This article was originally printed in the ABA Section of Family Law eNewsletter, November 2011.
One of the chief concerns in a divorce or child custody case is identifying the true income of one or both of the parties. It is not unusual for such a case to include allegations of hidden income or assets. It is common for a closely held business to suspiciously encounter declining sales and profits following the filing of a family law case.In each of these instances, properly determining the income of the party is critical to getting a fair and equitable settlement, maintenance award, or child support award. Until you have the correct numbers, the attorney may find it very difficult to decide what is fair or in the best interest of the client. Continue reading
Bank statements can be invaluable in evaluating an individual’s income for divorce and child support cases. They can help evaluate the person’s income, but an analysis of the expenditures is important too. Tracy Coenen talks about some of the specific ways the data can be analyzed.
Tracy explains the purpose of a lifestyle analysis in a divorce case, and the process used to analyze the family’s finances. The lifestyle analysis may be used to determine how much money is required to continue living the lifestyle the parties had while married. It may also be used to find hidden income or hidden assets, and Tracy discusses how she may uncover these items.
Bank statements can be incredibly useful when searching for hidden income during a divorce financial analysis. Both deposits and expenditures should be evaluated, and the process is explained in this video.
A question often comes up relative to the lifestyle analysis in divorce cases: Isn’t is just data entry that anyone could do? Why do I need a forensic accounting expert?
As I explain below, the lifestyle analysis is NOT just a data entry exercise. A level of quality control is necessary in order to ensure that all transactions are included in the analysis and no transactions are duplicated. In larger cases, there may be enormous volumes of data to be managed, and the client needs an expert who can effectively handle the data. Also, the numbers must be categorized and analyzed. Sometimes estimates or judgment calls need to be made. That is the work of an expert.
It is not unusual for the “out” spouse (the one who is not the major breadwinner in the family and who does not have control over the family’s finances) to suspect that income and assets are being hidden during a divorce. When one party is accused of hiding income, how can a forensic accountant find it?