Key Takeaways
- Forensic accounting is a branch of accounting that focuses on investigating and analyzing financial reports and documentation to resolve disputes.
- Key functions a forensic accountant can perform include financial analysis, asset valuation, asset tracing, fraud detection, comprehensive reporting, and testifying in court.
- Forensic accounting may be necessary if you notice red flags such as inconsistencies in financial records, the suspicion of hidden or concealed assets, suspicions of fraud or undue influence, and more.
- If you suspect discrepancies in your probate accounting, you should engage a skilled probate litigation attorney and a forensic accountant as soon as possible so that you can identify and address issues early to minimize delays in probate.
Introduction
High-value probate cases often have a complex portfolio of assets with valuable forms of property spread out across multiple jurisdictions. With a significant number of high-value assets, the risk of issues or discrepancies arising in financial records is often higher than for typical estates. In these cases, a forensic accountant can help uncover these discrepancies and ensure that all assets are properly accounted for.
Forensic accounting services can be beneficial in several ways, including uncovering financial irregularities, protecting assets, and offering valuable expert evidence and testimony during legal proceedings. Having the support of a skilled probate litigation attorney can help you connect with the proper professionals for investigating your family’s estate and use the information gathered to establish a strong case that protects your family’s interests.
What Is Forensic Accounting?
Forensic accounting is a specialized branch of accounting focused on investigating financial records and resolving financial disputes for legal purposes. Forensic accountants are professional, skilled accountants and investigators who use a variety of techniques, tools, and computer software to analyze financial data and information for legal purposes. Compiling this information from financial statements and analysis, accountants can prepare their findings for use in litigation to support a legal argument.
Forensic accounting in probate litigation tends to be a particularly beneficial tool in high-value estates because of their complexity and their associated asset portfolios. The greater number of assets and the high stakes involved with valuable assets only increase the risk of discrepancies or cases of fraud potentially flying under the radar and compromising the estate or trust administration process.
Key Functions of Forensic Accountants in Probate Litigation
A forensic accountant can be a valuable resource in probate litigation and can provide support to individuals with high-value estates in all of the following areas.
Financial Analysis
A forensic accountant can perform a detailed financial analysis to identify any irregularities or discrepancies in the estate’s financial records, such as unexplained withdrawals, misallocated funds, or fraudulent transactions. A forensic accountant will examine all estate and trust records, accountings, and transactions to identify irregularities that may demonstrate signs of financial mismanagement, breaches of fiduciary duty, theft, or other forms of fraudulent conduct.
Asset Valuation
In addition to their expertise in investigating financial records, a forensic accountant often also has experience in asset valuation, which can allow them to support in valuing unique or complex assets, which may not always be straightforward to assess. Assets that may be more difficult to appraise include those such as business interests, real estate, or investment portfolios.
Part of a forensic accountant’s experience includes either verifying or challenging the valuation of unique or complex assets. With their understanding of business valuation and how to research the market value of related assets, a forensic accountant can help to establish a fair market value of the assets in question.
Asset Tracing
In complex estates, assets may be difficult to accurately keep track of, especially in cases where assets are concealed or misappropriated. For example, assets like offshore accounts, foreign real estate, or hidden investments may be left out of the estate inventory and can be difficult to identify.
If an estate executor or another interested party suspects hidden or concealed assets or notices unexplained losses, they can engage a forensic accountant to identify and trace concealed or misappropriated assets. This support will be valuable for ensuring the smooth continuation of the probate process and ensuring that beneficiaries receive the inheritance they are entitled to.
Fraud Detection
A forensic accountant will conduct a systematic review of financial records and a detailed data analysis to detect signs of fraud, embezzlement, or financial elder abuse. Identifying such red flags is crucial for preserving the integrity of the estate and the value of assets left behind for beneficiaries and heirs.
This function is particularly important in will or trust contests. If a forensic accountant can find that documents were fraudulently altered or demonstrate signs of embezzlement or elder financial abuse, it could help establish circumstantial evidence that renders an estate plan invalid.
Reporting and Testifying
Forensic accountants can support a case after concluding their investigation by providing a comprehensive report of their findings, as well as providing expert testimony in court. This support can help you present a stronger case in court while also simplifying complex financial matters for judges and jurors so that they can better understand your case. Forensic accountants can also review reports provided by the opposing counsel during discovery, which may assist in developing a stronger counterargument.
Why Are Forensic Accountants Critical in High-Value Probate Litigation?
Having the support of a forensic accountant is particularly valuable for high-value estates, as these professionals can provide an impartial, data-driven perspective to address concerns. High-value estates present challenges due to their complex asset portfolios of valuable properties spread across multiple jurisdictions with numerous interested beneficiaries. Such detailed and valuable asset portfolios may be easily misrepresented, unaccounted for, mismanaged, or may face the risk of theft or misappropriation.
Forensic accountants can offer support in your probate litigation case through several avenues, like supporting legal arguments, uncovering evidence, and challenging opposing claims. If estate disputes arise, an accountant helps to provide clarity in the matter by offering financial transparency around matters of the estate, allowing for the resolution of these disputes.
Red Flags That Indicate the Need for Forensic Accounting
During probate litigation, you may encounter signs that indicate the need for forensic accounting. Typically, these red flags include any sort of inconsistencies or irregularities with the estate accounting that don’t seem to align with the estate plan or actions taken by the estate executor or administrator.
