There are four issues involved in considering any division of property in a divorce.  First, the characteization of each asset must be established.  In other words, is the item community property — something obtained during the marriage — versus separate property — something had before the mnarriage or through gift or inheritance?  Only community property items are divisible by the judge in a divorce. 

Second, what is the value of each item of property?  In order to determine whether a division of property in a divorce is "just and right" (the Texas standard) the judge must be able to compare the total value of the property awarded to each spouse. 

Third, are there any issues that would allow for a disproportionate division of property? Generally, Texas law requires a division of assets to start at 50/50, but allows for deviation from that standard based on various equitable factors.

The fourth factor is actually dividing the property.

In looking at the first and second factors — characterization and valuation — sometimes it is helpful to have a forensic accountant assist on the divorce team to evaluate various property division issues.

Consider the post from Alexis Dow on The Oregon Divorce Blog on When and How to Use a Forensic Accountant in Your Divorce:

A Forensic Accountant can be a great help to you and your attorney to assist in communication and explanation by creating, using and explaining visual displays for financial details.

Communication is fundamental to any human interaction. The ability to communicate clearly, concisely and in a way one’s audience can readily understand is an extremely important skill.

During a divorce, there is a need to communicate with opposing parties, attorneys, judges, and people in general. The stress and distractions of divorce can make communicating effectively a challenge. This is particularly true when trying to communicate the significance of property, income, and other information needed in divorce proceedings to attorneys, soon-to-be former spouses and possibly a mediator or judge.

Clearly laying out key ideas and arguments supporting divorce matters can be critical to successful negotiation or convincing the judge. Visual tools such as tables, charts and graphs can help make and emphasize key points. They can also be particularly helpful for laying out financial information. Clear communication can help achieve a satisfactory solution as soon as possible as both sides can clearly see the facts and figures.

Some of the areas where a CPA and forensic accountant can help develop and illustrate financial matters in a divorce include:
• Preparing a Marital Balance Sheet: Developing and presenting in tabular form a listing of assets and liabilities of each spouse before, during and after marriage and apportion assets and liabilities to each spouse based on the date and nature of property acquisition
• Determining Spousal interest in Marital Assets: Calculating the percentage owned by each spouse based on the timing of acquisition, use of joint funds to add to assets or to fund costs of assets and showing this information in a table or on a graph. For example, a 401(k) has a value at marriage, marital assets are used for additional investment, and then, after separation, individual funds add to the 401(k). During the period of ownership there are price fluctuations. The total marital value would need to be apportioned to reflect all the inputs. A second example, a home is owned by a spouse at date of marriage, it is rented during the marriage, but marital assets are used to pay shortfalls. Both the original owning spouse and the married couple now have an interest in the home. A third example is when spouses have separate checking accounts and each pays certain expenses related to a marital asset with one spouse paying more (possibly because that spouse earns more or has greater assets than the other spouse) creating a disproportionate interest in the asset.
• Calculating Controllable Cash Flow: Determining the total value of compensation, including perks and payment of personal items with business funds when a spouse owns a business and illustrating that information using a bar chart, pie chart, table or graph.
• Performing a Needs/Lifestyle Analysis: Calculating monthly needs for alimony payments and presenting this information in tabular form.

Other related services a forensic accountant can provide include:
• Valuing Spousal Interests in Businesses
• Analyzing personal expenses of business owner who denies income and available cash flow. Analyzing the personal expenses of a business owner who states there is little or no income to assist in proving the existence of positive cash flow.
• Tracing Assets: 1. Tracing the source of funds used to purchase assets during marriage; for example, one spouse owns a house at marriage, it is deemed separate property. That house is sold and the proceeds are used to buy stock, it would remain separate; 2. Following assets/income to determine if additional marital assets exist.
• Searching for Undisclosed Assets

When you want to communicate core financial issues in any dispute, contact a forensic CPA to help improve communication and facilitate resolution by providing clear visual displays of financial matters.

We have several forensic accountants that we routinely use as part of our divorce team. 

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Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes…

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes genuine compassion for her client’s difficulties, yet she can be relentless when in pursuit of a client’s goals. One judge said of Ms. O’Neil, “She cannot be out-gunned, out-briefed, or out-lawyered!”

Family Law Specialist

Ms. O’Neil became a board-certified family law specialist by the Texas Board of Legal Specialization in 1997 and has maintained her certification since that time. While representing clients in litigation before the trial court is an important part of her practice, Ms. O’Neil also handles appellate matters in the trial court, courts of appeals and Texas Supreme Court. Lawyers frequently consult with Ms. O’Neil on their litigation cases about specialized legal issues requiring particularized attention both at the trial court and appellate levels. This gives her a unique perspective and depth of perception that benefits both her litigation and appellate clients.

Top Lawyers in Texas and America

Ms. O’Neil has been named to the list of Texas SuperLawyers for many years, 2011-2018, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. In 2014-2018, Ms. O’Neil received the special honor of being named by Texas SuperLawyers as one of the Top 50 Women Lawyers in Texas, Top 100 Lawyers in Texas, and Top 100 Lawyers in DFW. She was named one of the Best Lawyers in America for 2016 and received an “A-V” peer review rating by Martindale-Hubbell Legal Directories for the highest quality legal ability and ethical standards.

Author and Speaker

A noted author, Ms. O’Neil released her second book Basics of Texas Divorce Law in November 2010, with a second edition released in 2013, and a third edition expected in 2015.  Her first book, All About Texas Law and Kids, was published in September 2009 by Texas Lawyer Press. In 2012, Ms. O’Neil co-authored the booklets What You Need To Know About Common Law Marriage In Texas and Social Study Evaluations.  The State Bar of Texas and other providers of continuing education for attorneys frequently enlist Ms. O’Neil to provide instruction to attorneys on topics of her expertise in the family law arena.