Forensic Experts Provide Litigation Support for High Net-Worth Divorce
Reliable calculations for marital estates, business valuations, and forensic accounting
Divorce is rarely as simple and straightforward as the parties would like. High net-worth marital estates with complex financial holdings complicate matters further. While the attorneys can disagree about how much of the estate their clients deserve, determining exactly how much that estate is actually worth often requires high-level forensic accounting. At North American Forensic Accounting PC, our experts provide robust litigation support for complex and contentious divorces. We specialize in providing valuations of family businesses. We also employ our expertise in forensic accounting to find hidden assets and can even provide projections of future earnings. If settlement is proposed, we can also analyze the tax consequences to the client. With NAFA examining the financials, you can negotiate with confidence. If the case must go to trial, our NAFA team can provide expert witness testimony in support of the financial aspects of the divorce.
Advice on tax consequences of asset division in divorce
The marital estate basically consists of property, defined as assets and debt, acquired during the marriage. Depending on the state in which the divorce is heard, the court can treat the estate as community property or pursue an equitable distribution. Our NAFA experts examine the couple’s financial records to advise attorneys on the tax consequences of various schemes for asset division.
Business valuation in divorce
When affluent couples divorce, marital estates can be quite complex, and one of the major stumbling blocks can be a ownership of a small to medium-sized business. When a couple jointly owns a business, or one spouse is claiming an equitable interest in a company the other spouse owns, it’s vitally important to determine how much that business is worth.
Married couples often engage in business together, in such enterprises as:
- Art galleries
- Apparel design
- Bars and restaurants
- Boutique retail
- Coffee shops
- Catering companies and food vending operations
- E-commerce retail
- Event planning
- Fitness instruction
- Home and office cleaning services
- House flipping
- Pet grooming and sitting
- Landscaping and gardening
- Blogs and YouTube channels
- Vacation and travel consulting
- Professional services, such as a doctor/dentist office or a legal practice
Such businesses rarely have hard assets, such as real estate or machinery, that would make a dissolution sale a viable option. The value is usually in the leased location, skilled operation, quality of service, client contracts, consumer good will, and Intellectual Property, such as trade/service marks and trade secrets. NAFA scrupulously employs accepted forensic accounting methods to arrive at firm valuations.
We provide a quality assessment of value and present a range of options, including dissolution, sale, continued co-ownership, and buyouts, so attorneys and clients can pursue the most appropriate course for the circumstances.
Questions of child support and alimony
In divorce, courts favor maintaining children and spouses at the standard of living they would have enjoyed if the marriage had remained intact. This is not always possible, given the demands of maintaining dual residences. Thus, questions arise as to how much a high-earning spouse must contribute on items such as child support and alimony. NAFA’s experts can perform a deep dive into each spouse’s finances to determine how much support is reasonable. In cases where one spouse has been out of the workforce, we examine all the pertinent information, such as level of education, former work history, necessary (re)training to become employable, the current job market, and obligations as a primary caretaker. We produce a projection of how much support the dependent spouse will need and for how long, before the goal of self-sufficiency is reached.
Hiding marital assets in divorce: The Case of the Sneaky Spouse
The matter of hidden assets often comes up in divorce, especially when one spouse has property worth protecting and a motive to deceive. Although parties to divorce are required to file a complete and transparent financial statement, some try to squirrel away more than a few acorns. Some of the more popular schemes for hiding assets in divorce include:
- Fraudulent transfer — The spouse sells property to a relative or close friend who promises to sell it back after the divorce is finalized. The selling price is far below true market value, so even if that cash goes into the marital estate and is divided evenly, the fraudulent spouse comes out ahead.
- Opening separate accounts — Spouses who anticipate divorce can spend months and even years tucking away money in personal accounts, perhaps even offshore.
- Keeping two sets of books — If a spouse owns a small business, especially one with a heavy cash trade, like a restaurant, there’s a temptation to produce two tracks of reporting: one that underreports income for taxes and another that tells the owner what’s really going on.
- Misreporting income and expenses — Even if a spouse doesn’t keep separate books, there’s still a chance that certain entries have been falsified. Failing to report income is common in cash-based businesses, as is claiming personal expenses were business-related. It’s common for spouses to spend extravagantly in the runup to the divorce and try to pass off those expenditures as marketing or advertising.
- Delaying the vesting of benefits — If a spouse is an executive level employee who expects a promotion and stock options in the near future, it’s not uncommon for that person to request a delay. It’s not entirely unreasonable to suggest you won’t be ready to assume new responsibilities while embroiled in a divorce, but that request shouldn’t allow you to exclude wealth from the marital estate.
- Claiming an item was lost or destroyed — When valuable personal items, such as jewelry, fine art, or antiques, go missing, but there was never any report of theft or an insurance claim, it raises strong suspicion that the items are hidden somewhere.
Our forensic experts are adept at tracing the flow of hidden assets. But even when we can’t locate an item or funds, we can present evidence of fraud. Divorce courts can then make an imputation of wealth or income in the amount specified. In this way, you can help your client achieve a fair property and/or support order.
Contact North American Forensic Accounting PC for litigation support in divorce
North American Forensic Accounting PC provides robust litigation support for high net-worth divorces. Headquartered in Harrisburg, PA, NAFA serves clients throughout the United States, including in Philadelphia, Pittsburgh, New York City, Atlanta, Charlotte, Miami, and the Tampa Bay Area. Call us at 347-286-4860 or contact one of our offices online to schedule an appointment.