“I think my spouse is hiding money.” It is one of the most common concerns we hear from people going through divorce, sparking the question, “Do I need a forensic accountant in the divorce?”
Maybe you notice transfers between accounts that you don’t recognize. Maybe your spouse owns a business and you aren’t sure how much money it generates. Maybe the financial picture doesn’t add up.
When you tell your attorney, you may hear three words: “Hire a forensic accountant.” But does everyone who suspects hidden money actually need a forensic accountant? No.
Understanding what a forensic accountant in divorce does, what information they need, and what you can do before hiring one can potentially save you significant time and money while giving you a clearer picture of your financial situation.
What Does a Forensic Accountant in Divorce Do?
A forensic accountant is an accounting professional who investigates disputed or incomplete financial issues, particularly matters that may ultimately be used in litigation. That can include tracing money, investigating assets, and reviewing complicated investments or other financial transactions.
But there is an important misconception about forensic accounting:
A forensic accountant does not automatically find hidden money.
A forensic accountant investigates a specific financial question or defined scope of work using the records available to them. If the necessary records aren’t available, the forensic accountant may not be able to complete the analysis. This distinction is incredibly important because people sometimes assume that hiring a forensic accountant means the accountant will somehow uncover every secret account their spouse may have. That’s not how the process works.
If the relevant documents aren’t available, there may be nothing for the forensic accountant to analyze.
You May Need to Do Some Financial Detective Work First
One of the biggest mistakes people can make is hiring a forensic accountant before they have a clear understanding of what they’re actually asking the forensic accountant to investigate. For example, you may believe your spouse has a secret bank account. But what evidence do you have that the account exists?
During a financial review, a CDFA may identify another account by looking at bank statements, tax returns, transfers and other financial records. If an unfamiliar account appears, that information can then be taken to the attorney, who may be able to pursue the records through discovery or a subpoena.
In other words, the first question isn’t necessarily:
“How do I find hidden money?”
Instead, it may be:
“What does the financial information I already have tell me?”
That distinction can make a significant difference in how you spend your money during divorce.
When Might Hiring a Forensic Accountant Make Sense?
There are situations where a forensic accountant can be extremely valuable.
For example, a forensic investigation may be appropriate when there are complicated assets, a cash-based business, complex investments, disputed transactions, or other financial questions that require specialized investigation. A forensic accountant may also be particularly important when an expert will ultimately need to testify in court.
Sometimes a forensic accountant can be retained without immediately beginning a large investigation. An attorney may want to establish a relationship with a particular forensic expert who knows the local court system and could testify if necessary. The key is to define the scope first and make sure the expert has the records necessary to perform the work.
Before You Spend Thousands, Ask One Important Question
What am I realistically trying to recover, and is the potential financial benefit worth the cost of the investigation?
If you believe your spouse has taken or hidden a substantial amount of money, your first instinct may be, “I need to find it.”
But what if the money was spent years ago? What if the conduct happened outside the relevant legal timeframe? What if the amount involved isn’t something you can realistically recover? Those are questions to discuss with your attorney before investing heavily in an investigation. Discovering something happened years ago doesn’t necessarily mean you can recover the money through your divorce.
What Can a CDFA Do?
This is where the work of a Certified Divorce Financial Analyst, or CDFA, can be particularly valuable. A CDFA’s role is different from that of a forensic accountant.
The goal isn’t necessarily to conduct a litigation-focused investigation. Instead, the financial work can help create a comprehensive picture of the marital estate, income, expenses, assets, debts and potential post-divorce financial circumstances.
At My Divorce Solution, the process includes creating a financial portrait.
That portrait can help identify:
- Assets and debts
- Assets that may fall into financial “gray areas”
- Lifestyle and spending patterns
- Income and cash flow
- Post-divorce budget needs
- Documentation supporting financial information
- Potential division scenarios
- The financial impact of different settlement options
The goal is to understand the financial picture before making major decisions.
Start With What You Know
Divorce can create tremendous financial anxiety.
You may think:
- “I don’t know how much money we have.”
- “I don’t know what my spouse earns.”
- “I don’t know what our lifestyle actually costs.”
- “I don’t know what accounts exist.”
- “I don’t know whether I’m going to be financially okay.”
Start gathering information. Look at your income. Look at your expenses. Gather tax returns. Review bank and investment statements. Identify assets and debts. Upload and organize the documents you can access.
As the financial picture becomes clearer, you may discover that some of your biggest questions can be answered without a forensic investigation. Or you may discover that something genuinely doesn’t add up.
That’s when you can have a much more informed conversation with your attorney about whether a forensic accountant is warranted.
Sometimes the Biggest Discovery Isn’t Hidden Money
A person may look at a spouse earning several hundred thousand dollars a year and assume there must be substantial money somewhere that isn’t being disclosed. But when you actually analyze the family’s spending, you may discover something different:
The family may be spending most or all of what they earn. That’s a very different financial problem from hidden assets. Understanding cash flow and lifestyle can therefore be an important first step before assuming that money is being concealed.
The Financial Portrait Can Also Help With Settlement Decisions
For example, you may have several possible ways to divide assets. One scenario may involve keeping the house. Another may involve selling it. One person may value retirement assets more highly, while the other may care more about retaining another asset.
Creating different financial scenarios can help you understand the potential consequences of those choices. That’s one of the reasons the financial work should happen before you’re making major settlement decisions.
You don’t want to negotiate based on guesses. You want to negotiate based on information.
Organizing Your Documents Can Change How You Feel
As documents are gathered and organized, you begin to understand your own financial situation. You start seeing what you have, what you owe, what you spend and what information is still missing. That knowledge can create a sense of control during a process that often feels completely out of control.
Once the available documents are gathered, the team can identify what they know, what they don’t know and whether additional experts, such as a forensic accountant or business evaluator, may be necessary.
So, Do You Need a Forensic Accountant?
Before hiring a forensic accountant, consider asking:
- What specific question are we trying to answer?
- What records are available to support the investigation?
- What additional records need to be obtained?
- What exactly will the forensic accountant deliver?
- Will the findings potentially affect my divorce outcome?
- What is the estimated cost?
- Is the potential financial recovery worth that investment?
And perhaps most importantly:
Can someone first help me understand my overall financial picture?
Knowledge Is More Valuable Than Suspicion
It’s completely understandable to feel suspicious when you’re going through a divorce and don’t understand the finances. But suspicion alone isn’t a financial strategy.
The goal should be to move from “I think something is wrong” to “I understand what I know, what I don’t know and what questions need to be answered.” That is where organized financial information can become incredibly powerful. And if there is something that truly needs to be investigated, you’ll be in a much better position to tell your attorney and your financial professionals exactly what needs to be examined.
The goal isn’t to spend money chasing every possibility. It’s to understand the financial picture, identify the questions that matter and determine whether the potential benefit justifies the cost.
Divorce is already expensive enough. Before paying someone to look for hidden money, make sure you know what you’re asking them to look for.
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