Accountants are certainly no strangers to divorce. Indeed, the professional advice of a trusted accountant is often an important voice during the divorce process. But sometimes accountants find themselves as a party to divorce. When accountants get divorced, they oftentimes need to consider certain issues that others may not need to think about. This is why contacting an experienced divorce lawyer is essential.
Below are two potentially relevant special considerations for when accountants and their spouses get divorced.
Texas courts generally employ a simple 50/50 split when it comes to property division. While this method works well for spouses who work as employees of companies, it leaves room for some complications when one or both spouses owns a business or has a professional practice.
As many accountants are likely aware, before any property division can take place, the value of the business or practice must be determined. This is achieved through an appraisal of the business’s assets and liabilities. Everything from the chairs and computers to the office’s lease and outstanding bills will be examined. But when determining the value of a professional practice, appraisers will also look to the goodwill of the practice.
Goodwill is basically the reputation of the practice (enterprise goodwill) or professional (personal goodwill). Where goodwill exists separate and apart from the accountant’s personal skills or ability, reputation is divisible on divorce. This means that if there is goodwill belonging to the practice or accountancy firm, then that goodwill will be subject to the property division. For example, a CPA held an ownership stake in a local accountancy firm. All of the firm’s clients cited the firm’s reputation as the principal reason for retaining the accountancy. A court ruled that because it was the firm’s goodwill and not the partner’s personal goodwill that drove client acquisition and retention, the value of her ownership interest in the accountancy must include the firm’s enterprise goodwill and must be subject to the property division.
Once the firm’s goodwill, if any, has been valued, the question of firm ownership must be addressed. The Texas Administrative Code strictly regulates the practice of accounting in the state. Included in those regulations are limitations on the ownership of accounting firms. Though non-CPA individuals are permitted to have ownership interests in accounting firms, courts are more likely to award a money judgment to the non-CPA spouse, secured by the firm and its assets.
Many accountants find success in their careers. Fortunately, this often includes financial success. The attention to detail and careful planning needed to build and manage a successful accounting practice often translates to financially sophisticated marital estates. The assets owned by accountants can be diverse and numerous. It’s not uncommon for an accountant’s marital estate to include real estate, retirement accounts, various certificates of deposit, trusts, and shares of investment funds. While diversified portfolios are an excellent method of reducing risk, it can also add complexity to the property identification and characterization phase of a divorce case in which the spouses’ property is determined to be the marital estate’s community or one of the spouse’s separate property. (Please feel free to review our brief primer on community and separate property.) This added complexity highlights the importance of an experienced family lawyer who can reduce costs, save time, and provide valuable peace of mind.
If you have questions regarding special considerations when divorcing as an accountant or divorcing as an accountant’s spouse in Texas, contact Kirker│Davis LLP to schedule a meeting with one of our lawyers today.