Divorce is a complex matter that involves different facets from parental and child-related matters to the financial-related issues, and they’re better addressed with a team of professionals that are experts in one aspect or another. Financials, for example, when one of the spouses have a closely held business, might require business valuators that could give their professional and unbiased opinion on the value of the business or in determining marital and non-marital assets. Vocational experts can also come in to evaluate the income-earning capabilities of a spouse that isn’t a wage earner to determine if and how much financial support should be allocated. Real estate appraisers can be needed to ascertain the value of any real-estate owned within the marriage. Divorce and Family Law Partners Jessica Winkler Boike and Thomas T. Field discuss what type of issues are usually involved and the experts they turn to for support.
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Experts Used In The Divorce Process
Our CMO, Sandra Napoli-D’Arco, asks questions that get the attorneys talking about everything they know and have experienced throughout their years of being divorce lawyers.
I’m here with Tom Field and Jessica Boike. We’re speaking about experts employed by divorce lawyers during the divorce process. Tom, Jessica, I know you both have done this before, but for people who haven’t heard your previous podcasts, please tell us a little bit about yourself.
Jessica: I’m Jessica Boike. I have been practicing for several years. I’m a Partner at Beermann. I live in the suburbs with my husband, two kids, and two dogs.
Tom: I’m Tom Field. I am a Partner and Head of the Family Law Department and practicing in this area of domestic relations for several years. I live in the city with my wife and two kids.
Who are the experts that you and your clients rely on during the divorce process?
Tom: Jessica was kind enough to help me assemble a laundry list of all the people that we tend to work with, on a fairly routine basis in our jobs by way of background. When we enter a divorce case, in particular, there are varying issues that we’re dealing with. If we split it in half, half the issues, assuming there are children involved, they are parental, child-related and the other half is financial. What we’ve got assembled to discuss are the varying types of third parties outside of our firm who are non lawyers mostly, but some are other lawyers who our clients and we rely on to help get through this process to address various issues. It probably helps to start with the issues and who we may encounter. Thinking about this episode, I think I said to Sandra that a hypothetical case might be a good way to think about how these issues come about. For purposes and Jessica can feel free to disagree or interject. We should probably discuss a case where we’ve got a couple that’s been married for maybe fifteen years. One of the spouses has a closely held business and they’ve got two children, the wife has been a stay-at-home parent. Let’s start out with those general parameters. You want to dig in on maybe financial experts?
Jessica: In a case like this, there are certain issues that immediately pop out for us to be able to resolve the case either via an agreement which is always preferred or in court at a trial. One of the examples that Tom just outlined in his hypothetical is let’s say the husband has a closely held business. What is it worth? We are divorce attorneys. Though we have a lot of experience and practice dealing with closely held companies, we are not valuation experts. In order to have a number assigned to that business, we pull in one of the professionals that we often utilize to essentially do an analysis of that closely held business and determine the value of it. Depending on how big it is, there are different professionals that we can utilize.Use experts who are certified to do business valuations to provide a professional opinion that would stand scrutiny. Click To Tweet
Sometimes people want a summary opinion and you can reach out to an accountant or a CPA. They can look at the cashflow or whatnot and give you a rough idea of what that closely held company is worth. If both parties have participated in that business or have an understanding of it, that might be enough for purposes of settling the case. When you’re going to trial and there’s a disparity in what you believe the value of that business is and what your opponent believes, you need somebody who is accredited with the specific certifications and degrees in order to come in forensic look at all the cashflow, the personal expenses that are being paid on the owner’s behalf. The different equipment that might be utilized and be able to provide a professional opinion in court that was stand scrutiny as it relates to that value.
We tend to use people who are certified to do business valuations to come in and provide us an idea of what that business is worth. A lot of the times, both sides will hire one independently and compare those two values or sometimes people use a joint expert. Luckily there are a few very reputable people that we’ve utilized and where other firms have utilized them as well and we trust in what their work product is. That’s one person, especially in this hypothetical that we would use whether for settlement or for trial.
Tom: Sticking with the same hypothetical, whether it’s the same experts that would do valuation or not, as some do both, we will often rely on an expert to help us do a cashflow analysis. When you’ve got a closely held business, there are oftentimes where it is difficult for us as lawyers and our clients to ascertain exactly what the other spouse’s income is. We can’t just rely on tax returns to tell the whole story. In this example where you’ve got a closely held business, some questions arise as to, a lot of people with closely held businesses, they fudge a little bit. No big deal, but they’re paying some personal expenses out of business. The business may be paying for the cell phones for both of the parties and their children, for insurance, and for gas. I’ve even seen instances where the business had paid college tuition for children and things of that nature or vacations for the family. Those ended up being add-backs.
Sometimes it’s necessary to have an expert come in and give them credit card statements and the general ledger, which is the check register for the business and say, “Review this.” Asking questions is necessary. It helps us distill down what the actual income is. Another issue that comes into play is a lot of times there are retained earnings in a business. People are distributing out money or not as the case may be, even though maybe available. If it’s an S corporation by way of example, taxes flow through to the person who is the owner in that corporation. The marital state may be paying taxes on money that it’s not receiving because the business is hanging on to some of the money to operate. Sometimes it’s more than the business needs to operate. That’s another example of an expert who is usually almost always a CPA. Some of the business valuation experts we use double as cashflow experts so that we don’t have to have multiple experts in the same case. That would be another example of work that we would send out of the house for the benefit of a client or ascertain the income of a spouse.
