When do you need a Forensic Accountant in a Divorce?

By Heather Deskins, CPA, CFE, CFF, CVA

Forensic accountants are used in a variety of capacities during a divorce. They may perform an examination of a couple’s personal financial situation, the financial records of a closely held business, or both. If a spouse is an owner of a closely held business, an examination may need to be conducted in order to determine what personal perks are going through the business and a valuation may need to be performed. A forensic accountant is able to perform an investigation into whether one spouse is hiding income and/or assets or even helping a spouse identify and trace separate property.

Long before a divorce petition is filed, the spouse with the highest earnings may try to hide, transfer or defer income in order to lower child and/or spousal support awards. A spouse who is hiding income from the other spouse is often trying to hide the income from the Internal Revenue Service (IRS). This can make finding the hidden income fairly difficult. A forensic examination may determine the existence of hidden, transferred or deferred income as well as determining the total disposable income of the parties.

Knowing that marital property is distributed between the divorcing parties, one spouse may attempt to hide property or transfer it to others in order to hide it from the other spouse. A forensic examination may discover hidden or transferred property.

On the other hand, the parties need to understand that separate property is not subject to division and belongs solely to the spouse that can prove that it is their separate property. A forensic examination may validate claims of separate property and trace separate property through commingled property.

The factors that should be considered when deciding whether a forensic accountant is needed include the following:

  • Does either party own a closely held business? Are personal expenses being paid by the company?
  • Does a spouse have suspicions that the opposing spouse has hidden or transferred income and/or assets?
  • Is separate property being claimed by either spouse? If so, is the opposing spouse likely to dispute the separate property claim?
  • Will the benefits of proving or disproving separate property or finding hidden income and/or assets outweigh the costs?
  • Does the attorney want a forensic examination performed in order to avoid the possibility of legal malpractice?

Heather Deskins, CPA/ABV/CFF, CFE, CVA

Heather Deskins,

Managing Member
P.D. Eye Forensics, LLC