Divorce involves far more than legal paperwork, it also requires making financial decisions that can affect your future for years to come.

In Episode 20 of the Herlihy Family Law Podcast, attorney Alison Herlihy is joined by Brandi Morgan, CPA, and Lyndsey Dixon, CPA, Certified Valuation Analyst, of Wilkins Miller to discuss the financial side of divorce. Together, they explore common tax pitfalls, business valuations, forensic accounting, and practical steps that can help individuals make informed decisions before finalizing a divorce.

Think Beyond Today’s Settlement

When emotions are running high, it’s easy to focus on getting through the divorce as quickly as possible. However, the financial decisions made during the process can have long-lasting consequences.

An asset’s current value doesn’t always reflect its true value. A retirement account, investment portfolio, or piece of real estate may all carry future tax obligations that significantly reduce what they’re actually worth. Two assets with the same dollar amount today may leave one spouse with substantially less money after taxes.

Cash flow should also be considered. Keeping the family home may seem like the obvious choice, but ongoing expenses such as mortgage payments, insurance, maintenance, and property taxes must also fit comfortably within a post-divorce budget.

Understand the Tax Consequences Before Signing

One of the biggest financial mistakes people make is waiting until after the divorce is finalized to think about taxes.

Tax planning should be part of the conversation from the very beginning. Important considerations include:

• How different assets will be taxed in the future
• Tax filing status during the divorce process
• Capital gains associated with investments or real estate
• Tax treatment of retirement accounts
• Potential penalties for early retirement withdrawals

Another commonly misunderstood issue involves filing status. Whether you file jointly or separately depends on your marital status on December 31 of the tax year—not when the divorce process begins.

Parents should also understand that divorce agreements don’t automatically determine every tax benefit related to children. Federal tax rules ultimately govern which parent is eligible for certain deductions and credits.

Business Owners Face Additional Challenges

When one spouse owns a business, determining its value becomes an important part of reaching an equitable property division.

Business valuation is far more involved than reviewing annual revenue or checking a bank account balance. Professional valuation experts examine factors such as:

• Future earning potential
• Profitability
• Industry conditions
• Customer concentration
• Management structure
• Business risk
• Whether the business depends heavily on the owner’s personal involvement

Two companies with identical revenue can have dramatically different values depending on how they’re operated and their ability to generate future income.

What Is Forensic Accounting?

Sometimes it’s necessary to take a closer look at a family’s finances through forensic accounting.

Unlike business valuation, which determines what a business is worth, forensic accounting investigates whether financial records are complete and accurate. Professionals may review records to identify:

• Hidden income
• Personal expenses paid through a business
• Missing assets
• Unreported cash
• Unusual transfers of money
• Significant financial changes before the divorce

It’s important to understand that forensic accounting does not begin with an assumption of fraud. Instead, it focuses on following the financial records to provide an accurate picture of the facts.

Don’t Rush Financial Decisions

Asset division becomes extremely difficult to change once a divorce is finalized. That’s why it’s essential to understand the long-term consequences before agreeing to a settlement.

Working with experienced financial professionals allows individuals to evaluate:

• The after-tax value of assets
• Long-term cash flow needs
• Potential tax liabilities
• Business interests
• Retirement assets
• Real estate considerations

Having complete and accurate financial information allows both parties to make more informed decisions and helps avoid costly surprises after the divorce is over.

Get Organized Early

Preparing financial information before meeting with an attorney or financial professional can make the entire divorce process more productive.

Helpful documents include:

• Tax returns
• Bank statements
• Investment account statements
• Retirement account information
• Mortgage documents
• Business financial statements
• Income records
• Lists of monthly expenses

Understanding what you own, what you owe, and how money flows through your household provides a much clearer picture when important decisions need to be made.

Better Information Leads to Better Decisions

Divorce often requires legal, financial, and tax professionals to work together. Attorneys protect legal rights, CPAs help identify tax implications, and valuation experts determine the true value of assets.

When each professional contributes their expertise, complex financial information becomes easier to understand, helping individuals make confident decisions that support their long-term financial future.

Listen to the Full Conversation

For more practical guidance on divorce, family law, and protecting your future, subscribe to the Herlihy Family Law Podcast for new episodes featuring trusted legal and financial professionals.

To learn more about the financial services discussed in this episode, visit Wilkins Miller at www.wilkinsmiller.com.