Nearly everybody has a general idea of what happens in divorce: marital assets and debts are divided, alimony and child support payments are determined, and eventually, the former spouses go their separate ways. Ideally, even if there is bickering during the settlement negotiation process, each ex comes away feeling that the end result was mostly reasonable.
The concept may be simple, but for many couples today, the process gets complicated quickly. There’s often much more to divide than house, car, and bank accounts, and a complex financial portfolio makes for a long, involved settlement process. If you and your husband have significantly different views about how to settle a complex portfolio of complicated assets — or especially if you suspect him misrepresenting his finances — that can make for a very arduous divorce indeed. And, the more complicated the circumstances, the more specialized the professional help you’ll need to get through it in good shape.
So, what does a forensic accountant do, and why might you need one?
A forensic accountant specializes in reviewing personal and business financial records in minute detail, with an eye to uncovering discrepancies and other problems that reveal hidden assets, under-valuations, unreported income, and any number of other fraudulent — but shockingly common — financial shenanigans. If you suspect your soon-to-be-ex of dirty financial tricks but can’t readily prove it, a forensic accountant will be an invaluable member of your professional divorce team. (That team should already include a divorce attorney to manage the legal aspects of your case, a divorce financial advisor to ensure your settlement is the best it can be, and a therapist to help you cope emotionally).
In addition, many forensic accountants are also valuation experts, and you’ll need those skills (whether or not you suspect any wrongdoing) if you require precise and defensible valuations of a business and its associated assets.
When dirty tricks are in play, forensic accountancy really shines. For example, I’ve seen husbands stall . . . and stall . . . and stall, before handing over financial documents for the wife’s divorce team to review, driving up her legal bills as high as he can before they even get a look. Then, when the paperwork finally arrives, it’s hopelessly disordered, with some items missing and irrelevant items thrown in to make it more confusing, time-consuming and even more costly to the wife to sort through.
Often, the records have been manipulated in a way not just to cause frustration and delay, but to hide the truth of his financial situation. You might suspect your husband is understating income, or otherwise hiding assets to keep them from being divided in your settlement. But these things can be difficult to prove in court — especially if he owns a business with a significant cash income, or if he’s been hiding assets for many years so that on the surface, his technique appears to be just normal practice, unrelated to the divorce.
A forensic accountant is exactly the expert you need to go through the mountains of paperwork, distill the financial truths within, and bring to light any evidence of wrongdoing. Here are some of the underhanded maneuvers a forensic accountant can uncover:
- padding payroll
- underreporting income
- overpaying creditors
- creating fake debt
- transferring assets to dummy corporations
- purchasing expensive items with secreted cash
. . . and the list goes on.
If your husband has provided incomplete, inaccurate or downright fraudulent records that distort his financial situation, your divorce team will have to construct a likely representation of his “true” income for the sake of negotiating your settlement.
Many women, watching their savings diminish as their divorce drags on, are reluctant to hire yet another expensive expert. If you’re in that situation, consider that the forensic accountant can actually save you money, as it would take your lawyer many more billable hours to address the same issues. Plus, remember this: If a forensic accountant does find hidden assets and/or income, he/she can help establish a greater value of the business, creating a larger amount for the two of you to divide.
“One of the most common and complicated issues in divorce is determining a spouse’s true income. A second is classifying which assets are marital or separate property or both and their values in each category,” explains Miles Mason, Esq., of Miles Mason Family Law Group in Memphis. ”Income determinations and classification issues require expertise. In many situations, a forensic accountant can provide both types of analysis to the client’s divorce lawyer less expensively and more quickly than the client’s law firm performing the same work. If either issue becomes contested in court, the forensic accountant can testify with less expense to the client because the work has already been performed by the accountant.”
Indeed, if your case is headed to court, you’ll find a forensic accountant particularly helpful.
“If a divorcing client must go to court over complex assets, income determination or some other financial issue, a forensic accountant can often testify on behalf of the party about particular financial issues,” Attorney Mason said. “Most divorcing clients like the idea of the accounting professional being cross-examined by opposing counsel, instead of the client.”
As a divorce financial advisor, I urge any divorcing woman who suspects wrongdoing, or has complex assets requiring valuation, to retain a forensic accountant. The money you’ll spend to pay for this expertise pales in comparison to potential losses from being cheated by an unscrupulous husband. There’s a lot at stake. Your settlement is a major underpinning of your long-term financial well-being, and the findings of a forensic accountant can have a huge influence on its terms.
Jeffrey Landers is a member of the DailyWorth Connect program. Read more about the program here.