Perhaps the most expensive divorce in history occurred when Russian billionaire Dmitry Rybolovlev was ordered to pay $4.5 billion to his ex-wife Elena. One of the charges Elena made against her husband was that he had attempted to hide assets in property bought hastily before his divorce.
Even in cases where there is less money at stake, an attorney needs help in going through these financial matters. That is where the aid of a forensic accountant comes in. Below are five surprising services a forensic expert can offer during a matrimonial dispute.
Preparation of a Net-Worth Statement
A Net-Worth Statement is a detailed account of a person’s assets, liabilities, income, and expenses. The net of the assets and liabilities are often referred to as the net material asset. Assets can include: cash, investments, and property. Liabilities include mortgages and debt. Income can be wages, interest, and business income. And expenses include housing, food, and education.
This seems rather straightforward. However, it can often be difficult to find accurate totals or hidden income. However, a forensic accountant has special training to not only investigate and find assets and liabilities, but also the ability to properly calculate the total net worth and determine the parties’ true and constructive income.
Back-of-Envelope Analysis of Valuation of Business
Because a business may be considered a marital asset, it must be accurately valuated when undergoing a matrimonial dispute. One method that can be used to begin valuating a business is a back-of-envelop analysis. This form of analysis is based on empirically available data such as industry benchmarks and historical transaction multiples.
Transaction multiples obtained from similar sized businesses are often considered in the business value. This, of course, is not a substitute for a formal business valuation or forensic examination; however, it may be a useful tool at the very beginning of a case.
Preparation of Questions for Deposition
When it comes to financial matters within a divorce, an attorney may need assistance in developing questions that will astutely scrutinize the information provided. A forensic accountant can prepare in-depth and important questions which will help an attorney and their client get the most out of the deposition period.
Reviewing Income Tax Returns
A forensic accountant can assist in a matrimonial dispute by thoroughly going over income tax returns and looking for anything that may be a red flag showing that the assessment of assets is incorrect. For example, an expert can analyze the Schedule A of an individual’s tax return. Here there may be found items which were not mentioned by the spouse in question. If one were to simply look over these items without an expert, much may have been lost.
Overall Assistance in Discovery
A forensic accountant can also provide assistance in discovering any other assets that may be hidden or unmentioned. For example, an analysis of a family’s lifestyle can determine whether the reported income seems to be understated. If someone is buying $500 bottles of Dom Perignon every week, but says they only make $800 weekly, there is probably some missing income somewhere. An expert can also analyze bank statements and review any suspicious withdrawals that may point to a spouse trying to hide money prior to the proceedings.
More than anything else, the services of a forensic account help develop a strategy that is customized to a case’s particular circumstances. Moving forward with this plan and with an expert’s precision and knowledge, will help an attorney help their client during the process.
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