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.Continue reading
This article was originally printed in the ABA Section of Family Law eNewsletter, March 2013.
Experienced family lawyers are familiar with the common ways spouses attempt to commit financial fraud in divorce: hiding or undervaluing assets, overstating debts, concealing income, and inflating or fabricating expenses. All of these are done in an attempt to get more than the spouse’s fair share in the property division, and to influence the amount of support that will be paid or received.
Successfully advocating for your client involves more than just knowing that these things occur during the divorce process. You must also be able to identify the red flags that indicate the financial issue(s) must be investigated further. Some are easier to spot than others, but once you have identified two or three red flags, it is time to get a forensic accountant involved. The financial analyst’s experience with fraud and deception will be invaluable in evaluating the red flags and determining if there is something of substance to investigate further.Continue reading
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.Continue reading
This article was originally printed in the Family Law Review, a publication of the Family Law Section of the New York State Bar Association, Fall 2012.
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.Continue reading
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.Continue reading
This article was originally printed in the ABA Section of Family Law eNewsletter, August 2012.
Everyone knows about the typical sources of financial information in divorces. Income tax returns, bank statements and related documents, brokerage statements, credit card statements, and business financial statements are some of the most common.
There are alternative sources of financial information that can be incredibly helpful in divorce cases, however. They are helpful because they can refute or support claims being made by one party about income and assets. They are particularly helpful because often, the other side isn’t prepared for these documents to become part of the divorce case.Continue reading
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.Continue reading