts separate from their former spouse’s. You can advise them on what kind of new accounts to create. In addition to banking accounts, this may include investment and credit card accounts.
Going from married to single requires some adjustments when it comes to managing money, especially if the client was used to a dual income or now has to pay child support or alimony. You can help your clients set up a realistic budget that helps them manage their money after the divorce. In addition to paying the bills, it’s important to help your client develop a plan to save for the future. This may include running a credit report to understand their debts.
If your client had life insurance or a will, he or she will likely need to update the beneficiary of those benefits – but he or she might not think of that right away, unless you remind the client. You can also advice clients with children on whether establishing a trust might be a sensible step to take in light of the divorce.
While no one wants to go through the difficulties of a divorce, your clients who are facing this life change will appreciate your advice as they deal with the financial changes and move forward with their lives.