Forensic accountants and Certified Divorce Financial Analysts often use Quicken personal financial software to complete the lifestyle analysis in divorce cases. Unfortunately, Quicken is not the best option for accurately and thoroughly analyzing a couple’s finances before and during divorce.
Why is it used so often? For years, Quicken was one of the better options available for compiling and analyzing personal finances. Also, since a fair number of consumers use Quicken to manage their finances, divorcing spouses sometimes provide a Quicken file to the attorney, which may be used as a starting point for the lifestyle analysis. The drawback to this is that clients don’t always keep accurate records, and the Quicken file is often incomplete or just plain wrong.
Quicken software should not be confused with QuickBooks software, which is a software package used for small business accounting. QuickBooks can be used effectively in divorce financial analysis, while Quicken is much more limited and does not produce as good a result in terms of accuracy or usability. Note, however, that even QuickBooks may not be the best option for litigation purposes.Continue reading
The skills of a forensic accountant can be useful in bankruptcy cases. In this video, Tracy talks about a case in which she was retained by a creditor to examine the finances of the debtor. There were allegations that the debtor concealed material facts about its financial position when it originally applied for credit, and that certain disclosures in the bankruptcy filing were fraudulent.
While consumers generally hate income tax returns because of their complexity, they can be invaluable sources of information in divorce proceedings. Not only do they provide insight into prior years’ earnings, they can also point to assets and sources of income. They may be used to unearth financial information that a spouse omitted from the financial disclosures, and can hold subtle clues to otherwise unknown financial details.
For example, assets are sometimes sold by the spouses to generate cash. Many times this may be a taxable transaction reported by the purchaser to the taxing authorities. Therefore, such a transaction will be required to be reported on the income tax return, and this may help unearth a hidden asset or provide clues to concealed cash.
Information on income and assets can be found within the personal income tax returns in the following areas:Continue reading
Income tax returns are an important piece of financial information in a divorce or child support case. There is so much information that can be obtained from the tax returns, and if we have several years of data, we can make comparisons from year-to-year. In the video below, Tracy talks about the financial data she analyzes on the income tax returns and what these items may tell us about the financial situation of the family.
Fifteen or twenty years ago, it may have been far-fetched to suggest that a simple internet search could help you win a case in front of a jury. Those immersed in the world of data mining knew it was possible, even then. Today, the sources of information on the internet have grown exponentially, and these can be used strategically in litigation.
The work of a financial investigator and expert witness is focused on financial documents and numeric evidence. Much of the information in fraud cases or contract litigation is found in private records, such as income tax returns, accounting records, bank statements, and financial statements.
In addition, public records can enhance a case. Traditional public records include real estate records, civil and criminal court files, probate court files, vital records, corporate registrations, intellectual property documentation, and professional licensing records.
Publicly Available Information
One source of information that is sometimes overlooked by counsel is publicly available information. The data includes everything else that is readily available to the public, if one knows where to look and how to get there.Continue reading
In divorce and child support cases, one party may attempt to hide income and assets to deprive the spouse or children of their rightful support. It can be difficult to prove hidden earnings or assets, particularly if the other party owns a business, owns assets within corporations or partnerships, or has other financial vehicles that could be used to conceal wealth.
However, there are ways to discover the existence of assets or reasonably estimate the person’s level of earnings. One such way is a lifestyle analysis, which calculates the earnings necessary to live the known lifestyle of the target.
The logic is simple: Life costs money. We can calculate how much you’re spending based on what we know about your mortgage, car payment, eating habits, utilities, toys, vacations, and other expenses. The money to fund these expenses has to come from somewhere, so we can infer that the cost of your lifestyle equals your earnings.
This type of analysis can be done in several different ways, or through a combination of these methods:Continue reading
When the Internal Revenue Services suspects that a taxpayer has unreported income, the agents can use one of several methods to uncover that income. These methods can also be used to help calculate hidden income in a divorce or child support case. One such method used to determine unreported income is the bank deposits method, in which the forensic accountant analyzes bank deposits. In the video below, Tracy explains how this is done.
In the early stages of divorce, clients are required to complete financial affidavits, financial declarations, or other similarly titled disclosures. The importance of an accurate disclosure of assets, liabilities, and income is obvious. Yet many clients are unable to accurately prepare this financial information.
Particularly in high net worth divorces, it may be difficult for the husband or wife to report these financial details because of a large volume of data and/or an inability to compute the numbers. The financial declaration will be a primary piece of information used to divide assets, calculate alimony, and calculate child support. Errors can therefore be very costly.
Divorcing spouses who own one or more businesses need a detailed financial analysis in order to properly evaluate these interests. A Business Lifestyle Analysis may be performed to determine the true income of the company and find out where the money is really going. Tracy Coenen talks about how she analyzes the detailed accounting records of a business.