Role of Forensic Accountants in Divorce Process

Have you wondered what forensic accountants do and why they are hired in legal cases? Since most litigation has a financial component, forensic accountants are retained to use their expertise to form opinions on the financial matters of the case. They are hired to value closely-held businesses, determine loss damages, identify diverted assets and assist couples in navigating the financial aspects of divorce. What does the forensic accountant do in a divorce? Who hires them? And when should one hire the financial expert?

What we do 

Forensic accountants perform many functions in family law cases. Some of these include:

• valuing marital assets and liabilities:
  • bank accounts
  • investment accounts
  • closely held businesses
  • real estate, including the marital residence
  • retirements accounts
  • vehicles
  • other assets
  • mortgage debt
  • credit card debt
  • auto loans
  • student loans
  • other liabilities
• determining which assets and liabilities may be marital or non-marital
• preparing a plan for distributing assets and liabilities between the parties
• calculating each party’s income
• determining the appropriate spousal support (alimony) and child support
• assisting in preparing financial affidavits
• in some cases, identifying dissipated or hidden assets

Often, the goal in family law cases is to avoid going to trial. Litigation is expensive, time consuming, and it puts the family’s future in the hands of a Judge who, while well versed in the law, does not know each family and their specific needs. Many cases are directed to mediation by the family court judges. In mediation, the couple can craft a settlement that is best for the family. Forensic accountants often participate in and assist in settlement negotiations. They will attend mediation sessions, and assist in settling the financial issues. 

Who hires us 

The forensic accountant’s financial relationship is with the client. There is a retainer agreement, separate from the attorney’s agreement. The attorney directs the case, and the forensic accountant is an expert supporting the litigation. 

Either party can hire a forensic accountant, or the parties can agree to share an expert. While an attorney’s responsibility is to represent their client’s interest, the CPA’s responsibility is to the public trust.  If each party engages their own forensic accountant, the two accountants will usually agree on about 80% of the issues. The other 20% would be subject to the expert’s opinion. 

The couples can save a lot of money and can expedite the divorce process by sharing a financial expert.  The forensic accountant can present the 80% of the issues that are in agreement, and present the parties’ differences for negotiation.

When to call 

Does every divorce need a forensic accountant? If you are reading to this point, you probably need one. 

For a couple where each has a job (W-2 employees), no children, and limited marital assets, they do not need a forensic accountant. But if there are children, if spousal support (alimony) is expected, if there are retirement accounts, jointly held real estate, banking and investment accounts, a joint debt like a mortgage, credit cards, automobile loans, then a forensic accountant is needed.

When you decide to hire a forensic accountant, do it sooner, rather than later. The forensic accountant can provide valuable assistance in preparing financial affidavits, developing document requests, and identifying areas of special interest in the case.

Finances are a central component of divorce cases. Forensic accountants can simplify and clarify complex financial issues. They can help facilitate settlement negotiations and are trusted, expert witnesses.