Do you find yourself wading through financial documents and pondering the same accounting questions time and time again?
Are there things you feel you SHOULD know... but you could perhaps do with a refresher?
RSM has a dedicated Family Law team has a wealth of experience in providing support services to Family Lawyers and their clients throughout the property settlement process. With experts across tax, corporate finance, superannuation, financial advisory to restructuring and recovery, we have you covered.
The below tips highlight some of the areas of expertise our talented team can assist you with.
What happens if one of the parties in a Family Law case is bankrupt?
- Bankruptcy is a legal process for individuals who are unable to pay their debts.
- In summary, a bankruptcy trustee realises the vested assets of a bankrupt, conducts an investigation into a bankrupt’s financial affairs, and distributes available funds.
- Most assets vest in the bankruptcy trustee, subject to some exemptions. The bankruptcy trustee, not the bankrupt spouse, has the right to deal with the vested assets.
- The bankruptcy trustee is interested in family law matters insofar as there are vested assets.
- Identifying the vested assets will ensure you are engaging with the correct party.
You have the financial statements, so what do they tell you?
- Financial statements generally do not reflect the market value of the assets. Accountants however will generally maintain registers of CGT assets/shares on hand that will provide a starting point for identifying individual assets and obtaining valuations.
- Beware of the formatting of debits and credits in financial statements - what you see isn’t always what you get.
- No up-to-date financials? – no worries – if the individual/entity is carrying on a business, ask for the GST detail reports. If the reports are on cash, make sure you ask for reports on an accruals basis as well.
- Outstanding income tax returns raise a very big red flag – not lodging a tax return is a criminal offence. If the parties have a poor lodgement history think twice before relying on indemnities to cover historical tax risks.
- Division 7A: If there is a private company and/or a trust with a corporate beneficiary within the group, seek independent advice. Not only on potential liabilities arising from proposed orders, but inherent liabilities lurking beneath the surface.
Managing self-managed super funds (smsf) in Family Law Matters
- Ensure you have the latest financial statements and Trust Deeds.
- Engage with a specialist early.
- Ensure the underlying assets are reviewed and any valuation issues identified early.
- If the value is contentious, make sure it is agreed to early.
- Identify any time constraints you may have in dealing with SMSF assets.
Is it necessary to obtain a valuation?
Special Purpose Financial Statements do not require assets to be carried at market value. What do you need to look out for to determine whether it may be necessary to obtain a valuation?
- The income earned is from a trading business and not passive investment income.
- The entity has a consistent history of trading profits (on arm’s length terms).
- The entity incurs employment expenses for staff in addition to the owner.
- The assets of the business consist of production assets, such as machinery and equipment.
- There are intangible assets on the balance sheet (such as goodwill).
When providing instruction to Business Valuers it is also important to understand what you require to be valued. Enterprise value relates to the value of the business, whereas Equity value relates to the value of the entire entity (the Business, surplus assets, and net debt). In our experience, the most useful valuation to request in Family Law matters is an Equity valuation.
Financial advice for post-settlement assets
Once the financial settlement has occurred, it presents a good time to review your new position and make the necessary changes:
- Search for any “lost super” – this can be done through MyGov if you have your TFN linked to any previous super funds.
- Make sure you update your beneficiaries on your super funds. Some nominations are non-lapsing and do not change unless you make a new nomination. You would not want to have your superannuation paid to your ex-spouse.
- Review any insurance cover which may be in your superannuation fund. Your updated position might mean you may either be under or over-insured.
- Talk to a financial adviser who can assist you with cash flow, budgeting, insurance, and investment advice for your settlement proceeds.
How can RSM help?
By marshalling all the individual specialists typically involved in the successful settlement of family law matters into one team, RSM offers family law practitioners, from firms big or small, an alternative end-to-end service that could potentially deliver superior client outcomes. If you require assistance on the above article or would like to get in touch, please contact your local RSM office today.