Understanding the Role of a Forensic Accountant in Divorce Cases

Flicker, Kerin, Kruger & Bissada LLP

In the complex world of high-net-worth divorces in California, where substantial assets and intricate financial portfolios are at stake, understanding the role of a forensic accountant is pivotal. Dissolution proceedings involving significant wealth often require the expertise of a forensic accountant to navigate the complex financial landscape and ensure a fair and equitable resolution for both parties. Below, we will delve into the role of forensic accountants in divorce cases, shedding light on their responsibilities and the benefits they bring to the table.

What Is a Forensic Accountant?

Forensic accountants are financial experts who possess the knowledge and skills necessary to assess the financial intricacies involved in separating a couple’s finances. These experts can work alongside divorce attorneys to ensure a thorough and complete evaluation of all financial aspects of the marriage.

In high-asset divorce cases, where significant wealth and complex financial issues are involved, forensic accountants play a crucial role in various aspects of the dissolution action, including: characterization and valuation of separate property and community property interests through forensic tracing; calculating the value of a business when one party is a business owner; determining the appropriate amount of child support and spousal support (also known as “alimony”) when the parties have fluctuating income and significant equity compensation; and analyzing complex tax considerations in the division of assets, among many other pivotal considerations. 

Forensic experts can be retained jointly by the Parties to ensure the appropriate division of assets takes place and other financial arrangements are equitable. In this role, the financial accountant’s expertise helps both parties and the court make well-informed decisions to achieve the appropriate financial outcome in the proceedings.  Forensic experts may also be retained by one party to serve as that Party’s expert in the dissolution.  In that capacity, the financial accountant’s role is to ensure that the client’s property rights and financial interests are protected through providing a detailed accounting on issues relating to separate property rights, income available for child and spousal support, and similar financial considerations that can have a substantial impact on the outcome of the divorce.

The Role of Forensic Accountants in Divorce 

The primary role of a forensic accountant in a divorce case is to conduct a comprehensive financial analysis on the specific financial issues that arise in each particular case. Financial analysis in a divorce is a meticulous process that involves dissecting every financial aspect of the marriage. This process may include:

  1. Asset Valuation: Forensic accountants are responsible for valuing marital assets accurately. This includes businesses, investments, retirement accounts, personal property, and other assets of value. Similarly, when assets have both separate property and community property components, such as an investment account established before marriage and contributed to during marriage with community income, the forensic expert may be tasked with determining the value of the separate and community interests in order to appropriately divide the mixed character asset in accordance with the respective property rights .
  2. Income Assessment: Forensic accountants analyze the income of both spouses, which may involve scrutinizing employment income, self-employment income, bonuses, equity compensation, investment income, retirement income, and any other sources of revenue. This assessment helps determine factors like spousal support and child support.
  3. Expense Analysis: Forensic accountants examine the couple’s financial records to understand the expenses and spending habits of each spouse. This analysis can be essential for establishing the marital standard of living of the Parties, which in turn, can have a significant impact on considerations such as spousal support.
  4. Tracing Hidden or Omitted Assets: One of the critical roles of a forensic accountant in divorce is to detect any hidden or undisclosed assets. Spouses may attempt to conceal assets to minimize their obligations during property division, or spouses may unintentionally fail to disclose assets during the extensive asset disclosure process required under California law.  In either case, these accountants use their expertise to uncover hidden or omitted assets in order to ensure their inclusion in the division process.
  5. Financial Disclosure: Forensics assist in ensuring full and accurate financial disclosure by both parties, which is a requirement at the outset of any dissolution proceeding in California. This assistance helps create a transparent and fair financial picture for the proceedings, and can mitigate the negative consequences that may result from a partial or incomplete financial disclosure by one of the Parties.
  6. Expert Testimony: Forensic accountants may serve as experts in court. They present their findings and analysis to the judge, helping the court make informed decisions regarding property division, reimbursement claims, spousal support, and child support.
  7. Financial Strategy: When retained as an individual expert, these accountants work with divorce attorneys to develop strategies that can benefit their clients and protect their property rights. This may include advising on negotiation tactics, settlement options, and potential tax implications of various monetary decisions.

In short, specialized accountants scrutinize financial documents, bank statements, tax returns, and business records to provide a clear picture of the couple’s financial situation. They may also find any hidden or undisclosed assets so that all property interests are accounted for and appropriately taken into consideration in dividing the marital estate. 

The Importance of Expert Professionals

The importance of a forensic accountant in high-net-worth divorce cases in California cannot be overstated. Their expertise in financial analysis, asset valuation, income and support calculations, separate property claims, reimbursement claims, and the detection of undisclosed assets ensures all financial considerations in any divorce proceeding are appropriately addressed and accounted for, either during settlement discussions or at trial. s. 

When navigating the complexities of a high-asset divorce, seeking the assistance of a skilled divorce attorney with experience working with forensic accountants is essential to protect your interests and secure a favorable outcome. We encourage you to reach out to experienced attorneys like those at Flicker, Kerin, Kruger & Bissada LLP to discuss your case. Our skilled team has roughly 50 years of experience representing clients in complex divorces in San Mateo County, Santa Clara County, and throughout the Bay Area. Schedule your consultation today to learn how we can assist with your high-net-worth divorce and help protect your substantial wealth.

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