Forensic Bookkeeping in Divorce

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Forensic Bookkeeping in Divorce

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Sometimes bookkeepers need to step back in time to help their clients today.

Forensic Bookkeeping in Divorce By Judy Heft

Last week I talked about a special project we’ve been working on to help settle an estate. This week I have another special project to talk about, centered around divorce.

I recently received a referral from a financial advisor colleague. It involved a very high-profile divorce featuring an ex-wife (Diane) who had been in the dark about finances, an ineffectual divorce lawyer representing her, and an ex-husband (Dan) who is not willing to compromise. The divorce was already a done deal when I got involved, with Diane having settled for a few million dollars. Unfortunately, because she wasn’t invested properly and she wasn’t tracking her spending, she spent most of the settlement within a few years.

Her accountant did the best she could with the information Diane gave to her, but when her advisor looked at the returns it seemed like there were quite a few deductions that did not get included. It also came out that Diane was not receiving the amount of spousal support that she should have been.

How could we help Diane recover what is owed to her? How could we help her become more self-sufficient?

The Plan

We’re taking a deep dive into Diane’s accounts, going all the way back to 2014. We’re tracking everything for her and looking at all the expenses that she paid out to see if she needs to have an amended return, which she most likely does. On top of that, she wasn’t getting reimbursed for half of the expenses that were in her divorce agreement, like medical, education, travel, etc.

The couple also jointly owns two homes, but Dan doesn’t want to sell. Diane’s motivation for selling is simply to get some liquidity. We’re going to go back and see what options might be available to Diane to get more money to live on — including the possibility of renting out her half of one of the homes.

This project is going to have a lot of forensic bookkeeping, tracing, and tracking. It’s really like putting the pieces of a puzzle together — which we’re very good at.

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