Trust and estate disputes often involve a complex mix of emotions, intricate financials, and legal technicalities. For lawyers, litigants, and finders of fact alike, the need to dissect a densely veiled financial landscape is usually at the heart of a trust and estate case.
That’s where a forensic accountant can lend critical support. Forensic accountants uncover the facts and provide objective financial analysis to assist in dispute resolution. In this post, we’ll explore how forensic accounting services can help resolve trust and estate disputes.
Unraveling the Money Web
The first step for a forensic accountant in a trust and estate dispute is to begin unraveling the “money web” — that is, to examine, evaluate, and interpret the complex web of financial transactions and documentation involved in the case.
Here’s a more detailed glimpse into the process:
- Following the Money: This entails reviewing the financial records, including bank statements, investment portfolios, real estate documents, invoices, bills and the like to trace assets and determine the sources and uses of funds.
- Analysis of Responsibility and Authority: This involves examining who was responsible for managing the estate or trust, their role, the transactions they made, and their financial decisions. Knowing who had control over the finances can be key in uncovering the root cause of disputes.
- Transaction Timeline: One of the most important responsibilities is plotting a timeline of the transactions made in relation to the trust or estate. Any irregular or inconsistent activities during this timeline can provide significant clues centered around the dispute.
Tracking the Paper Trail
Forensic accountants are trained to find patterns and recognize inconsistencies in financial documentation. When we talk about ‘tracking the paper trail’, we refer to following the sequence of paperwork and electronic information that validate or document a series of transactions or activities within the trust or estate.
Here’s how it works:
- Detection of Unusual Activities: Forensic accountants are adept at detecting patterns and identifying anomalies. We look at things most people would not see, like inflated expenses, mysteriously low revenues, odd transactions or sudden changes in spending.
- Identification of Fraud or Embezzlement: Instances of fraud and embezzlement are often a reality in trust and estate disputes. An organized, comprehensive examination of the financial records can unveil unsanctioned transfers, withdrawals, or use of funds.
- Unreported Income or Assets: Sometimes, certain assets or income sources of the trust or estate are not properly declared. By following the money, forensic accounting services can identify undisclosed assets and income.
- Inquiry into Disbursements: Forensic accountants also investigate disbursements or distributions made from the trust or estate, checking to see if they concur with the terms and stipulations outlined in the trust or will.
Tracking the paper trail requires a keen eye for detail, proficiency in accounting and financial management, robust analytical skills, and in-depth understanding of legal aspects of trusts and estates. With these skills, forensic accountants can help paint a clearer picture of the trust or estate’s financial landscape.
The Expert Witness
Perhaps the most significant contribution of a forensic accountant in a trust and estate dispute is to serve as an expert witness. Our findings and valuation opinions hold substantial weight in court proceedings, and our ability to present complex financial data clearly and concisely helps in achieving a fair resolution for all parties involved.
Takeaway
In essence, forensic accountants are the financial investigators in trust and estate disputes. Combining our analytical skills with a working knowledge of trusts and estates, we serve as invaluable assets in untangling the web of monetary issues that commonly arise in these disputes. By providing objective and accurate financial analysis, forensic accountants lend credibility and clarity to the often-obscure world of trust and estate disputes. Forensic Strategic Solutions has substantial experience assisting counsel and parties in trust and estate disputes. To learn more about our work, contact us for a consultation, or visit our practice area page on Forensic Investigations.