What to do if my client gets divorced

Divorce can be a highly charged situation for CPAs, especially when one accountant represents both parties in a divorce. CAMICO has more than 30 years’ experience handling such situations. These are some of our best practices for CPAs with divorcing clients.

Representing both sides in a divorce is a potential conflict of interest

Representing both parties in a divorce isn’t prohibited, but it is rarely advisable. If you do represent both sides in a divorce, you’re exposing yourself to risk in the future. Even if you disclose your potential conflict of interest to both clients, and get them to waive the potential conflict, you are still exposed to risk. If one of the divorcing parties is unhappy with the results of their settlement, they might file suit against you.

CAMICO has handled lawsuits of all sorts filed by one aggrieved party to a divorce. Those parties generally alleged that a CPA favored one party over the other when preparing tax returns or performing other services. A lawsuit based on such allegations can be harmful to your reputation, and any civil suit is expensive to the defendant. We strongly recommend that you seek advice from your risk advisor or legal counsel before taking action.

Personal and family accounts in divorce

Splitting up household assets in divorce is often difficult and contentious. As a result, both divorcing parties can perceive their accountant to favor the other side.

That’s why you should be clear about your role in the process. This can be difficult, especially with long-time clients or clients whom you know socially. It’s extremely important to keep your professional relationships separate from your personal relationships during the normal course of business. Many divorce proceedings can start friendly but end acrimoniously.

If possible, ask both clients to formally sign a conflict of interest consent. Attorneys often push clients to pursue third parties, and thus larger settlements, in divorce or divorce-related litigation. A consent may help protect you from that sort of legal action. Also make sure that your communications with clients are documented. Documentation can help protect you from future legal action.

How to deal with business accounts caught in divorce

If a divorcing couple jointly owns a business, they may require a business valuation for their divorce proceedings. If you represented one or both of the divorcing parties before they split, it’s best not to perform a business valuation — doing so can expose you to risk. Either spouse might dispute the valuation during the divorce proceedings or during subsequent litigation. The valuator might be accused of favoring one side over another.

CAMICO Resources

If you are a CAMICO policyholder, please log into the CAMICO Members-Only Site to access additional divorce related resources and advice such as risk management articles, war stories with loss prevention tips, engagement letter regarding divorce settlement, disengagement checklist and much more.

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