Why would I need a forensic accountant for my divorce case? This is a common question asked by our clients. Family law matters are unavoidably fraught with financial issues. You may be desperately relying on child or spousal support, or you may be obligated to pay child support or spousal support. You may have property to divide and some assets are subject to tax if liquidated.
Whether you are going through a traditional court divorce or looking to stay of out court by choosing a less stressful alternative — collaborative divorce or mediation, a forensic accountant may serve as an important asset in your case.
Lawyers Are Not Accountants
You need to hire the right person to do the financial work, and that person would be a trained divorce forensic accountant. If two wage earners with W-2s are involved in a case, it’s possible that a forensic accountant may be overkill if support is the only issue.
On the other hand, in many cases where one or both parties are self-employed, a forensic accountant is the expert. They are trained to find out what income is available for purposes of the support calculation.
The layperson or attorney is not qualified to determine what income is available for support by looking at a tax return’s Schedule C. An opinion as to what income is available for support often can only be accomplished by a qualified professional trained in accounting techniques to look “behind” the profit and loss statements and tax returns so as to offer an opinion presentable to the court. As an example, some deductions for tax return purposes may be added back for support purposes. This could make a difference to the guideline support number.
A forensic accountant can also be instrumental in determining the parties’ respective interests in certain assets. For example, sometimes one or both spouses made the down payment on the family home or used separate monies to improve the family home. Another example would be the family business, which may have been started before or during marriage.
Other examples would include separate and community property interests in retirement and/or stock portfolios. A forensic accountant might be engaged to value a business. Or to uncover hidden assets. The accountant assists the divorce lawyer or mediator / collaborative attorney with these financial issues and more.
What Is a Forensic Accountant?
A trained professional who possesses a unique skill set related to the financial issues of your divorce. Depending on the scope of work, a forensic accountant will form an opinion and/or written report to be used to support and provide evidence of a particular financial position. A party can use the opinion for purposes of settlement negotiations or submission to the court.
A forensic accountant can conduct valuations of businesses, locate hidden assets, determine what income is available for child and spousal support, trace community and separate property money, to name a few.
How Does a Forensic Accountant Form an Opinion?
Opinions are based on the financial information and documentation available in your case. In forming their opinion, the forensic accountant will review and analyze financial disclosures, tax returns, paystubs, W-2 and 1099 forms, profit and loss statements, brokerage account statements and all other relevant financial information and documentation obtained by your family law lawyer.
Does My Case Really Need a Forensic Accountant?
Cases that are good candidates for such services are situations where: a family business is managed by one spouse or both spouses; couples have mixed community property; separate property assets and debts; marital standard of living issues; the need to uncover hidden assets and income; as well as determining income available for child and spousal support.
The cost of this service is determined by the scope of work needed to be done in your case. Because the cost is case dependent, consult with your family law lawyer about the cost reasonably expected to be incurred based on the facts and financial issues of your case.
Do I Still Need a Forensic Accountant If I Am Mediating My Case?
Although mediation takes a less aggressive posture than litigated cases, the need for accurate financial information and analysis remains the same. The overriding goal of mediation is to settle outside of court. A family law settlement is only as good as the information upon which it is based. A forensic accountant can assist you with making an informed decision regarding the financial issues in your mediation.
If you believe your family law matter might need the assistance of a forensic accountant, please contact Zonder Family Law to arrange your Strategy Session.
Learn More: Strategic Partnering With CPA’S