The following red flags may demonstrate the need for the support of a forensic accountant:
- Missing or unaccounted-for assets in an estate.
- Unexplained withdrawals or unusual transactions from estate accounts.
- Sudden changes in asset ownership before the decedent’s death.
- Discrepancies in asset valuations (e.g., undervalued or overvalued properties or businesses).
- Suspicions of undue influence, elder financial abuse, or fraud.
- Lack of transparency surrounding the administration of trust or estate business interests
If you notice any issues with the financial management of your estate, you should consult a probate litigation attorney about the most appropriate next steps. An attorney will offer guidance on how to move forward, whether you have a case, and how to find a reliable forensic accountant.
When Should You Involve a Forensic Accountant?
You should involve a forensic accountant as soon as you suspect financial discrepancies in an estate—this may happen at any stage in the probate process. For example, you may contact a forensic accountant at any of the following stages:
- Early in the probate process, if financial discrepancies are suspected
- When initial reviews of estate or trust records reveal irregularities
- Before litigation, to gather evidence for negotiation or mediation
- During litigation, to strengthen a legal case with expert testimony
Engaging an accountant early helps to clear up any issues and potentially resolve conflicts before they affect the estate administration process. A forensic accountant may also be able to provide guidance by ensuring that the estate inventory is accounted for and free from errors before it leads to disputes.
How To Choose a Forensic Accountant for Probate Litigation
When choosing a forensic accountant for probate litigation, it’s important to be mindful of their past experience and specialized area of expertise. Finding a skilled accountant is important for helping you adequately account for all financial assets, build the strongest possible case, and present relevant evidence appropriately in court proceedings.
Consider the following criteria:
- Their level of experience in estate and trust matters
- Whether they are certified and have trial experience as expert witnesses
- Their ability to clearly present findings to non-experts
- Whether they have experience in high-value estates
In cases of probate litigation, it’s important to engage a legal professional to support you in building and presenting your case. Choosing an experienced probate litigation attorney will likely mean that they will have a strong network of professionals you can turn to that will be able to strategically collaborate and coordinate with the forensic accountant to build a formidable case.
The Role of Attorneys in Collaborating with Forensic Accountants
Probate litigation attorneys work in close collaboration with forensic accountants when necessary to strengthen their argument in litigation involving financial estate disputes. As they work to build a comprehensive case for their client, the attorney may engage the support of a forensic accountant to ensure they have as much evidence as possible for building an effective case strategy in pursuit of the best possible outcome.
By maintaining clear communication with the forensic accountant, an attorney can ensure they understand the findings and can present them in an effective argument in court.
Legal and Financial Tools to Support Probate Litigation
In addition to an attorney, it’s important to have a comprehensive team prepared to support you throughout the case. Engaging other professionals who may work alongside forensic accountants may help strengthen your case even further.
Other professionals who may be helpful include:
- Asset appraisers
- Financial planners
- Tax advisors
- Private investigators
Forensic accountants work alongside these professionals to gather as much information as possible and assist you in developing a comprehensive case that increases your chances of achieving the best possible outcome. If assets exist across multiple jurisdictions, then it may be helpful to engage advisors in each jurisdiction where there are discrepancies so that they understand the unique nuances surrounding regulations and taxes in these areas.
When To Seek Legal Assistance
You should seek legal assistance anytime you experience the threat of entering into probate litigation. Meanwhile, any time you feel the need to engage a forensic accountant, you should also reach out to a skilled probate litigation attorney.
You should seek legal assistance if you suspect any of the following:
- Financial mismanagement
- Fraud
- A breach of fiduciary duty in an estate or trust
An attorney will be able to support you in building a case to address any acts of misconduct and protect the interests of your family’s estate. As you search for legal assistance, be sure to consider a firm’s track record of success, its experience in high-value estates, and the network they have to support you.
Protect Your Rights in High-Value Probate Litigation – Contact Us Today
The support of a forensic accountant can be invaluable for addressing cases of probate litigation. If you suspect financial discrepancies at any point in the probate and estate administration process, you should contact a skilled probate litigation attorney who can connect you with a trusted forensic accountant.
The team of probate litigation attorneys at RMO may be able to help you resolve your financial disputes. Between our extensive experience with high-value estates and our network of experienced forensic accountants and other professionals, we’ll help you build a winning strategy in court to address your concerns and protect the best interests of the estate.
Schedule a consultation with our team at RMO Lawyers to discuss your case and your potential legal avenues.
Glossary
Estate Fraud – Any dishonest or illegal activity that occurs in the administration of an estate, often involving manipulation of estate proceedings for financial gain, including misrepresentation, embezzlement, or theft of estate assets.
Forensic Accountant – A skilled accountant with investigative skills who uses a variety of methods to analyze financial reports and uncover potential evidence that can be used in litigation.
Probate – The court process in which the assets of an estate are gathered, accounted for, and distributed to the heirs or beneficiaries after an individual passes away, either in accordance with the deceased’s wishes if they had a will or following local intestacy laws if there was no will.
Probate Litigation – A lawsuit filed by an interested party in an estate against another during the probate estate administration process.
Undue Influence – A legal concept that occurs when one person exerts excessive pressure or influence over another, typically to manipulate their decisions, particularly in the context of estate planning or inheritance.