Financial disclosure is an important part of any divorce. Spouses have to review their resources, income and financial obligations to make the right decisions. Especially in scenarios where spouses intend to pursue alternative dispute resolution rather than a litigated divorce, a thorough and accurate understanding of marital financial circumstances is crucial.
Spouses attempting to resolve the details of the divorce using mediation or collaborative divorce have more control over the outcome. However, they lack the same protections available to those who litigate. Without the formal discovery process, there is a degree of financial vulnerability to consider.
Spouses have fewer opportunities to question the conduct of a spouse or take action if they discover undisclosed income or resources later. Financial uncertainty can certainly complicate divorce proceedings, especially if one spouse is currently self-employed.
How can people effectively assess the income of a self-employed individual?
A thorough financial review is necessary
Some people attempt to manipulate financial matters during divorce for their own benefit. They intentionally choose not to disclose certain assets or try to make their income appear lower than it actually is. A self-employed professional might hold off on starting new projects or exaggerate their operating expenses and liabilities so that they can under-report their overall income.
Those preparing to negotiate with a self-employed spouse may need support from professionals. Partnering with a forensic accountant can be a smart move for those uncertain of what a spouse actually earns. Instead of looking at the most recent invoices that may be lower than usual, a more robust, long-term financial analysis may be necessary.
Forensic accountants can assist by going over the financial records of the self-employed spouse thoroughly to better identify their average income level and the actual operating expenses for the business they run. The information that they gather can help one spouse counter the other’s artificially reduced income during collaborative divorce proceedings or in mediation sessions.
When combined with the advocacy of an attorney familiar with alternative dispute resolution, the support of forensic accountants and other financial specialists can help people accurately determine what a self-employed spouse earns. That information can then play an important role in the property division process and any support-related negotiations.
Recognizing that divorce negotiations can be riskier and more complicated with a self-employed spouse can help people better protect themselves. Spouses who have a realistic understanding of household finances are in the best position possible to negotiate for appropriate economic terms.
