Though a skilled and experienced divorce lawyer is your greatest ally during an Alabama high-asset divorce, they are not the only members of your divorce team. Depending on the needs of your case and your circumstances, your divorce team might include a combination of mental health professionals, a divorce coach, a certified divorce financial planner, and a forensic accountant. Today, we will focus on this last role because forensic accountants are so important in a divorce, especially a high-asset divorce. Here’s why, but first, let’s discuss what a forensic accountant is.
What is a forensic accountant?
Forensic accountants are responsible for tracking and valuing assets whose value is not readily apparent. The asset that often immediately comes to mind is a business owned by one or both spouses.
Other assets that will potentially require assessment by a forensic accountant are goodwill in a practice, such as a dental or medical practice, or a legal “book of business,” such as what a lawyer might have if they are a partner in a law firm or a law firm owner. There are other examples, such as pending patents developed by entrepreneurs. The point is this: If you can’t immediately put a price tag on it to divide it in a divorce, it will require analysis by a forensic accountant.
Why is a forensic accountant so beneficial in a high-asset divorce?
Married couples with high assets generally have built their wealth from multiple sources, as mentioned above. High-asset couples may also derive wealth from stock options, restricted stock units, and other deferred compensation earned during the marriage, but that will only be realized after the marriage ends. Therefore, a forensic accountant will have the arduous task of not only valuing specific assets but also sorting through a couple’s assets to help determine why a particular asset should be classified as separate versus marital property and vice versa.
A forensic accountant will also indicate to the parties’ lawyers where more information is needed so the lawyer can request documentation. Finally, and often most importantly, if a divorcing spouse suspects that their spouse is hiding assets or has depleted assets during the marriage or separation, a forensic accountant will be the one to follow the money trail and, hopefully, recover those assets that have been misappropriated and should be considered part of the marital pie that is subject to equitable division.
Do only high-asset parties need a forensic accountant?
No. Many divorcing spouses, including those who do not have high net worth, could benefit from the support provided by a forensic accountant. Though high-asset spouses frequently turn to a forensic accountant due to the complexity of their financial picture, many non-high-asset spouses face the same issues (i.e., business ownership, deferred compensation, the hiding or depletion of assets) that high-asset couples do, but for whatever reason, do not have the assets to be considered high net worth.
Fortunes also change; a couple may have had a high net worth at one point only to fall on hard times that severely affect their bottom line. Consequently, it is not only assets you will be dividing in an Alabama divorce but also debt. Your forensic account will be looking for that as well.
Can my spouse and I use the same forensic accountant during our divorce?
Just as you would want your own divorce attorney in your Alabama divorce, you will also want to hire your own forensic accountant to join your team. Although both forensic accountants can work together to create a comprehensive picture of your and your spouse’s marriage — corresponding about what documents they need from one another and working together with your and your spouse’s lawyer to craft a fair settlement based on the financial analysis they provide — you will want to have a divorce team who is advocating for you independent of your spouse. Your and your spouse’s financial goals and what is in your respective interests are likely not aligned, so it’s best if your forensic accountant works only for you.
What documents will I need to collect for my forensic accountant?
Even if you haven’t started the divorce process yet and are still thinking about divorce, it can help to know what documents your forensic accountant will need to access so you can begin collecting them. Here is a list to get you started so, at a minimum, you know what you have and what you still have to obtain:
- Tax Returns (Personal and Business): Include individual, joint, and business tax returns (if applicable) for the past three to five years. These should include all W-2s, 1099s, and accompanying schedules.
- Bank Statements: Include statements for any personal, marital, or business accounts you have, including checking, savings, and investment accounts.
- Credit Card Statements: Include credit card statements held by you or your spouse, even if only one of you is on the account.
- Pay Stubs: Include any recent pay stubs that verify your and your spouse’s income and any deductions you took.
- Loan Documents: Include your mortgage, car loan, and any personal loan documents you may have, along with your payment history for each.
- Retirement Accounts. Include statements for your and your spouse’s retirement accounts, such as 401(k)s, IRAs, pensions, and deferred compensation plans.
- Investment Accounts: Include any records of stocks, bonds, mutual funds, and other investments you and your spouse have separately and together.
- Business Financial Statements: If you and/or your spouse are a business owner, include balance sheets, profit and loss statements, and cash flow statements for the business.
- Corporate Records: If you and/or your spouse are a business owner, include corporate tax returns, partnership agreements, operating agreements, and buy-sell agreements, among others, for the business.
- Property and Asset Documentation: Include titles and deeds for real estate, vehicles, and other significant assets.
- Insurance Policies: Include life (term and whole), health, disability, and property insurance policies and statements.
- Utility Bills and Recurring Expenses: Include statements to assess household expenses.
- Trust Documents: Include trust agreements, financial statements for trusts, and an accounting of any disbursements made.
- Stock Options and Deferred Compensation Plans: Include documentation of stock options, RSUs, or deferred compensation benefits.
- Loans to Family or Friends: Include any records of any loans or gifts made to or from family and friends.
- Documentation of Hidden Assets: Include any financial records that may indicate attempts to hide assets or income.
Don’t worry if there are some documents you cannot access or are missing; your divorce attorney will request them from the appropriate sources during the discovery phase of the divorce.
How do I find a forensic accountant for my Alabama divorce?
When you search for a divorce lawyer for your Alabama divorce, it is helpful to inquire whether they have a network of professionals they work with often, trust, and like. It is why you want to choose a lawyer for your divorce who practices family law primarily, if not exclusively, so they not only know the issues that often arise in Alabama divorces but are also prepared for the ones that don’t come up that often but could.
Find an Alabama divorce lawyer and forensic accountant for your high-asset divorce.
At Summit Family Law, we understand how emotionally charged high-asset divorces can be, particularly due to the complex nature of financial assets, where they originated, and where they have traveled. Our team of Huntsville and Birmingham divorce lawyers has decades of cumulative experience between us and a deep network of well-established legal professionals to call on, including skilled forensic accountants, who are ready to support you in your divorce. Call our office today or schedule a consultation.
