Following the Money Trail: Forensic Accounting in Divorce with Kristin DiMeo • Your Divorce Case
Uncovering Hidden Assets in Divorce with Forensic Accountant Kristin DiMeo
In this installment of our "Your Divorce Case" series, Seth and Pete welcome Kristin DiMeo, a forensic accountant and expert witness who has seen Seth in action representing clients in mediations and trials. The conversation focuses on Kristin's role in the divorce process, looking backwards at a couple's finances to uncover and analyze assets that may be hidden or overlooked.
As a CPA, Kristin compiles and examines past financial records to help answer key questions about a divorcing couple's money matters. Beyond digging into the details, she also assists clients and attorneys in settlement discussions and preparing exhibits for court. Seth and Pete dig into what someone should expect when working with a forensic accountant like Kristin and how she approaches complex issues like business valuations.
Questions we answer in this episode:
What does a forensic accountant do in divorce cases?
How does a forensic accountant work with divorcing individuals and attorneys?
What are the different approaches to valuing a business in a divorce?
Key Takeaways:
Forensic accounting is about uncovering financial details, not always catching deception
Divorcing individuals can help the process by gathering as many financial documents as possible
Business valuations in divorce consider assets, income, the market and non-marital factors
For anyone facing a divorce who is unsure about the complete financial picture, this episode is a must-listen. Seth, Pete and Kristin break down the crucial role a forensic accountant can play in ensuring all assets are accounted for and valued properly to enable fair settlement discussions. Tune in for an inside look at the financial side of untangling a marriage.
Links & Notes
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Pete Wright:
Welcome to How To Split a Toaster, a divorce podcast about saving your relationships from True Story FM. Today, a word of advice, never hide money in your toaster.
Seth Nelson:
Welcome to the show everybody. I'm Seth Nelson. As always, I'm here with my good friend Pete Wright. Today we're talking about everything the toaster represents in your divorce. Shared memories, broken promises, and the messy, often hidden financial realities of a life split in two. Sometimes to untangle that mess, you need a financial detective, someone who can follow the money, uncover the hidden accounts, and find out who really paid for that stainless steel bread warming contraption on your counter. Joining us today is Kristin DiMeo, a forensic accountant and expert witness. She has actually, Pete seen me in action in mediations representing clients and even in trials. Kristin, welcome to the Toaster.
Kristin DiMeo:
Well, thank you for having me. Glad to be here.
Pete Wright:
I told Kristin, Seth that because she's seen you in action, she is welcome to share any dirt that she has on you, so you should be ready for that because I think she's-
Seth Nelson:
I'm ready for the very short show.
Pete Wright:
... Okay. I'm excited about this conversation because as you know, we're in the middle of your divorce case series. We are walking you through what to expect as a divorcing couple and the faces and folks you might run into along the way. And Kristin, you are a forensic accountant. And when I started this show some years ago, I thought that meant that you were an accountant for the recently deceased. That's what a kind of a rube I am when it comes to your role in the divorce process. So I would love if we could start with what you do.
Kristin DiMeo:
Well, we definitely don't use a microscope or any other kind of a blood sampling techniques or anything like that, so nothing that hands-on. Forensic accountant really just means that we're a CPA that is looking basically backwards to some extent. So looking back into financial records, compiling financial information, analyzing it, and providing information to help answer questions about the couple's finances. And then specifically forensic accounting for purposes of a divorce matter also involves other areas such as assisting the client and the attorney in settlement discussions, as well as if we have to going to court exhibits for you and other schedules for use in court and ultimately testifying in court.
Seth Nelson:
And Pete, Kristin is an expert at testifying.
Pete Wright:
Okay.
Seth Nelson:
I'm not just saying that because she's on the podcast. There are forensic accountants I've worked with where sometimes it would take me like three or four questions to kind of get the answer that I'm looking for, even when we're just talking through a case, but Kristin and I would just always click. And it makes for a much more seamless flowing testimony, which then of course is more persuasive. And Kristin is talking about looking backwards about what were the assets on the data filing, what happened after the data filing? Were people moving them around? Is there a business, I know we're going to touch on this in the show later, but does she have to do a business valuation for division of assets and debts? How much is that business worth? What are different ways of valuing businesses? So there's a very wide berth on what a forensic accountant can work on and can testify to and create schedules, and it is Excel, spreadsheet city. I love it. It's great.
