When Should You Use a Forensic Accountant in Your RI Divorce?

When many people hear the term “forensic accounting,” they often assume that this is a process used just in criminal investigations to uncover embezzlement or other types of fraud. While forensic accountants do work in the criminal justice field, they can also be helpful in divorce and other family law proceedings. Forensic accounting can be used to uncover important information and provide important documentation to support your case.

One of the most common issues couples fight about in marriage is finances, and this issue is definitely one that usually continues to be a contentious one in a divorce. This is because all of the assets (and debts) that make up the marital estate have to be equitably divided between the spouses in the divorce settlement. Determining finances also helps the court determine how much child support a spouse may be ordered to pay, as well as whether or not one spouse should pay the other spouse alimony.

Unfortunately, there are spouses going through a divorce who decide it would be better to hide assets rather than have the other spouse receive their fair share. This is more common than you may think. The National Endowment for Financial Education (NEFE) has been studying “financial infidelity” for more than a decade and finds that the issue continues to be a prevalent one. Their studies have found that hidden funds are discovered in two out of three marriages.

The NEFE studies have also found that there are common red flags that should alert a person that their spouse may be hiding assets. These include:

• The spouse has taken over the finances completely.
• The spouse has changed online passwords for all financial accounts.
• The spouse is secretive and not at all forthcoming about the couple’s financial accounts.
• The spouse often “lends” money to family and friends.
• The spouse transfers funds from the couple’s accounts to family and friends.
• The spouse downplays expensive purchases they are making.
• The spouse sets up a large life insurance policy without any discussion.

Hidden Assets in Divorce

A spouse who is hiding assets often begins this strategy before there has been any decision or possibly even discussion of divorce. And while there are some individuals who may get away with this strategy, a skilled Rhode Island divorce attorney knows how to protect their clients' best interests. If you suspect your spouse has been hiding assets and now one of you has filed for divorce, your attorney knows that a forensic accountant can help uncover those assets.

A forensic accountant knows just how to search for those hidden assets. They look for inconsistencies between the financial information and the non-financial information a spouse provides and determine whether they are attempting to conceal property or income to avoid dividing certain assets. Some of the methods spouses use to hide assets that a forensic accountant can uncover include using secret bank accounts, transferring funds to relatives or friends, cryptocurrency, or paying nonexistent employees if they own a business.

Other Ways Forensic Accounting Can Help

A forensic accountant can help in a divorce even if neither of the spouses is attempting to hide assets. Some marital estates can be very complex, and an accountant can help the courts determine the following:

• Income determination: Child support and alimony are based on a spouse’s income. When a spouse has a high net worth from multiple income sources, (i.e., executive benefits packages, bonuses, investments, business interests), it can be difficult for either party to fully understand what that actual income is and what the income is projected to be in the next few years.
• Commingled assets: When a couple own complex assets, it can be hard to determine which assets are marital assets and which ones are separate if those assets have been commingled. A forensic accountant can determine which assets and debts are jointly owned and which ones are separate.
• Business valuation: If one or both of the spouses own a business – whether together or separate – the value of the business needs to be determined to ensure a fair division of assets and property.
• Tax consequences: One major issue that is often overlooked by spouses when deciding on an asset and property settlement is what will the tax consequences be for transferring or selling the assets. A forensic accountant can determine what those taxes will be, which can help ensure that any divorce settlement is structured to minimize both spouses’ tax obligations.

Call Our Office for Legal Assistance

If you have made the decision to end your marriage, a Rhode Island divorce attorney from Kirshenbaum Law Associates, Inc. can help navigate you through the divorce process and division of property decisions to determine what choices are the best ones for your family, no matter how complex your case may be.

To learn more, call Kirshenbaum Law Associates at 401-467-5300 for a confidential consultation.