Use of a Forensic Accountant
Learning how much your spouse’s business is worth can be a difficult task without a lawyer. Depending on your case, your attorney may even require the outside assistance of a forensic accountant to perform a full cash flow analysis. If you are contemplating a divorce, or have already initiated one, and do not fully trust your spouse regarding how much they earn, the following list is a sample of information and documents you will want to obtain.
- Information on your spouse’s complete education and employment history.
- A list of all banks and brokerage firms as well as the account numbers
- Information on what standard of lifestyle you enjoyed during the marriage. This includes items such as vacation, entertainment, dinners, childcare, property taxes, cars, hair and makeup.
- Information of all sources of income that your spouse has. This includes pending litigation and insurance settlements, estate proceeds, asset sales, and loans.
- Names of your spouse’s current or past business partners, any ex-spouses, and children.
Methods Used To Find Hidden Assets
Forensic accountants utilize several methods to discover assets typically hidden by one spouse from another. An important principle to keep in mind is that often the assets are not hidden, but simply require someone to know where to look. Together, a forensic accountant and your divorce attorney will know exactly where to look.
Expenditure Method
Perhaps the most popular method is the expenditure method, which compares total personal expenditures to reported income. Reported income is documented through tax returns, pay stubs and bank loan applications. The comparison of reported income and lifestyle enjoyed provides the forensic accountant with a good idea of whether there are hidden assets.
Net Worth Method
Another tool used is the net worth method, which compares net worth at the beginning of the year to net worth at the end of the year. The increase or decrease in net worth is then compared to the reported income for the period to help determine the likelihood of hidden assets.
What Types of Other Information Aid the Cash Flow Analysis?
There is other useful information besides tax returns and pay stubs to determine whether income or marital assets are being hidden. Your attorney and forensic accountant will examine public records to identify unknown business and real estate investments, frequent flyer statements that demonstrate an extraordinary amount of travel, phone bills, credit card statements, hotels and rental car charges. To learn more about the process of discovering hidden marital assets, see Villani and Deluca’s blog post, “Separate Property vs. Marital Property”.
Villani & DeLuca – Your NJ Divorce Attorneys
Partner, Vincent C. DeLuca of Villani & DeLuca, P.C. has successfully mediated hundreds of divorce cases. He is certified by the Supreme Court as a Matrimonial Law Attorney and also has been approved by the Supreme Court of New Jersey as an Economic Mediator. Should you have any divorce questions that you wish to have answered, please call Villani & DeLuca at 732-965-3350 and schedule your free initial consultation.