When you are divorcing, the added expense of a forensic accountant may seem unnecessary. This viewpoint is more often the case if this is your first divorce. However, divorce lawyers can assure you, in the right case, failing to hire a forensic accountant can be far more expensive in the long run.
When a couple has a high net worth, if there are complex finances, when one party’s income is variable and compensation is multifaceted, or a family business is involved, a forensic accountant assists in identifying and valuing the couple’s assets and debts. This is an important first step because Maryland’s law calls for the equitable division of assets. Without knowing the value of the assets, equitable division is not possible. Further, because child support is based on the income of the parties, when one party’s income varies, a forensic accountant can provide the parties and the court valuable information which will inform child support and alimony determinations.
Assets a Forensic Accountant May Review
For the purpose of valuing assets, a forensic accountant may look at any number of different types of property or assets. These can include, but are not limited to, the following:
- Stock options;
- Retirement funds;
- Deferred compensation;
- Family businesses;
- Partnership agreements;
- Art collections;
- Property held in other states or other countries; and
- Other offshore accounts.
There are other things a forensic accountant can do as well.
Areas in Which a Forensic Accountant Can Help
A forensic accountant can help in many ways. Most parties to a divorce are honest and upfront with their lawyers. However, some people try to hide assets or income. A forensic accountant can locate hidden assets. Their review of financial data can reveal sources of revenue and attempts to conceal income.
One thing a forensic accountant may do is compare various financial documents for consistency. For example, the business loan application document’s indication of personal income should be the same as the amount listed on the tax returns, as well as the amount listed on the car loan application.
Review Business Expenses
In business, certain expenses can be written off for tax purposes. This necessarily reduces one’s income for tax purposes. However, these must be legitimate business expenses, and not personal expenses. A forensic accountant may review tax returns to confirm the expenses listed are, indeed, legitimate business deductions.
Every business owner has an idea of what their business is worth to them. However, in a divorce, the question is, what is the value of the business for the equitable distribution of the assets? Whether the business is worth $50,000 or $500,000 matters when determining the allocation of the rest of the assets. A forensic accountant has the skills necessary to determine the actual value of the business.
Assisting the Lawyer
As a preliminary matter, the forensic accountant can assist the lawyer in deciding what documents must be collected in order to make a proper determination of the value of the assets. This assists the lawyer both in deciding what to ask the client for, and in deciding what to demand from the other side.
Additionally, a forensic accountant can assist the lawyer in crafting questions for the other spouse, should the spouse be deposed, or should the case go to trial. Your divorce lawyer specializes in family law issues. Your forensic accountant, on the other hand, is paid for their knowledge of how offshore accounts work, how art collections are valued, and the different ways one can manipulate deferred compensation.
Assisting Other Experts
Sometimes, depending on the circumstances, a forensic accountant can assist other experts. For example, when reviewing the tax documents of a party, a forensic accountant may call into question whether something is a legitimate business expense. A forensic accountant may work in tandem with a private investigator to uncover more information. This can be particularly true if the investigation must take place in another state, or in another country. It is not unheard of for some people to have a whole other family tucked away in another part of the country. A forensic accountant, working with a private investigator, may uncover such an arrangement.
A forensic accountant can provide testimony during a deposition or in court. As experts, forensic accountants may offer their opinions on relevant issues that go to financial aspects of the divorce. This testimony could include information about the value of given assets; the costs of various debts the couple may have accumulated; assist the judge and lawyers in determining the appropriate amount of child support, given the income of the parties and other variables as contemplated by law; assist the judge and lawyers in determining the appropriate amount of alimony given income and assets; and assist the judge and lawyers in determining the equitable division of assets.
Thinking about a Divorce?
If you are thinking about a divorce, don’t go it alone. Contact the office of Fait & DiLima to schedule a consultation. You should know what your divorce may entail. Because we focus exclusively on family law, our attorneys are able to dedicate all of our time and attention to the laws governing family law issues, including divorce, child support, alimony, and parenting time. The skills of forensic accountants are just one of many tools we rely on when helping our clients through the divorce process. In addition to our family law attorneys, we employ a team of professionals to offer assistance, including paralegals and case managers, to ensure your divorce process is as smooth as possible. We offer mediation and collaborative law approaches to divorce as well. Contact us today at (301) 888-6384.