Who Pays for a Forensic Accountant in a Divorce?

Going through a divorce is a difficult time for many reasons. First and foremost, the emotional challenge of divorce cannot be overlooked, as it’s likely to be one of the most challenging times of your life from a personal perspective. Added on top of the many emotions you are experiencing is the financial side of this matter. From ongoing personal expenses to potential child support and beyond, divorce can be very messy from an accounting perspective.

Often, forensic accountants are called in to help with divorce proceedings. While the use of forensic accounting during a divorce process is a smart choice, you may be hung up on who is going to pay for the forensic accounting services that need to be performed. This article will dive into that question along with addressing some other matters related to the forensic accountant divorce process.

If you are currently going through divorce proceedings or will be in the near future, Space Coast Forensics is ready to serve you in this difficult time. Whether with a business valuation, the tracking down of hidden assets, or any other task needed to reveal financial information, we are up to the job. Take a moment to reach out today and learn more.

Why Use a Forensic Accountant?

Is a forensic accountant required to go through the divorce process successfully? No – and we’ll discuss that point more later on this page. For now, however, let’s focus on why you might need to bring in this type of professional to work through the issues you are facing and get to the finish line with fair and reasonable agreement.

Find Hidden Assets

Perhaps the main reason to use forensic accountants during a divorce process is to locate assets that one party has hidden from the other during the marriage. If it is believed by one member of the relationship that there are additional assets not being disclosed, a forensic accountant could work through financial statements and other sources to bring those to the surface. This is important work, as the holding of additional assets will impact the math on who should be paying support and how much should be paid.

Accurate Valuations

When trying to divide assets fairly, it’s important to know exactly how much those assets are worth on the market today. The various divorce scenarios that could play out as the property is divided up are going to depend in large part on how much some of these assets are truly worth. It’s easy to divide up cash, of course, but things can be trickier when an obvious value is not readily available. For instance, what is intellectual property worth, or how much value should be assigned to a portfolio of real estate assets? The math can get very complicated here, and the stakes are high – especially for couples with a significant net worth and plenty of meaningful assets to split. Working with forensic accountants in this process will give everyone more confidence in the numbers that are used.

Determining Income and Expenses

If fair terms are going to be set for both spousal support payments and child support, it is necessary to have a clear picture of income and expenses for the two parties involved. In some cases, this will be pretty easy – if both parties maintain traditional employment, and there is nothing complicated about their expenses, forensic accountants won’t be needed. However, if various cash flow streams exist, and the overall financial picture is a bit cloudy, getting professional help is the right way to land on terms that are fair for everyone.

Forensic accountants are experts in the matter of figuring out how much money people are making, and where all of that money is going. Following the flow of money as it comes in and goes out is what they do best, and that skill is particularly valuable during a divorce process to make sure nothing is being hidden. Often, forensic accountants wind up working like private investigators, doing their best to look under every rock and be sure the truth is out in the open.

What Property is Shared?

It’s not necessarily the case that everything owned by the two people in a marriage is going to be shared property. In some cases, there will be separate property that belongs to one person or the other, along with shared property that needs to be divided. Forensic accountants can help to trace the origins of some assets to settle whether they are shared or separate property, and that determination will help to solve how the assets are split in the agreement. An individual who believes some of the property in the marriage is theirs alone and not shared may decide to hire a forensic accountant in the hopes of proving their case and keeping more of the belongings.

Serve as an Expert in Court

Some divorces just aren’t able to be worked about between the parties and their lawyers, so the matter ends up contested and has to go to court to be sorted out. When that happens, one side or the other may choose to bring in a forensic accountant in order to present testimony about the financial realities of this relationship.

This could be done in a proactive, positive manner, such as bringing in the accountant to talk about the financial situation that a respective party finds themselves in as a result of the divorce process. The forensic accountant may present some financial records or other forms of documentation that prove what their side is asking for in the matter is fair and just.

Alternatively, forensic accountants are sometimes called in because they are needed to argue against what is being presented in court by the other party. For example, if the other party is denying ownership of some hidden assets, or is claiming a lower business valuation than what is believed to be true, using an expert witness to research the matter and then present their findings in court is a useful strategy.

Options for Paying for a Forensic Accountant

Coming back around to the question posed in the title of this article, let’s look at who may be required to pay for the services of a forensic accountant during the divorce process. There is no one-size-fits-all answer here, but there are a few possibilities that you should be aware of. Once you know how this process often plays out, you’ll probably be able to tell which is going to apply to your situation.

