Forensic Accountants Help with Asset Discovery in Divorce Cases
Ben Allen18 Oct 2021

Forensic accountants work with attorneys during divorce proceedings to do investigative research, quantify assets, and provide evidence. An attorney cannot prepare a solid case, and a judge cannot make a fair decision, unless he or she has all the facts. A forensic accountant can uncover financial details that attorneys can use to prepare a solid case.

A forensic accountant is needed in a divorce where:

• The couple has complicated finances and might not understand their own assets.
• One spouse suspects the other is hiding assets, or has misused assets.
• The divorce is acrimonious.
• One spouse does not have a good understanding of the couple’s finances because the other spouse handled their affairs.
• One (or both) of the spouses is a contractor.
• One (or both) of the spouses owns a business.
• One (or both) of the spouses had significant wealth or significant debt before the marriage.

In a divorce, a spouse might be deliberately concealing wealth, or simply unaware of the value of some of the couple’s assets. A forensic accountant begins by analyzing bank accounts, known sources of income, and expenditures to develop a financial profile, then compares this to the person’s lifestyle. A person who appears to be spending more than their reported income is likely to be hiding assets. An example is a person who claims to be receiving a modest paycheck, but posts photos of foreign travel, sportscars, or a yacht on their Facebook page.

What about tax?

Tax returns often contain clues about investments and business expenditures. Real estate records, insurance policies, loan applications, employment applications, and credit reports might also contain information that points to hidden assets. The person might hide wealth by putting it into an investment account at a brokerage, or a 401K, then withdrawing cash.

The accountant might do a background check, and interview business partners and coworkers. Frequent overseas travel could indicate that the person owns real estate or has bank accounts in another country. A search of DMV databases might reveal that the person has purchased luxury cars or boats. The search can be expanded to friends and associates, in case hidden assets such as houses or vehicles were purchased under their names. If the person owns a business, the accountant will look at the cash flow to see if personal expenses were paid by the business. To reduce reported income and avoid child support, a business owner might register a second corporation to receive dummy payments for “outsourced services.” If a marriage has been long, the accountant will go back many years, looking at retirement accounts and real estate purchases, deciphering who contributed what to the household wealth.

A forensic accountant can access tools to discover if the person being investigated is using a secure email service such as ProtonMail to communicate in secrecy about financial transactions.

The forensic accountant acts as an investigator. When the forensic accountant discovers the existence of a hidden bank or investment account, he informs the attorney, who can then subpoena documents to find out the exact amounts involved and prepare a legal case.

A forensic accountant can assist with divorce proceedings in other ways, including:
• Determining cash flow for the calculation of alimony and child support payments
• Performing a business valuation
• Appraising assets
• Identifying which assets are owned jointly
• Monitoring how jointly owned cash is spent during the separation and divorce proceedings
• Preparing a plan for dividing assets
• Helping attorneys prepare deposition questions for the other party’s attorneys
• Reviewing the work of the other party’s forensic accountant
• Serving as an expert witness in court

It is important to identify assets and gather all information about your financial situation before court proceedings begin, to make sure that support payments are calculated correctly and property is divided fairly. It is illegal to hide or devalue assets during a divorce. Anyone caught doing so will lose a greater amount of marital assets, and face penalties and possible criminal charges.

Do you need help with asset discovery for a divorce or a financial judgement? Contact Allen Forensics today for a free consultation.

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