The forensic accountant in divorce cases is charged with requesting, gathering, analyzing and evaluating financial data provided by the spouses and their attorneys and then communicating his or her findings. Specifically, forensic accounting assignments may include the following:
- The forensic accountant may trace the flow of funds between accounts.
- The forensic accountant may calculate the parties’ spending habits to provide insight on amounts needed in future financial support payments to maintain each spouse’s lifestyle (lifestyle analysis).
- The forensic accountant may calculate the current earnings and/or potential earnings of each spouse to offer insight into how much each spouse may have the ability to pay in future support payments (income analysis).
- The forensic accountant may prepare a comprehensive schedule of the spouses’ assets and liabilities, including the values of each item individually.
- The forensic accountant may determine the value of business interests, stock ownership rights, pension plans, or other assets/liabilities owned by the parties.
- The forensic accountant may prepare alimony and child support payment scenarios the parties can use for negotiation purposes and think creatively for a win-win solution.
- The forensic accountant may calculate the tax implications of certain assets, liabilities, and support payments.
- The forensic accountant may distinguish between marital and non-marital assets and liabilities.
Benefits of Using a Forensic Accountant in Collaborative Divorce
Collaborative divorce offers many benefits over the traditional litigious divorce process, particularly when using the expertise of a forensic accountant. In collaborative divorce, the forensic accountant plays a unique role in that he or she acts as a “neutral advisor” who provides the divorcing couple with objective, unbiased financial advice. To handle such a role, the forensic accountant selected must have the specialized training, knowledge, and skill needed to aid the couple in reaching a settlement that makes sound financial sense for both parties. The following describes several benefits of using a forensic accountant in the collaborative divorce process.
- Reduced Cost: Unlike the traditional adversarial divorce setting where each side hires their own forensic accountants / business valuation experts, the collaborative divorce process includes the expertise of one neutral financial advisor; thus, the parties pay for just one forensic accountant rather than two or more experts. Using one neutral expert also eliminates the excessive “dueling” that often occurs between forensic accountants on either side of the case.
- Reduced Time: The forensic accountant can gather and interpret data more quickly in the collaborative divorce setting as discovery and other document exchanges are limited to only necessary documentation. In collaborative divorce, the divorcing spouses agree to voluntarily provide all pertinent financial information in the initial agreement. This allows for a free and transparent exchange of financial data needed to reach quick financial conclusions and opinions.
- Clear Understanding: In collaborative divorce, the forensic accountant assists both spouses in gathering and preparing financial data so that they both have a clear and comprehensive understanding of the issues. The forensic accountant is able to clearly explain to each spouse both sides of the issues and can highlight the financial pros and cons of the proposed scenarios.
- Creative Thinking: Unlike in litigious divorce, the neutral forensic accountant is able to engage in brainstorming sessions together with both parties. This provides a forum for transparency among the spouses and attorneys present and leads to creative and “outside the box” thinking often needed to resolve issues quickly and advantageously for both spouses.
The collaborative divorce process offers divorcing spouses flexibility not available in traditional divorce. In each case, the spouses, with input from their attorneys, define the specific roles and duties of the forensic accountant throughout the process. The neutral forensic accountant in the collaborative divorce setting is able to assist the divorcing couple and their attorneys in a uniquely creative, efficient, and problem-solving capacity.