Law Forensic Accounting and Divorce

Accountants are commonly used to help lawyers calculate alimony and child support payments and assist in other general financial issues. Forensic accountants are specialists in uncovering hidden income and assets. They may be hired in cases where one spouse is a high earner or a closely held business is involved. In anticipation of a divorce, a spouse may hide or transfer income and assets to lower the amount of support payments. Especially in this case it is recommended that a forensic accountant be consulted. The results could greatly impact the financial outcome of the divorce. At the very least, this level of expertise is beneficial in finding and tracing marital, separate, and joint property.

The forensic accountant will analyze financial statements, accounts, and audits to trace income and assets. He/she can also use personal tax returns and business and fiduciary returns to examine a spouse’s financial status. Public records and loan applications are also helpful tools. Comparison of the family’s lifestyle vs. reported income can reveal discrepancies that need to be investigated.

A closely held business is defined as one that is operated and managed by a small group of shareholders. These are usually, but not always family businesses, and it is estimated that 90 percent of American businesses are closely held. A closely held business is ideal for hiding assets and income, and a good forensic accountant will use the above tools to make a detailed analysis of the hidden value of the company. Several scenarios for concealing income are possible with a closely held business. A spouse may deliberately reduce company profits at the prospect of divorce. He or she could also use business assets for personal benefit over and above reported income, or use the firm to obtain cars, planes, or homes for personal use. Forensic accounting is crucial to appraising the real value of the firm for equitable distribution in a divorce. The forensic accountant can ensure that the statement of income and assets is accurate.

When trying to achieve an equitable settlement for a divorce in Media, the skills of a good forensic accountant can be vital. The investment made in hiring one most often results in a better outcome for the client. The findings of the forensic accountant may prove to be a good negotiating tool when it comes to negotiating a settlement.