Just as it makes sense to have a lawyer handle the legal issues of divorce, ending a marriage involves such important financial considerations that an accountant should be part of the decision-making process. But not every lawyer is skilled at divorce law, and not every accountant understands the unique financial issues that arise from dividing financial assets in the marital estate. For that you need a forensic accountant, who combines financial knowledge with investigative skill to uncover and analyze all assets that exist and ensure their proper division as the divorce case goes to court. Here are six reasons why.
- Community Property Balance Sheet. In more complex estates, a forensic accountant will build the community property balance sheet which sets forth each community asset to be divided in the case and places a value on the asset. As part of this process, the accountant will usually collect and maintain the documentation to support each item on the balance sheet. The accountant can then testify to the balance sheet and its value at the time of trial.
- Separate Property Tracing. Often separate property claims of either spouse are not easily proven because the asset has been commingled with community property. A family law forensic accountant understands the legal principles of tracing ownership and will build the documentation to establish the separate property claim.
- Financial Statement. In all divorce cases, each party must prepare a financial statement which is set forth on a court form called an Income and Expense Declaration. A spouse who is self-employed, or has complicated business, real estate or investment holdings can benefit from having a forensic accountant, rather than the divorce lawyer, prepare the Income and Expense Declaration. This is because the accountant can typically better present the financial picture to the Court.
- Business Valuation. If there is a business interest involved in the divorce, it must be valued for division. While many forensic accountants have the knowledge to value the business, not all have the necessary certifications and training to do so. If there is any chance a case will go to trial, it is important to work with an accountant who is certified to value the business and can qualify as a business valuation expert at trial. (Note: there are other experts who are not accountants but are business valuation experts who the court will accept in lieu of a forensic accountant. The lawyer hiring the experts will weigh the pros and cons of working with a business valuation expert who may also be the forensic accountant on other issues in the case)
- Legal Authorities. Family law forensic accountants not only understand the interplay between the family law statutes and the Internal Revenue Code. They are able to bring to the case another dimension of legal knowledge which a family law attorney would typically not have.
- Settlement. One of the most valuable skills an accountant brings to the case is the ability to aid in settlement. Accountants of course can help the lawyer and client understand the range of settlement possibilities, and analyze a settlement proposal. But it is often invaluable when accountants representing each party in the divorce work together to narrow the financial differences and assist in creating a settlement. This often leaves little for the lawyers and clients to dispute.
As integral members of the legal team, forensic accountants bring more than just the numbers to the table. Every case is unique and the family law attorney should work with the client to decide if and when a forensic accountant and other qualified experts should be brought into the case.