Some California divorces involve relatively straightforward finances. Others involve businesses, numerous accounts, fluctuating income, stock compensation, separate property claims, or transactions extending back many years. When financial questions become too complicated to resolve through ordinary records alone, a forensic accountant may play an important role.

A forensic accountant does more than prepare tax returns. In a family law case, the accountant may analyze financial information to help identify, characterize, trace, and value assets or determine income available for support.

Business Ownership Can Create Complex Valuation Issues

A closely held business can be one of the most complicated assets in a divorce.

If either spouse owns an interest in a company, professional practice, partnership, or other business, determining its value may require specialized financial analysis.

The accountant may examine financial statements, tax returns, accounting records, compensation, expenses, and other business information relevant to valuation.

This can become particularly important when the spouse who owns or operates the business has significantly greater access to its financial information than the other spouse.

Forensic Accountants Can Analyze Income for Support

Determining income is not always as simple as looking at a paycheck.

A self-employed spouse may receive money through salary, distributions, business benefits, reimbursements, or other sources. Business expenses may also require examination when determining income available for child or spousal support.

Similarly, employees may receive compensation through bonuses, commissions, stock options, restricted stock, or other incentive programs.

A forensic accountant can analyze the available financial information and assist in presenting a more complete picture of income.

Tracing Can Help Resolve Separate Property Claims

California divorce cases can also involve disputes about whether property is community or separate.

Suppose a spouse claims that money used to acquire an asset came from property owned before marriage or another separate property source. If those funds moved through multiple accounts or were mixed with community funds, tracing may be necessary.

A forensic accountant can examine bank statements, transaction histories, and other records to determine whether funds can be followed back to the claimed source.

Tracing may also be relevant when evaluating reimbursements and post-separation payments of community obligations.

Not Every Divorce Requires a Financial Expert

Hiring an expert can add substantial expense to a divorce.

The complexity of the financial issues and the resources available to the parties should therefore be considered before deciding whether expert assistance is justified.

In some cases, the parties already agree that an asset will be sold and the proceeds divided. A detailed valuation may have little practical purpose in that situation.

In other cases, however, failing to investigate a complicated financial issue could leave important questions unanswered.

Financial Complexity Should Be Identified Early

Business ownership, self-employment, numerous financial accounts, retirement benefits, stock compensation, disputed separate property, and unusual income are all signs that additional financial analysis may be useful.

Identifying these issues early can also help guide discovery. Instead of collecting financial documents without a clear purpose, the parties can focus on the records needed to answer the specific financial questions affecting property division or support.