If you’re a successful professional in the Bay Area, chances are high you hold complex assets that can complicate your divorce. Your high-net-worth domestic partnership dissolution could involve business ownership interests, income from stock options and capital gains , real estate, or bonus compensation packages that change the property division formula.
You cannot resolve your divorce until you address how all of your assets and debts will be split under California’s community property rules . You and your spouse have options for how you decide property division – through settlement negotiations , mediation , collaboration , or litigation in court. As part of the divorce process, you will both be required to submit an honest and accurate account of your individual and shared finances.
A forensic accountant is invaluable in complex financial negotiations like high-net-worth divorce. You need someone with the expertise to properly uncover and evaluate complicated assets. Even if you trust your spouse not to deliberately hide any assets from you, a forensic accountant may find items that were initially overlooked or undervalued.
Ideally, your divorce lawyer will not only know when a forensic accountant is necessary but also have relationships with talented forensic accountants who can assist in your case.
What Do Forensic Accountants Look for in a Divorce?
When you bring a forensic accountant aboard your case, they will work with your family lawyer to go through you and your spouse’s financial documents such as bank records, tax returns, employment contracts, titles and deeds, retirement accounts, and business holdings.
The goal of a forensic accountant is to establish an accurate understanding of you and your spouse’s finances to ensure a fair division of assets and debts in your divorce.
- Your forensic accountant will know how and where to dig deeper to uncover forgotten, overlooked, or deliberately concealed assets.
- A good forensic accountant will have the skills to find any inconsistencies between your spouse’s claims and their actual financial activity.
- Your forensic accountant can accurately value any business or professional interests you hold, including professional practices for doctors, lawyers, etc.
- A thorough forensic accountant can identify any other unique pieces of property that may hold unexpected value, such as pieces of art, antiques, or collectibles.
The divorce process requires a certain level of good faith, where both spouses are expected to be honest and forthright in the disclosures they make to the other spouse and the court. But even if you trust your spouse not to conceal their wealth in offshore accounts or properties, it’s always important to independently check and verify the financial records they provide.
How Can Forensic Accountants Help the Divorce Process?
Forensic accountants are critical to the divorce process, especially for high earners, industry leaders, and entrepreneurs. But they do much more than simply establish the value of assets.
A good forensic accountant can help simplify and clarify the terms of your divorce, especially when they work together with your family lawyer and the rest of your divorce team.
- A forensic accountant can help establish transparency and reduce uncertainty in your divorce. The earlier you get a forensic accountant involved, the sooner you can proceed with the confidence that your negotiations are based on accurate financial information. The more thorough the forensic accountant, the fewer unknowns that leaves for you and your spouse to conflict over. You don’t have to worry about uncovering hidden assets later on in the process or worse – after you’ve settled your divorce. This certainty helps clear the way for smoother sailing in divorce negotiations.
- Forensic accountants can help determine the origins of your assets – this, in turn, determines whether those assets are community property or separate property. This is extremely important because you get 50% of all community property, 100% of your own separate property, and 0% of your spouse’s separate property. As a result, it’s critical to track down the source of the funds behind each asset owned by you and your spouse.
- A forensic accountant’s role is about more than just the financial figures they report. The details and reasoning behind a forensic accountant’s investigation are just as important as the figures themselves. A forensic accountant’s work helps verify the finances at stake. It’s not just about how much a business is worth but why it’s worth that much. Your forensic accountant should know to use industry-specific appraisal methods when appropriate. When financial figures are backed up by solid reasoning and proof, that leaves less conflict to be hashed out between spouses.
- A forensic accountant’s findings can affect the amount of child support and spousal support paid from one spouse to the other. If your spouse underreports their income, a forensic accountant would find out. If your spouse deliberately hides assets from you in order to avoid paying support, a forensic accountant’s investigation can uncover the full extent of their wealth. That could make a huge difference in the amount you’re entitled to receive, especially if the hidden assets count as community property.
- Based on their findings, your forensic accountant can work with your divorce attorney or mediator to come up with a property division strategy that satisfies both you and your spouse. California does not require that you split all of your property 50/50 in-kind. Rather, you can offset the price of one asset with another. For example, one spouse may buy out the other’s ownership interest in their family home with cash. Both spouses get an equal amount of value out of the transaction despite keeping different types of assets. A forensic accountant can help evaluate the best approach to split the value of complicated assets like stock options or capital gains.
A forensic accountant is an absolutely necessary part of your divorce team, especially if you feel like you’re in the dark about the full extent of your spouse’s wealth.
Without a forensic accountant on your side to verify your spouse’s finances, you have no other option but to trust in the figures your spouse gives you. Your forensic accountant can help shed light on your spouse’s finances – and keep them honest in their disclosures. As a result, you’ll end up with a much more accurate and fair property division agreement in your divorce.