Pete Wright:
You're right at home. I'm curious, when you think about your role, Kristin, are you approaching it from an angle of deception? Are you always looking for secrets or because it feels like as soon as if I'm going into a divorce and I hear Seth say, well, we're going to bring in a forensic accountant, the little hair stand up on the back of my neck, do they assume that I am doing something wrong?
Kristin DiMeo:
I think a lot of people think that that is a big part of our role and it is part of our role and we definitely when we are looking at financial documents or keeping an open mind and not trying to make assumptions about anything, but ultimately the way I'm really approaching each situation is by talking to the client, talking to the attorney and finding out what the questions are that they have about their financial situation and then how we can get answers to those questions so that they can make informed decisions about how they want to resolve the financial issues that they need to resolve. In some cases that might be might, I know we sold this business a few years ago and I'm really not sure what happened to all of the money.
Well, there might not be anything deceptive going on other than that the person just was consumed with other roles in their life and didn't pay attention. But now that they want to make sure that everything's accounted for, they would like to have some more information about specifically what happened. Of course, sometimes people have done things to try and hide something from their spouse, so we are always keeping an eye out for that as well. But most of our work really is about just making sure that the client or when we're retained as a joint expert, that both clients have all of the information to try to create a level playing field so that they can have meaningful discussions about how to resolve these financial issues and move on with their lives.
Pete Wright:
Seth, weigh in on that. I ask a provocative question about deception, and Kristin of course answers beautifully, but I want to hear from you. When you bring in a forensic accountant, are you operating at all from an assumption of financial malfeasance?
Seth Nelson:
Well, no. I think Kristin answer is excellent and that's why she's a great expert witness. But there's a couple things to understand. When Kristin says, well, someone might not know, and yeah, we do look to see if there's been anything a little sketchy going on or as the kids say these days is there's something sus, in case my kids are listening to this, I'm just trying to get some props there, Pete. I was outstanding. For example, Kristin doesn't do an audit. So if she's looking at a business or she's looking at someone's just credit card statement that there's charges and the charges are going and it's for the pool guy and the yard guy and it's the electric bill, she's not actually going to look at those electric bills in the pool statements unless someone's saying, look, I think that's a bogus statement.
When she gets bank statements, she's not trying to define whether or not they're fraudulent. But what she does is she looks through it and she'll be like, wait a minute, I'm reviewing two or three years of statements or in Kristin's hypothetical from the business when it was sold to now and I see a transfer to an account that we haven't seen before. And so maybe someone was hiding it. Or she'll be looking on the tax return and say, wait a minute, I see interest income on this tax return. Where's that interest income from, what statement? What bank is it at? Or I see that there's been a brokerage account where something, so it's putting all the pieces together and there's a lot of pieces. There's bank statements, there's the financial affidavits, which we all know can be wrong. There might be the end of the year pay stub, there's the tax return. So there's all these different pieces of the puzzle that you need to try to connect. And as Kristin says, she's going to make assumptions.
What I do in court is try to attack the assumptions that I think are worthy of attack to bring doubt. I'm not going to attack, is this really a Bank of America statement? Did you check with Bank of...? That's not going to be persuasive, but I might say to the expert, what assumptions did you make when you allocated $3,000 a month to food in household goods? And the assumption might be, well, it was for the wife and the children, and I didn't know how much percentage would be for the wife or the two kids. So you have to attack those assumptions. And Kristin, she's not going to be ding for that. It just might be the judge might be like, oh, if I'm doing alimony and it doesn't count on the kids' portion, that 3000, I'm going to knock it down to 1000. But yeah, I'm hiring Kristin to put the pieces together, not necessarily saying, go find where he is hiding the money in the Caymans, and I swear I don't have an account labeled numbers ending in 5832 down there.
Pete Wright:
Nobody asked, this is an own goal. You are outing yourself. Kristin, do you work directly with one or the both divorcing parties? You don't just work with what the attorneys give you?
Kristin DiMeo:
Correct.
Pete Wright:
Okay.
Kristin DiMeo:
Typically we're retained by the client and part of our engagement letter though will reference that we'll take instruction from the client as well as from their attorney because it's very important that we're working hand in hand with the attorney to make sure that the work we're doing is ultimately something that's going to be helpful to either the resolution of the case or the presentation to the court, which is what they want to be paying us for.
Pete Wright:
Okay, perfect. Now, let's imagine I'm coming to you, I'm in this situation. What are you going to say to me to set up my expectations for this engagement? What sort of a mood do you want me in to make your life easier?
Kristin DiMeo:
Oh, I like this question. Basically what I try to explain to people is that everything that we do, we want to be looking at a cost benefit analysis, and also to the extent that there are parts of the legwork that they can take on, then that's less that we have to do unless that they're paying us to do and quite often something they can maybe do more efficiently. So for example, just gathering documents. Even if someone doesn't have statements on hand or able to be downloaded that they've already saved on their computer, it might require them actually going into a bank and making inquiries and requesting statements. But if they go ahead and do that themselves, that's going to save a lot of time and effort on our part to try to track those down using also time from the attorney to use discovery methods to get that same information.
So a lot of times people I think will feel like, oh, can't you guys just do all this? Well, to an extent we can and we can talk with your attorney about methods to gather this information, but to the extent that it's really about helping yourself, so taking that time to put yourself in the best position to have the information that's needed so that we, meaning their team, their forensic accountant and their attorney can advise them properly is well worth, you're really doing that for yourself. It also has the side effect of meaning. I'm not having to chase after, okay, you gave me the May statement and the June statement, but not the July statement because that can take a lot of time that could be better spent on what we're really good at doing, which is analyzing the data and putting together the information the attorney needs.
Seth Nelson:
And on that Pete point, when we're working with a client-
Pete Wright:
It's a Pete point?
Kristin DiMeo:
It's a Pete point.
Seth Nelson:
A Pete point, exactly.
Pete Wright:
Trademark.
Seth Nelson:
Is literally, you might not get all the statements and it might just be exhausting and the client might be overwhelmed, and even when we send out a subpoena, maybe let's just take an IRA, someone gets married, they have an IRA, it's worth $100,000. Three years later they get divorced, it's worth 130,000 and they've put money in along the way. So as we've discussed before, there's a non-marital component and there's a marital component. So on three years, you're pretty good that you're probably going to get all the statements, but if this marriage was 10 years and Kristin's asked to figure out, well, there was $100,000 dollars there 10 years ago, the account is now worth 700,000, how much is attributable from the 100 to the seven versus in growth, just passive versus I was putting money in every month?
Well, maybe we're missing three months here and six months there and two months here, which happens all the time. Can she make a reasonable assumption based on the numbers and the math that this is what happened in those missing statements? Then you just go to court and the judge might believe you, the judge might not, the other lawyer might attack you on that, but she's done the absolute best she can making reasonable assumptions with the documents provided. So don't get so stressed out if you don't have every single one. Lawyers, we like every single document, accountants like every single documents, but there are ways to kind of bridge that gap.
Kristin DiMeo:
And to follow on that, it's really about communicating with your accountant and your lawyer, but on this saying, look, here's what I think I can get, here's what I'm not sure. I'm not sure which of these things is more important for me to spend the time tracking down. Just talk to the accountant and we can help guide you on what's really more important and what's not as important. So a lot of this is about having good communication with the client and also even if the client is just feeling overwhelmed by what they're being asked, that's important for us to know too because we can give tips, we can say, here's how we can help. So we want to be helpful to the client in whatever way that we can that's going to end up with us getting the information that we need.
Pete Wright:
Okay. You mentioned discovery methods. Before we get into some of the more practical, Seth already dropped, we're going to talk about businesses. I am curious how you use discovery methods to find information and to work with the attorney that you're working with to find the information that is not given to you by the client. What are the kinds of things you're looking for when you have to employ mysterious discovery methods? What does that look like?
Kristin DiMeo:
I'm not sure about mysterious discovery methods. They're mostly pretty straightforward, but we do some of our own searches on the division of corporations and Google searches. And if we're seeing names of businesses in the records that just anything that comes up that hasn't been disclosed, we're going to just take a quick look and see if is there more of a relationship here then what they've disclosed. Searching for real estate owned in the name of corporations, just doing some of that that doesn't take a terribly long time, but just to make sure that some of those things are being fully disclosed, that if they haven't initially disclosed them, that we can ask follow up for information.
They're also, and Seth can speak more to this, but there are other types of requests, requests for admissions, things like that where we can help the attorney to draft those so that if something is responded to in a way that doesn't disclose something that we already know exists, then the attorney has that ammunition to use as well. So sometimes it's getting an answer when you think you maybe even already know the answer to see if you're going to get the right answer.
Seth Nelson:
The other thing I can do, Pete, is when Kristin says, look, I'm finding all these things and they're not giving us any of these documents. Well, as a lawyer, I have subpoena power, so I have to give notice to the other side, it's called a notice of non-party production, and I'm going to subpoena a bank and ask for all the records that they have. And when they start fighting those subpoenas, then you know you're onto something because now they're like, well, why are you supplying going after the bank? I'm like, because I believe you have statements there and you've not disclosed them. And then they go to court and they say they make up all these reasons, and the judge goes, "You don't have to do anything, sir. The bank is the one that has to fill their obligations under this subpoena."
Pete Wright:
You have just been taken out of the loop.
Seth Nelson:
Exactly. Exactly. Or you go set the deposition of their banker that is signing off on all these loans. Well, what did they tell you? What did they discuss with you? So you start digging in, people hate that. It's just so much easier to be forthcoming.
Pete Wright:
Okay, so let's transition to business valuations. How do you approach business valuations in divorce cases? Let's just say in the cleanest possible scenario before we muddy it up with complications?
Kristin DiMeo:
Right. So in the fairy tale land of where we actually have all of the information that we would like to have, and it's a straightforward kind of business. Basically, there are three approaches to business valuation, similar to if people are familiar with a real estate appraisal, you'll see there are different approaches that real estate appraisers use in valuing real property. Similarly with businesses, there's three different approaches, asset approach, income approach, and market approach, and then a lot of detail of the techniques that are used under each of those approaches. In a perfect world, you would value the business under all three approaches, and the value should come out fairly similarly if they've been prepared properly under each approach.
The reality is that some businesses, one or two of the approaches is more appropriate to use in that situation, and sometimes you just don't have the information available to prepare each of the approaches. So you have to talk through all of those things, explain to the client and the attorney why you're taking the approach that you're using, and you also have to take into consideration the information available, the amount of assumptions that would need to be made, the type of business, how it's going to be explained to the court, as well as taking into consideration issues specific to family law. So there are parts of the value of a business that may not be considered a marital asset, and so we have to look at using approaches to be able to carve out that portion of the value. And just to muddy it up a little bit more, if it's a business that was owned by one of the parties prior to the marriage, you may need to determine a premarital value of the business and look at whether that has retained its non-marital character as an asset of that person.
Seth Nelson:
Okay. There's a lot there. So let me unpack this a little bit for you too, Pete, okay?
Kristin DiMeo:
We need a Pete point.
Seth Nelson:
Yeah, exactly.
Pete Wright:
Where's the Pete point?
Seth Nelson:
Exactly. The asset approach is the easiest. What are the assets, what are the debts? And if you subtract the debts from the assets, what's left? So that might be used when you have a business where it's someone who's just a consultant. Let's say you're calling the guy that he has no employees other than himself, and all he does is if you want your logo put on a pen, that's the guy you call if you want your logo on the shirt. So he's just the middle man. He buys the shirts because you ordered 10 of them, he has your logo, he goes to the printer, they put them on, he sells you the shirt at an upcharge, and that's how he makes his money.
He might only have a computer and a cell phone, and he might have a list of contacts that use him year after year, but if he's not there, they're not calling because he's a one-man band. So his whole real business is a service business, and you care that it's him. So it's all his personal goodwill, but if he's not there, the business stops. So you can't really do that as an income saying, well, how much do you make every year? And you can sell it to someone that's going to make that year and you're going to have a multiple, because the guy's like, "Nope, I'm not going to sell."
Pete Wright:
Yeah, if I'm not here, it's nothing.
Seth Nelson:
That's right. That's right. And so that might be a reason to do an asset approach.
Kristin DiMeo:
In those kinds of businesses. Another way of thinking about it, is it really a business or is it basically a job that they just have set up as a business entity? If it's really just a job, we``ll, whoever took over that job would have to get paid the same amount. So there's no extra income that you can place a value on as a separate owner of the business.
Pete Wright:
Okay, wait a minute, I need a Pete point.
Seth Nelson:
One mistake, it keeps coming back.
Pete Wright:
It's never going to die.
Seth Nelson:
I know. That's great.
Pete Wright:
So I produce podcasts. I have a business, we produce and host podcasts. If I were to, let's just say I dropped dead. No, I'm divorcing. I leave. How do you value that? Is that a job or a business? I'm trying to figure out what I am. This actually became an identity podcast.
Seth Nelson:
Yes, exactly, exactly.
Pete Wright:
I really want to assess out what the difference is between a job, and a business. It feels like a business, they tax me like that.
Kristin DiMeo:
For purposes of in a divorce, for the valuation, you would look at, like you said, if you weren't there, what's the value of what's left? What would someone be willing to pay without you there?
Seth Nelson:
That's right. So let's take the Toaster, right?
Pete Wright:
Yeah.
Seth Nelson:
If you weren't on the show, no one's listening.
Pete Wright:
That's not true. I think there are people who would pay me not to be on the show.
Seth Nelson:
Well, that's true.
Pete Wright:
This actually might increase the value if I were not here for you
Seth Nelson:
Now, that's what the other side's going to argue, Pete. But that's the whole point. In your business, part of your business is you being the face of the business and you getting it and being the co-host, because shockingly for our listeners, this is not the only show that Pete's the co-host of.
Pete Wright:
Shocking.
Seth Nelson:
There's many shows. So if you are not here, I mean, let's be honest, if you're out, and Andy, the one who's not allowed to talk on to fill your spot, we're done.
Pete Wright:
Well, that's because you've told him he is not allowed to speak.
Seth Nelson:
That's right. But that's more like a job, right? Because you guys, now you have a partner and you have all these equipments, but really it's you guys out there hustling and you're really the face of it and doing it. It's not like you have 50 people under you that are also sourcing podcasts and coming up with ideas and doing it. Right?
Pete Wright:
Right.
Seth Nelson:
So that's why it's more of a job.
Pete Wright:
No, I get it. Yeah, it's a job.
Seth Nelson:
Right.
Pete Wright:
Okay.
Seth Nelson:
Now take my law firm.
Pete Wright:
Okay, that's a business.
Seth Nelson:
That's a business. But are people calling because it's Seth Nelson or are they calling because they've heard it's NLG? So that's the difference between personal goodwill that is non-marital in Florida, check your local jurisdiction stays with me versus enterprise goodwill. So if you go to rent a car, you literally do not care who owns that company.
Pete Wright:
Truth.
Seth Nelson:
When you're in the service business, you care whether I'm your lawyer or not. So part of it's going to be personal goodwill, but people call the firm all the time and it has nothing to do with me. And that's the enterprise goodwill. So you got to separate that out.
Pete Wright:
Okay. Let's then muddy it up. If I haven't muddied it already, let's muddy it up. What are the most common, would you say, Kristin, the most common sort of financial deceptions or complications that you run into when you're looking at a business valuation first?
Kristin DiMeo:
It's a big category, but probably generally figuring out what is the true income of the business. So there can be a lot of things that are affecting that. One of the most common in smaller businesses is the fact that often people are running personal expenses through the business. And some of those might be purely personal, some might be partly personal and partly business, so we have to kind of figure that out. But some, they'll want to argue, oh, well, I have to have this for the business. Yes, but I have to be a member of this club and I have to eat my meals there. But well, yes, but you would've still had to eat that meal somewhere. So there can be some complexity with just figuring out what's really personal versus what's business. Then you have to look at things like non-recurring or unusual events that have happened both on the income side, the revenue side, as well as on the expense side, and make adjustments to normalize for those things.
Some of those are obvious and some can be more difficult, and you have to look at trends over a longer period of time and look at things going on in the general economy and all of that. Obviously, COVID threw a lot of complications into a lot of business valuations because of the impacts on businesses and trying to figure out what's going to be a permanent impact or a long-lasting impact versus what was just for the period of the hardcore pandemic. And then obviously also the things when getting back to deception like, well, what about unreported revenue or cash revenue that never hits the books? And then you also have to look at, well, was there expenses related to that revenue? You can't just recapture the revenue without also capturing if there were cash coming in but then also cash being used to pay expenses. So you have to look at both sides of that.
Seth Nelson:
Just on that. For example, you hear that a lot where someone like husband, let's say, is a plumber, and he's like, he's always doing side jobs for cash, and he's always got thousands and thousands of dollars in cash, and he goes to the bar and he spends cash and he gives cash to the kids. It's his cash, cash, cash. Now, historically I'd be like, yeah, good luck finding that. Now more people are doing Venmo and cash apps. So that's actually helped us find more income than previous because how people do their transactions.
Pete Wright:
Because Venmo is stupid and public. People don't think about that.
Seth Nelson:
Well, you can make it a private setting.
Pete Wright:
How many people do though, really?
Seth Nelson:
I do.
Pete Wright:
Well, if you're an attorney, goodness.
Seth Nelson:
You asked, but I'm not the only one.
Pete Wright:
You might be the only one. Okay. I think that's fascinating.
Kristin DiMeo:
But at least then it has to hit an account. It has to hit an account at some point, so there's a trail there that can be followed versus actual cash.
Pete Wright:
I want to move into alimony and child support. What is your relationship with those calculations and helping plan for that?
Seth Nelson:
She tries not to pay any of them. Okay, next question.
Kristin DiMeo:
Yeah.
Seth Nelson:
Yeah. Right.
Kristin DiMeo:
That is often one of the main areas where we're brought in is to assist with alimony and child support. So I think, as you've probably covered in other episodes here, we are looking at what is the income available for each of the parents or each of the parties, and then also what are the expenses of the person who is seeking the alimony in which child support. Then there's some other specific amounts that we have to figure out that go into the calculation of child support.
Income can be straightforward, but if someone's a straight W2 employee and that's their only source of income, you may not need help from someone like us. Although sometimes even some things on some W2's can be confusing if there are certain kinds of stock options or other equity awards that the person has that flows through their W2. But often if you have someone who's self-employed, someone with multiple sources of income, income that is commission based and maybe varies. So there can be a lot of complexity with just figuring out what is the income available to each of the parties. That's the amount that should be used for purposes of these calculations.
Seth Nelson:
On that income side, I think also to be really clear about is you think, well, I got their pay stub, like Kristin said, but do you count in your jurisdiction whether they have paid time off that they haven't used? Is that allowed to be deemed income or is that an asset that might be on the asset sheet because they can get paid out? So there's all these little intricacies and nuances that year after year Kristin would pick up on and learn and then add to the sheets, but go to the expense side.
Kristin DiMeo:
And then on the expense side, looking at what truly are the expenses? There again, what's regular and recurring versus what was perhaps unusual, how do you divvy up those historical expenses between the various members of the family? So just figuring out what should an appropriate number going forward be can take some work as well.
Pete Wright:
Okay. As we get toward wrapping up, let's talk about trial.
Seth Nelson:
All right, favorite topic.
Pete Wright:
Settle down now, settle down. What are you going to do-
Seth Nelson:
We're talking about trial. We're in the courtroom with spreadsheets. It doesn't get any better than that.
Pete Wright:
... Okay, you're in trial now, what are you going to be counted on for? What is your experience in trial and do you love it? Is it the best?
Kristin DiMeo:
Do I love going to trial?
Pete Wright:
Yeah.
Kristin DiMeo:
Well, I'll say first, depends quite a bit on the attorney that I'm working with. I do generally enjoy going to trial with Seth, and the main reason is because he's prepared and we have had discussions and are on the same page and he has clients that are well-informed and know what to expect. So all of those things definitely add to the trial experience. Overall, to me, it's almost a necessary evil. You do get a little bit of an adrenaline rush from doing it, but at the same, I would always rather try to help the clients resolve the issues themselves without having to go to trial. But if we're going, we're going to be ready.
My role is to make sure that I have the financial information analyzed and able to be presented in a way that is clear and concise and is going to aid the judge who's making the decisions in making hopefully what is the best decision for our client, meaning based on accurate information. So that's really my role in presenting the information, but then also in assisting the attorney in asking questions of the other expert even of the other party to fair it out where they may be not being as clear as they should be or made assumptions that are not in our client's best interests or maybe have some fault in their logic of their arguments. So that part can be interesting as well.
Seth Nelson:
And Pete, she's doing this while always maintaining the cloak of being neutral because she's an expert, but there's assumptions everywhere. And so Kristin has had a very successful career because the judges know when she goes in there and says something, she believes it to be true based on the information that she's reviewed. So even though she might be my expert against another expert, the judges view her as a neutral, even though they know, well, she's on the wife's side on this case, but that becomes year after year, trial after trial and being involved to get that type of reputation. And it's not that she's going to be able to slip one by anyone, we've got very good experts on the other side and lawyers can ask the questions about her assumptions.
But it's a very interesting dynamic when you think this is really the way it should be. But it's my job to advocate, it's her job to answer the questions that are asked. And hopefully, and this is why I really love working with Kristin, is we work a lot on how you present the evidence because do you want to put it in a flow chart? Do you want to do a pie chart? There's different ways to present it. It's the same numbers, but maybe they look different. Maybe they feel different. And that's part of the art of working with an expert and why it's just a joy to work with her. And by the way, I am promising her to buy her dinner later, Pete, so that's probably where those nice comments came from.
Pete Wright:
Oh, outstanding. All right. All right. This is, hey, this is not a court. I'm okay with that. Look, we have a couple of questions that have come in that I wonder if we could throw your way, Kristin, that I think are interesting.
Kristin DiMeo:
Sure.
Pete Wright:
This first one, I suspect my spouse has been under reporting income to the tax authorities. How can a forensic accountant help to uncover this during our divorce?
Kristin DiMeo:
So we would need more information to understand what those sources of income are. So we would first talk with this person about what is the basis of this suspicion, and then talk about the various techniques or information that we could obtain to try and dig into that a little further. But very generally, it might be something like, okay, we know these are the sources of income, this is how much we would expect to see coming in. Let's match it up with the deposits into the accounts and see if it matches. Or let's look at the things that we know money is getting spent on. Are all of those expenses coming out of the identified accounts because maybe this unreported income is going into an account that hasn't been disclosed. So a lot of it is about taking what we know and seeing if that matches up with the information we have, but then also basically just seeing if all the pieces kind of make sense together in the puzzle.
And if we are talking about some amount of significant unreported income, there's somewhere along the line there, something's not going to match up. And then we say, okay, here's where we need more information. But oftentimes we will advise people to do that in a scaled kind of way. Like let's go ahead and start by looking at a one-year time period and see what that shows us. And if that's showing us something, then we go further. Because all of these things, you always have to keep in mind the cost associated with doing that work. So we don't want to spend money unless we think there's a reasonable likelihood that we're going to find something. You can't always know that, but at least if you do it kind of in a staged way, I think that is a better use of client's money.
Seth Nelson:
And the other part about that is, let's say we think that there is underreporting, and let's say I represent the wife and we think the husband's underreporting, we can then get a tax attorney involved and say, "Look, she filed married joint. She wants to amend her return. She doesn't want to have any part of it." Which is going to create potentially some marital debt that hasn't been paid. And then how does that factor in where we're dividing assets and debts, or maybe we think it's underreporting and we go to court with our expert and say, "Judge, he underreported. You can't make him file a new return, but we want this contingent debt because if the IRS finds out we want this contingent debt to be his responsibility, not ours." So there's some legal implications if you start uncovering and kind of pulling that string and it all starts to unravel.
Pete Wright:
Here's one that is related, and because I know Seth is such an aficionado of these tools as financial vehicles, we have investments in cryptocurrencies and digital assets. Can you accurately trace and value these assets in the course of a divorce?
Kristin DiMeo:
So again, there are documents that we can obtain to, unfortunately, they don't make our lives easy with the way most of these-
Pete Wright:
Blockchain, blockchain, blockchain, it's all public, Kristin.
Kristin DiMeo:
... Yeah, they make it as difficult as possible. So it can be time-consuming, but oftentimes we're going back to, well, where did the money come from to invest? And we start there. So the money has to come from somewhere to invest in those things. So that's oftentimes the starting point to see if we see that, and then having to, once the investments are made, track the buying and selling and what's left and what's been moved from this account to that crypto wallet. And so it can be time-consuming, but largely, yeah, not the most fun.
Seth Nelson:
When crypto was new, I had a client who was convinced that the other spouse put a lot of money in crypto and it was brand new. I really had no idea how it even worked. And so I literally got on and I was trying to figure out how it worked, and when I did all that, I put in 50 bucks just to learn the process. Pete, I forgot about it. I totally forgot about it. And then we were talking about crypto once and I was like, I had this case once and I put in 50 bucks and it was worth like three grand.
Pete Wright:
And then your eyes opened and you thought, I have a future after law.
Seth Nelson:
Yeah, exactly. Except I have my smart ass child who goes, "Well dad, why didn't you put in 50 grand or 500 grand?" And I'm like, "Why don't you let me kick your teeth in?" Yeah. So that's my big crypto story there.
Pete Wright:
Big story. Big story. All right, how about we do one more? This one is, this is a good one. Our divorce is quite contentious. Does your approach change in highly acrimonious divorces? How so? Aren't the numbers the numbers?
Kristin DiMeo:
Yes, the numbers are the numbers. Oftentimes it's very contentious. That means they're going to just make our lives a lot harder trying to get to the accurate numbers is oftentimes what that means. Also, that is going to heighten the alert for looking for things that are maybe not the way that they should be, but ultimately the numbers are the numbers. I think it comes more to when we get into the aspects of trying to get to a settlement and looking at the real world implications of how you're going to, and this is outside my realm, but just as a human co-parent with this person going forward, how you're going to deal.
It might even, from my aspect of that, it might be when we're talking about how are you going to deal with dividing out of pocket medical costs for a kid going forward? If it's highly contentious, we don't want these people exchanging receipts on a monthly basis because every time they have to deal with each other, it's a point of contact. And so we might think about, well, what are ways we could limit those points of contact going forward? So it just becomes more, those kinds of thought items, especially in the settlement.
Seth Nelson:
Numbers are never the numbers.
Pete Wright:
You can't just read the bumper sticker, Seth,. Why pray, tell, are numbers never the numbers?
Seth Nelson:
Because in child support, people will say, well, it's just a mathematical formula. So the numbers are the numbers, but how are you using deductions? What are you doing? Are you really doing their tax basis properly? I mean, from gross to net properly, did you get all the proper deductions? Did you really capture all the income? And what else might be out there? So I'm a numbers guy. We've talked about it. I love it and I love it when opposing counsel goes, yeah, I went to law school not medical school because I was bad at math. And I'm like, I'm about to school you. So that's why I say the numbers are never the numbers, and you kind of just got to follow that money trail.
Pete Wright:
Great. Great insights today. Thank you. We so appreciate you for being here. Kristin, thanks for being such a great guest.
Kristin DiMeo:
My pleasure. Thank you.
Pete Wright:
And thank you everybody for downloading and listening to this show. We sure appreciate your time and attention. Don't forget, you can ask questions in the live stream if you're watching it live, and you can ask questions at Howtosplittatoaster.com. Just click the submit a question button. We've got them stacking up again. I'm pretty excited. That means another listener question show. Ooh, it's coming. Maybe in the new year.
Seth Nelson:
Nice.
Pete Wright:
Very, very good. On behalf of Kristin DiMeo and Seth Nelson, American's favorite divorce attorney, I'm Pete Wright, and we'll see you next week right here on How to Split A Toaster, a divorce Podcast about saving your relationships.
Outro:
How to Split A Toaster is part of the True Story FM Podcast Network, produced by Andy Nelson. Music, by T. Bless, and the professionals and DB Studios. Seth Nelson is an attorney with NLG Divorce and Family Law with offices in Tampa, Florida. While we may be discussing family law topics, How To Split A Toaster is not intended to, nor is it providing legal advice. Every situation is different. If you have specific questions regarding your situation, please seek your own legal counsel with an attorney licensed to practice law in your jurisdiction. Pete Wright is not an attorney or employee of NLG Divorce and Family Law. Seth Nelson is licensed to practice law in Florida.
