Divorce is messy and complicated for many people. Figuring out a person’s financial position before or after divorce takes specialized skill, which many forensic accountants can provide. The tasks a forensic accountant performs varies depending on the divorce, and not all couples will need one. However, at Lawrence Law Office, we regularly work with forensic accountants when their expertise will help our clients. Below, we take a closer look at how these professionals assist us in our work.
What Does a Forensic Accountant Do?
A divorce unwinds a couple’s financial relationship. For this to happen properly, our lawyers need to understand the financial condition each side is in. We sometimes find it beneficial to employ forensic accountants who can do any of the following:
- Calculate child support payments
- Determine how much each parent’s income is available to pay for child support
- Identify a couple’s marital or separate assets
- Identify a couple’s marital or separate debts
- Get property appraised
- Engage in assessing the value of a business
- Draft a plan for how a couple can divide assets and liabilities
- Track down assets that are not disclosed
- Trace how joint funds have been spent by each spouse since they agreed to separate
- Identify how premarital separate property has been spent after marriage
As you can see, the work a forensic accountant provides varies depending on the circumstances. Sometimes, people assume the word “forensic” means that the accountant acts as a detective, tracking down hidden accounts offshore or in a separate state. And, in some high-asset divorces, that is exactly what a forensic accountant will do. When one spouse has significant assets, they often have an incentive to underreport or outright hide some of them, which is against the law.
But even couples with more modest assets and incomes might need the help of a forensic account. In many marriages, only one spouse handles all of the finances, so only he or she really understands the couple’s financial position. A forensic accountant might help bring necessary light to this issue.
Who Hires the Forensic Accountant?
Typically, each side will get their own forensic accountant. Although accountants can act as “neutral” third parties, it often makes more sense for each side to retain their own. When there are disagreements, the forensic accountants can meet and hammer out differences if you are trying to negotiate a settlement, so you avoid a contested divorce.
When Does a Lawyer Recommend Hiring a Forensic Accountant?
As mentioned above, not all divorces require a forensic accountant’s help. There is no reason to take on this added expense if not necessary. However, we often think a forensic accountant is helpful in the following situations:
- Either spouse has self-employment or investment income
- Either spouse has an ownership interest in a business
- The couple has more complicated assets than simply retirement funds and a home
- Custody will not be divided equally between the spouses and child support is hard to calculate
- The spouses have significant marital or separate property
- Either spouse has significant intellectual property that is difficult to value
- One spouse has premarital property that might have been commingled with marital property, e.g., an inheritance that was used to make renovations on a home or used for a small business
We can review your assets and determine whether a forensic accountant will be useful. We can also identify the issues that the accountant will work on.
How to Work Effectively with a Forensic Accountant
An accountant works most effectively when he or she has all of the information requested in a timely fashion. Pulling together financial records can be time consuming and difficult, especially if you have small accounts at many different financial institutions. Someone who has worked 10 different jobs might have 10 individual retirement accounts.
A forensic accountant will also help our clients understand their financial future, including whether they will need to delay retirement. Many of our clients are shocked to discover that they are facing serious downsizing once they have their divorce decree in hand. Of course, it is harder to fund a lifestyle when you are no longer sharing expenses, but the full cost of living alone might be difficult to calculate. A forensic accountant can help with this.
Contact Our Lawyers Today
At Lawrence Law Office, our team has worked with many forensic accountants to better understand the financial issues at play in the divorce. We have built continuing relationships with many of the most skilled accountants in the area. To discuss your divorce, please contact our firm today.