Industry Insights for Accountants: Asset Valuation in Family Law Property Settlements
In many family law property settlement matters it is impermanent that family lawyers and accounts work together. One aspect of this cooperation is figuring out the property pool of the parties. However, valuing assets for family law purposes may require more than just producing and printing last year’s financial statements and tax returns.
Valuing fixed assets
Apart from valuing real estate, the valuation of all fixed assets usually falls on accountants and family financial advisors. Although producing financial statements and tax returns for the past few years is essential, unfortunately the figures in such statements are not always enough for family law purposes.
Financial statements and tax return usually provide for the written down or the depreciated value of assets such as vehicles and shares. Whilst these will help family lawyers in understanding the overall financial position of their client, they will also need estimates of the current market value of such assets. Some value estimates can be done by the client themselves but valuation of shares and other financial products may require help from accountants.
Family law takes a very different approach to valuing businesses than say for example the valuation process required when a business is sold. In most family law cases, the family business is one of the most valuable assets for both parties but it is also a source of income if not for both but at least one of the parties. As the business can be seen both as an asset and a financial resource, standard valuation methods such as income approach, asset approach or market value approach are not appropriate.
In order for accountants to satisfy the family law requirements, they may need to adopt the so called ‘value to owner’ approach as the family law system is not only interested in the value of businesses but also their prospective value as a source of income. It is important that family lawyers and accountants work together and assist each other through the process of a property settlement so that our mutual clients will achieve their desired result in their property settlements.
For more information on how accountants and financial advisers are involved in Family Law matters, visit our other blog posts on the topic: