Forensic accountants aren't only helping businesses and investors uncover fraud and embezzlement, but they also can help people who are going through a divorce trace the assets of their estranged partner.
The forensic accountant is typically brought in by a divorce attorney. "Generally, forensic accountants get involved in a high-net-worth divorce," said Karen Webber, a partner at the Bonadio Group in Rochester, New York. "The work that forensic accountants do really runs the gamut. It depends on what the attorney needs."
The Bonadio Group, a Top 50 Firm based in Pittsford, New York, acquired her firm, Webber CPA, in March (
Some of the most common tasks for forensic accountants involve tracing separate property, as opposed to community property, calculating and recalculating child support, and investigating wasteful dissipation of marital assets if, for example, one of the spouses tends to be a gambler.
"In one of the recent cases that we worked on, someone was a day trader," said Webber. "We had to argue that had this individual invested that money in the S&P 500, they would have had far more dollars than if they day traded all day, where they lost hundreds of thousands."
Other tasks can involve analyzing a prenuptial agreement and trying to void or invalidate it.
Child support is an often contentious issue for many couples, and the rules can vary by state, "New York has a pretty standard form that you complete to determine what child support might be, although the judge has a lot of leeway in determining whether that amount holds," said Webber. "Any divorce case is really a negotiation, and some things may be worth more emotionally to a spouse than dollar amounts. What we're trying to do in a divorce case is put dollar amounts on certain things, and then it's kind of a bartering discussion. In child support, the judge has leeway in saying, 'OK, based on these external factors in the divorce, or this certain settlement, we will lower or raise the child support standard calculation.'"
Similarly, one spouse might prefer to keep the house, even if it's worth less than an individual retirement account to which they're both entitled, but the emotional value of keeping the house may be worth more than fighting for an even share of the IRA.
Forensic accountants may need to dig into whether the child support payments are being paid or used properly for the benefit of the children, and if they should be increased later.
"You're fishing through bank statements to see when the child support payment came in, where did it go, and what was it spent on," said Webber. "Another thing that individuals can do post-divorce is you're actually entitled over the life of the child to revisit the child support payments."
For example, if the spouse who is paying child support starts earning double what they originally made back when the judge issued a divorce decree, the other spouse is able to ask for the child support amount to be recalculated, arguing that the parent could be providing a better standard of living for the child based on their increased income. But sometimes that's an ill-timed idea.
"We have a case right now where it doesn't always go like that," said Webber. "In this particular case, a woman sees that her ex-husband is putting a pool in, and he's driving this really expensive car. And she's like, 'What the heck, I'm shopping at the dollar store for the benefit of my kids, and he's living high on the hog. I think I want to go back and recalculate child support.' So their attorney hired us, and we started looking at tax returns and profit-and-loss statements. We found out that he actually lost money. This was during the COVID years and he had a food operations business. And we were able to say, 'You know what, I know you want to bring this motion to adjust your child support. But if you bring it right now, it's actually going to bring your child support payments down, so let's not go there.' Sometimes we get involved before there's a court proceeding to see if you have a case. Should you or should you not?"
Investment accounts can be another bone of contention that forensic accountants can investigate for divorcing couples.
"Those are super detailed," said Webber. "There are a lot of Excel spreadsheets and calculations that go into them. But the way that separate property works — at least in New York State — is what you own on your wedding day stays yours. That's separate property. Say you had $300,000 in your investment account on the day of your marriage. We can, if it's worth it, go back and look at what happened to those investments. Maybe they earned dividends and those dividends were reinvested. All of that growth on that separate property stays the other person's. But you can imagine it gets really complicated with longer marriages, because those dollars might have been in the S&P 500 at the day of marriage, but they were sold and bought and sold and bought and you have to trace it all the way through. It's only really worth it when you're dealing with larger portfolios. It's worth it to spend $30,000 to save $300,000, but it might not be worth spending $30,000 to save 10. That's a discussion we have when we sit down with the attorney."
Prenuptial agreements may or may not always protect a spouse's assets, but challenging the documents could be a mistake.
"We had a case where there was a very wealthy individual who had had multiple marriages," said Webber. "There was a prenuptial agreement with the most recent wife, and we took a look at what the agreement said. It gave the wife a payout based on how many years she was married to this individual. And even though she signed the prenuptial agreement, she was trying to invalidate it at the time that they divorced, thinking that if she could invalidate the prenup, she would be eligible for more money. But what we were able to do was say, actually, all of the assets that you're talking about were separate property, and if you argue to invalidate this prenup, you're actually going to get less money. So how about let's just honor the prenup, not go to trial, not spend a ton of money for divorce attorneys and forensic accountants? It's just looking at the terms of the agreement, versus what the standing law would have been, had no premarital agreement existed."
The high-profile divorce case involving Hollywood stars like Angelina Jolie and Brad Pitt and their dispute over the winery they owned in France could be instructive, in which Jolie's attorneys accused Pitt of
"Someone puts a lower valuation on theirs, but a higher valuation on the other spouse's," she said. "That's when business valuation experts get involved in a case. They'll look at benchmark data and say, 'Here's where your numbers should have gone based on this amount of sales or based on this value of assets, or this crop of grapes, the type of grapes that you hold.' It becomes an argument between two experts on the methodology behind valuing certain business assets."
Forensic accountants also need to investigate whether spouses are trying to hide their assets, such as keeping cash in a business and not distributing it because if it's distributed, it becomes marital property, but if they keep it in the business, it stays separate.
"We look at the bank records and see when the money came in, where did it go, and was that specific account disclosed on the statement of net worth," said Webber. "A lot of times people fill out a statement of net worth. That's the beginning. You document all of your assets and all of your debt on this statement. But sometimes people don't put an asset on there because they're trying to hide it, and sometimes people totally forget that they have certain assets."
For example, she might be going through an analysis and see a transfer to an E-Trade account, and then go back to the client and ask why the E-Trade account was not disclosed on their statement of net worth. They may have simply forgotten that they just wanted to invest in some penny stock. Spouses frequently do a bad job of keeping track of their finances and are surprised at how little money they have.
"They are driving their expensive cars, and they've got their husbands who are wearing expensive suits, and their kids are going to the best schools," said Webber. "And it comes time to divorce, and they realize that there are no assets. And they think, 'This is impossible. We've been living this glamorous life. He's got to be hiding money somewhere.' And sometimes it's going back and demonstrating no, you guys spent every dollar that came in. There are no assets."
For people who are going through a divorce and wondering whether they need a forensic accountant to dig into their spouse's finances, they may ask their attorney about any potential red flags.
"I would tell them to bring it up to the attorney and say, 'Do you see anything in here that would require the use of a forensic accountant? I suspect my husband is hiding assets. I suspect that I should be owed child support. Or I don't think this is the appropriate value of this business. Can we challenge it?' You have to advocate for yourself," said Webber. "If you have a good attorney, certainly they'll bring that up to you, but sometimes you have to push a little extra for it."
For accountants who are considering a career in this niche, the American Institute of CPAs has a Forensic and Valuation Services Section with
"You can add the FVS to your AICPA membership," said Webber. "There's all kinds of continuing education available and different certificates available for divorce work, but a lot of it is just experience. It's networking with attorneys who do this work and letting them give you an opportunity on a case."
She finds the services interesting and personally rewarding. "What's neat about divorce work is that you're dealing with individuals," said Webber. "A lot of accountants work strictly with businesses, so you're looking at P&Ls and business bank accounts all day. I love looking at people's personal financial records. It is the most interesting thing to me like, ooh, this guy was on a dating site. If you're a naturally curious person, and you care about people, this is just a perfect niche to get into."
Forensic accountants can help individuals in other personal situations as well. "The personal side gets overlooked so much," said Webber. "You don't realize how many times in your life you actually might need a forensic accountant for a divorce or an estate. If you're an executor and you think more money should be there, or if you have an older adult who gets financially exploited, you need to know a forensic accountant. Forensic accountants get associated with embezzlement and organizational crime, but everyday people need them too."
