In divorce cases, forensic accountants can use the “net worth method of proof” to calculate income. This is used to search for hidden or unreported income. Rather than simply taking a spouse’s word for it that his or her income is X, we can do an analysis like this to try to verify the claimed income.
This method of proof is one part of a lifestyle analysis, in which we are analyzing the party’s lifestyle and determining if that lifestyle matches the income that is being reported. This video explains the process of completing the net worth analysis.
This article was originally printed in the ABA Section of Family Law eNewsletter, January 2014.
The vast majority of family law cases are settled without trials. However, a client should not enter into a voluntary settlement if there are significant concerns about the truth of the financial disclosures and indications that assets or income may be hidden. The first step in determining whether a forensic accountant is needed to evaluate the finances of the parties is the identification of “red flags” of fraud. A red flag is simply a warning sign or an unusual item or circumstance.
Attorneys often use their instinct to determine when a forensic accountant is needed in a family law case. If something does not feel right, it probably should be investigated. A client is often suspicious of the spouse even before they are separated. The spouse may even be known to manipulate the money. Read More
This article was originally printed in the On Balance, the magazine of the Wisconsin Institute of CPAs, March/April 2013.
Divorce and child support cases often are highlighted by disputes over money. One party may be accused of artificially depressing earnings, hiding assets or manipulating the finances to lower the financial obligation to another party. Understanding the complete picture of the finances is necessary before a fair settlement can be reached.
Chicago divorce attorney Jeffrey Knipmeyer, partner at Nottage & Ward, cautions that spouses of individuals hiding income and assets rarely have the financial sophistication to recognize that manipulation is occurring. He adds that during the marriage, they typically have been hands-off, and their only knowledge of the finances depends on what the spouse has communicated. Read More
Family law cases often focus heavily on financial issues. Whether the parties to a case are of modest means or great wealth, both sides want their own version of what is fair. Unfortunately, this can lead one or both parties to hide income and assets. With the help of a financial expert, counsel can identify income and assets that might otherwise go undiscovered, and hopefully reach an equitable end to a divorce or child support case.
Sources of income and assets owned can be identified with the right documentation. Attorneys need to be familiar with some of the most common financial documents so they know what to request. Attorneys with financial knowledge can also help identify issues that may need further analysis in a family law case. Read More
If you’re a family law attorney practicing in Wisconsin, you might want to consider attending a State Bar of Wisconsin CLE seminar being presented by Gregg Herman and Al Dassow on January 11, 2013. They’re talking about Tax and Tax Fraud Issues in Family Law.
Gregg Herman has been practicing family law since I was a little kid (he’s going to hate me for saying that), and I’m fortunate to run into him in my office building from time to time. He has blogs on family law issues, and I urge you to take a peek at his blog and put it into your RSS reader so you can keep up with it. He has been blogging faithfully for the better part of a year (no small feat!) and I am looking forward to reading more. Read More
One way to foil your spouse’s plans to hide income and assets from you during your divorce is by being aware of some of the schemes that can be used. It is very common for one spouse to have control over the money in the marriage, be the major breadwinner, control the spending of the money, and maintain control of financial documentation.
The spouse in the lesser financial position must take immediate proactive steps to protect herself or himself in the divorce. One of these steps is understanding some of the common schemes that may be used hide assets and income. By knowing about these schemes, you can look for signs and hopefully limit the success your soon-to-be ex-spouse will have with them. Read More
Today the Wall Street Journal had a piece about the Texas Supreme Court considering whether to allow people to use fill-in-the-blank forms for divorces, potentially saving them a lot of money in legal fees. It is possible to handle your divorce pro se, but there is a concern that people are doing so to their own detriment. In an effort to help do-it-yourself divorcees, 36 states currently have fill-in-the-blank forms for divorce.
It is simple to find forms to use in your divorce, but some attorneys say that this is a problem because divorcing couples don’t use the right forms, become a burden on the courts when they require hand-holding, and can make uninformed decisions during the process of the divorce. Read More
This article was originally printed in the ABA Section of Family Law eNewsletter, Feb/March/April 2011.
When a divorce or a child support issue is looming, it’s amazing how a quickly a closely held business starts “losing money.” I use quotes because such a situation is so predictable. One party wants to protect her or his assets, and when there is a business involved, the motivation to hide money can be stronger than usual.
The types of businesses that can be prone to manipulation of the books include restaurants, retail stores, doctor or dentist offices, construction companies, auto dealerships, and law practices. This list isn’t exhaustive by any means, but it provides good examples of businesses at risk of financial maneuvering. Read More