From the perspective of dealing with other professionals – lawyers, accountants and financial planners – the most significant learning for me is the importance of effective communication between the relevant professionals.
The professionals I come across in my work where we have effective communication are able to deliver the most positive impact for their clients. Typically they reach out to their clients who are contemplating or facing divorce, and suggest they seek professional advice before saying or doing anything.
Unfortunately, too often we will sit down with a client for their first consultation and they will detail all of the steps that they’ve already taken. They soon realise what they have done might not have been the best course of action.
When you have communication you don’t have mistaken presumptions.
A classic example of the negative impact of poor communication is this…
As part of a property settlement we transfer a company-owned car to the wife. It seems very simple. ABC Pty Ltd signs a transfer form to the wife and she’s now the owner of the family car. The problem however lies in that there are many circumstances where that could deemed a dividend. The wife discovers that while she’s received a $100,000 car she now has a tax bill on the basis that she’s received a dividend from the company of $100,000 and no-one took that into account when working out the settlement.
So in this instance, a strategy could have been devised to avoid the tax being payable, such as having the husband give the wife the money to buy the car from the company at it’s written down value, resulting in no tax consequences for anyone.
If we presume that the client has spoken to their accountant or their family lawyer to get advice about anything, this is almost always problematic. In the instance above, on the accountant’s part, it could be that they presumed that the family lawyer knew of the tax implications. Or on my part I may have presumed that the client had spoken to the accountant. Presuming any lawyer, accountant or planner has advised their mutual client that there is a consequence to an action is just that, a presumption.
So, when we are involved in property settlement work, there needs to be lines of communication, so no incorrect assumptions are being made and the implications can be thought through before any decisions are made.
It’s very seldom that there isn’t a consequence to a particular action.
Open up a channel of communication
Sometimes when a client comes to see us they have been referred from an accountant or financial planner. In these cases, it’s relatively straightforward to ensure the lines of communication are opened between the different professionals from the start. Often, however, clients will come directly to us. In these cases, I will ensure that I make the effort to contact the client’s accountant or financial planner to ensure they are across the proposed actions.
By opening up the channel of communication between those other advisers and the family lawyer, we can ensure they aware they need to have input on the strategies and consequences of each client’s case. This two-way communication is about knowing that if a strategic decision needs to be made, the accountant is across it first, so there are no surprises later on and everyone is fully informed to make good decisions.
This sharing of information doesn’t mean every communication needs to be copied into the accountant but it is a false economy to try and save costs by not keeping all parties involved.
As a lawyer, I need to get advice from the appropriate source so a decision can be made from an informed basis.
Testing the reality of plans
Financial planners are in a perfect position to assist family lawyers by using modelling tools and data available to them to future-test potential outcomes. For example, let’s say that a mother is emotionally attached to the former matrimonial home, so she will do anything to keep the children in the home. She looks to take a settlement that consists almost entirely of the equity in the home with the plan to borrow money to pay her husband out. By reality testing this plan she discovers, with the help of her planner, that she has left herself in a situation where she doesn’t have the means to cover her day-to-day living expenses if she takes on a considerable mortgage.
As lawyers, we can raise and highlight the issues to a client, but we need to point them in the right direction to reality test the outcomes. When communication lines are open, financial planners can sit down with a client and show them what life will look like after a settlement.
In the case above, a planner might propose a more modest home so the client can sustain their lifestyle. Then the planner may recommend using additional money from the settlement to earn a passive income stream.
The trusted advisor role
If a husband and wife have a family-run business, accountants, commercial lawyer and sometimes financial planners are involved. In this role as trusted advisor, they are often aware early on of a separation or a potential separation between a couple.
If you are a trusted advisor, it is highly beneficial for you to be aware of changes like these in your clients’ relationship so you can recommend they seek family law advice and open the lines of communication between all of their trusted advisors for a more comprehensive approach.
Document everything well
It is important to ensure that everything is documented well and communicated between all parties involved. This should be the case all throughout a family law matter, even when the matter is coming to an end and implementation of orders is about to occur.
In my 35 years as a family lawyer, the golden rule has always been to ensure sufficient communication. This puts everyone on the same page to reduce risks and avoid any surprises. If you are a commercial lawyer, accountant, financial planner or other trusted advisor, and you become aware that your client is separating or about to separate, the very first step is to direct them to seek professional advice from a family lawyer. Then, ensure all parties are in communication so together we can give our mutual clients the best possible outcome based on their circumstances.
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