Not everyone is planning a special Valentine’s Day for their spouse this week – unfortunately, many couples are planning their divorce instead. It is not uncommon for one partner to commit “premeditated divorce”- a split they have planned for years as they begin to hide away assets in off-shore accounts or other investments unknown to their spouse. They hope these hidden investments will not be split during the divorce, therefore giving them a much larger portion to enjoy after the divorce is over.
As a forensic accountant, I am often called upon to assist divorce attorneys to help uncover hidden assets and financial inconsistencies during a couple’s breakup. Using technical analysis and a trained eye, a forensic accountant can follow the money to uncover these hidden assets or income.
As is typical with such ‘pre-planning’ for divorce, the business-operator spouse is oftentimes in such absolute control, s/he may divert business funds and thereby hide assets. Alternatively, with jointly operated businesses, there may be two sets of books and an accompanying cash hoard that has been used by the community. With either scenario, the out-spouse is disadvantaged when faced with divorce prospects, perhaps without meaningful information for making informed decisions.
One such case was with a divorce where both spouses owned their own business – one spouse had been squirrelling away money from their business for years, unbeknownst to the other spouse, in preparation for a divorce filing. When they filed for divorce and assets and income were disclosed to the court, things just didn’t ‘add up.’ Our forensic team was retained to perform an investigation of the assets and income of the businesses, including analyzing bank statements, and accounting records. We were able to track regular cash withdrawals over a two year period, identify significant missing funds for one of the businesses, and determine that earnings had been understated in our filings, for each of the businesses. Armed with the financial details discovered by the forensic accounting investigation, there was greater likelihood for an equitable resolution to the divorce litigation.
An attorney can make a stronger legal team by using forensic accounting reports, which can in turn help achieve a fair settlement for their client. If you are going through a divorce, or are a divorce attorney, consider using a Certified Fraud Examiner if something in the books doesn’t seem quite right. Divorce is never easy, but achieving a favorable and fair settlement is more likely with a strong case rooted in financial documentation.
Mike Rosten is a CPA and Certified Fraud Examiner at Piercy Bowler Taylor & Kern CPAs and Business Advisors. You can reach him at email@example.com.