Valuators working on divorce cases often say they like the work but hate litigation and the adversarial approach. A two-part panel discussion on collaborative law at the recent AICPA conference in Atlanta offered financial experts a vision of how they can stay in the game and enjoy it.

Collaborative law is a legal process in which couples who seek a divorce work with a team of professionals, including a lawyer for each spouse, a mental health professional (facilitator), and a neutral financial professional (NFP) to resolve their dispute outside the court system. This approach is based on transparency, and financial and personal issues remain confidential. Because information sharing is key, a collaborative divorce often ends up costing less than a litigated divorce.

The financial expert on the panel, Paul Garcia (Paul A. Garcia PA), who has served as expert in collaborative divorces and litigation settings, says the neutral financial professional plays a vital role in keeping costs under control. There are no court directives. Instead, the NFP, based on the spouses’ wishes, defines the scope of discovery, sets the valuation date, and develops a financial picture based on a limited financial review. The NFP’s financial assessment serves as a road map for developing different settlement options.

Explaining valuation concepts and developing calculations of value are key responsibilities, particularly when the contested assets include a business (or businesses). Typical valuation issues are goodwill, the value of the owner spouse’s services to the business, underreported or unreported income, and personal expenses charged to the business.

Garcia notes that, in many divorces, financial issues represent a major pressure point. But, by working with the parties on clarifying the spouses’ financial picture, the NFP can help alleviate some of the strain. Garcia has observed that often one spouse has less financial knowledge than the other spouse. The NFP can help educate the financially less savvy spouse as to basic financial and budgetary concepts. Watching clients develop more confidence in financial matters makes for great job satisfaction, Garcia says.

A more detailed account on this topic will appear in the January 2019 Business Valuation Update.