Individual Retainer

When one spouse wants to use a forensic accountant as part of the divorce process, that spouse will likely need to pay the accountant on an individual retainer. This makes sense, of course – the party that has chosen to bring forensic accounting into the picture is the one that will need to pay for those services. Of course, the expense is taken on with the hopes that using forensic accounting will help to uncover hidden assets or other pieces of information that will wind up being even more valuable in working out a settlement.

Joint Retainer

This is going to be an option when the divorce is amicable and the parties are willing to work together to come to a reasonable conclusion. For couples that have significant assets and many different financial interests, it may be too hard to untangle everything fairly without professional help. Even if the spouses are being open and honest and genuinely want to reach a fair agreement, doing so without involving forensic accounting may prove impossible. So, when things are agreeable and both sides think that this kind of service is in the best interest of the process, using a joint retainer to share the cost is the appropriate arrangement.

Under Court Order

While a joint retainer can be effective when everyone is getting along, a court order may be invoked when the opposite is true. If the court is involved in sorting things out, and it determines that a closer look at the financial matters of the couple is called for, there may be an order issued to hire a forensic accountant as part of the process. Along with that order, the court will likely specify who needs to pay for the cost of the accountant, whether it is all directed at one spouse or set to be divided between the two.

Forensic Accountants May Not Be Needed

There is no doubt that using forensic accountants can be a powerful tool in the process of settling a divorce. And, of course, as a forensic accounting firm, we are proud of the services that we offer and are always willing to speak with potential new clients about their needs to see if there is a good fit. You are welcome to get in touch with us at any time and we’ll go over the details of your situation. If you are even on the fence about bringing in this kind of professional help, you might as well reach out to get more information and see what the next steps would be.

With that said, it would be a mistake to represent the idea that forensic accounting is needed in all divorce processes. That simply is not the case. For plenty of couples who are in the process of going through a divorce, there is no need to retain the services of a forensic accountant, and doing so would accomplish nothing but incur an additional cost and delay the resolution of the divorce even further.

The section earlier on this page about why you may wish to use a professional accountant specializing in forensic work is a good insight into the situations where this service might be needed. If a couple does not have a significant number of assets to divide up, and if there is no suspicion of hidden assets or other financial improprieties, deciding to hire a forensic accountant would simply be a waste. Often, it will be at the suggestion of a divorce attorney that the idea is brought up to have the accounting records looked at more carefully, so that is a good place to start. If the law firm you are working with thinks that bank statements and other community property matters need a closer look, that is proper motivation to explore this possibility.

As Always, Negotiations Are Necessary

Relationships are made up of ongoing negotiations. Even healthy relationships feature many negotiations day after day, from who is going to pick up the kids to who is going to make dinner, and on and on. Negotiating is at the heart of what we do as humans when we interact with each other, and that continues even when a relationship is ending and a divorce is required.

When trying to figure out who will pay for the services of a forensic accountant in the divorce process, this might wind up being just another thing that has to be negotiated by the two parties. Just like spousal support will need to be negotiated and settled, and the various pieces of marital property will need to be divided, a divorce case can also include the task of negotiating over the cost of professional fees like those needed to hire an accountant to go over financial statements. In other words, there isn’t necessarily one specific party that always pays for this service – it can and will vary on a case-by-case basis.

Arriving at a Fair Conclusion

The goal in divorce cases should always be to arrive at a fair conclusion that is suitable for both parties. Sure, you might not be getting along particularly well at the moment, but the proper conclusion is one that is fair to both individuals, along with any kids that are involved in the split. When utilized properly, a Certified Public Accountant who offers forensic accounting services can play an important role in getting to that fair conclusion.

A divorce case settlement or agreement won’t be fair if one party is able to hide assets in order to sway the final terms in their favor. For example, if one member of the relationship is a business owner who has hidden property from the other, that should be uncovered so the final verdict is actually a fair one. Things like spousal support payments can only be calculated properly when all of the cards are on the table.

An Important Period of Life

With all that you are going through leading up to a divorce, it’s easy to get to a point where you just want the process to be over. That’s understandable, but it’s important to remain patient and to work through this period carefully to make sure you don’t agree to things that will make the rest of your life more difficult to manage. Using a qualified forensic accountant like Space Coast Forensics will help you pull all of the relevant info from bank records, tax returns, and more before the divorce is finalized and terms are established. We’d love to serve you on this important matter, so get in touch right away and let’s chat about your situation.

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