The information is given to the divorce lawyers and then you analyze and review it with your clients. It doesn’t go to the client?
Tom: Keep in mind when any of the financial issues that we’re talking about, the goal in every divorce case is two-fold. It’s to nail down a balance sheet of all of the assets and liabilities in the case and at the same time ascertain what the cashflows up. You need to have an agreement on asset and liability values as well as incomes for purposes of being able to divide the assets and set support obligations. Those are the two goals that we’re trying to get to in each case.The goal in every divorce is to be able to divide assets and set support obligations. Click To Tweet
I’m sure it becomes very difficult when you have someone who has a private family business and maybe they’re showing they make $10,000 a year when in reality it might be $1 million lifestyles.
Tom: It’s not rare that we see those. It’s some level of frequency. Jess, do you want to talk about maybe vocational experts as long as we’re talking about income?
Jessica: For purposes of determining cashflow of the primary wage that Tom indicated that sometimes we need cashflow analysis. However, in this hypothetical, the stay-at-home-mom. If she had previously been working in a profession for the first, let’s say fifteen years of the party’s marriage, and just the last five years she’s been out of the workforce, she does have income-earning abilities such that it should at least be considered when setting support. It’s not to suggest that she can go back into the workforce as if she was in year ten and earn the same amount. What do you do? There are professionals who are called vocational experts. They come in and they do a market analysis of what could that person earn in light of her professional accreditations, her education, the fact that she has been out of the workforce for five years. Has earned any additional certification credits, lessons, classes that she’d have to take to recertify in a certain profession or to gain back those skills that may have been lost essentially. Even just catch up on the tech that’s being used in certain firms.
That vocational expert looks at all of that information and then generally assesses if this person did A, B, and C she could earn X number of dollars in one to two years. It’s information that the courts like to be able to review and rely on when setting maintenance and support. You sometimes have the primary wage earner saying, “This person is not a maintenance candidate or doesn’t need child support because they can go back in the workforce and earn based upon their historical earnings.” The other side says, “I can never make any more money because I’ve been out of the workforce for five years.” This person comes in and says, “Judge, here’s the reality of the situation. There’s no way that she might be able to earn what she did when she left the workforce, but she does have income earning capabilities and here’s what they are.”
Also, it’s helpful because that vocational expert can set out the different steps that that person might have to take in order to get herself back in the position she once was, which is helpful for both parties involved. That something we rely on that expert to come in and give us a dollar amount or at least to demonstrate that there are income earning capabilities. It’s then up to us at trial or in a settlement as to whether or not we’ll be seeking an imputation of that income to that party. For example, if the vocational expert says this person can make $50,000 and she started. We would ask then in a settlement that at least is considered as an offset to some degree on any support and at trial that it be considered when calculating support in both maintenance and child support.
Tom: Along the lines of accountants and support, another thing that we sometimes do that people would be unfamiliar with that aren’t in our world is hire an expert to do a lifestyle evaluation for us. This is typically conducted by a CPA, although there are some bookkeepers that are fairly expert in doing this and have been given the expert title by judges and qualified as experts. This is essentially a bookkeeping function with some nuance. Most of our clients here at Beermann are affluent and have varying levels of substantial lifestyles. What comes along with that is typically a high level of income. The statutes that we’ve got for support in Illinois have guidelines, but the guidelines phase out over $500,000 of income. We as lawyers, especially lawyers who have a clientele that typically has a level of income that phases them out of the typical statute, have to take a little bit of a deeper dive and say, “Should we extrapolate based on the guidelines to whatever the income is or should we be doing more of a needs-based analysis as far as maintenance, which is our term for alimony?”The intent of the maintenance act is to afford a spouse the ability to maintain a semblance of the lifestyle they enjoyed before divorce. Click To Tweet
A lot of times in more significant cases we’ll look more towards that needs-based analysis because if we were to use the guidelines, it would provide for a level of support that would be far and away exceeding what the actual lifestyle was during the marriage. Our statute says the intent of the maintenance act is to afford the recipient spouse the ability to maintain some semblance of the same lifestyle similar to that which they enjoyed during the marriage. These lifestyle experts come in and essentially take what we consider a financial affidavit, which has all of the expenses of a household on a monthly basis broken down in very detailed categories. Your mortgage, your real estate taxes, your homeowner’s insurance or utilities, etc. For both parties, all households involved all of their children and broke it down into the individuals as best as they can.
Using our present hypothetical, if the wife was seeking maintenance from the husband, the lifestyle expert would try as best that they can to work with the wife if they were the wife’s expert to review all of the bank and credit card records for a period of time. I would say a standard period might be the three years leading up to the divorce and try to ascertain as best they can what the wife’s expenses were on a monthly and annual basis so that you can justify a maintenance request for settlement purposes. Sometimes those experts also come and testify at trial if the matter remains contested, but that would be another example of an income and expense type of experts that we would hire for one of our cases.
Who else do you hire?
Jessica: Going back to the closely held business, we discussed the value and we discussed cashflow, but there’s also one other component is the classification of that business is not merit or marital. At times, we hire experts to help us trace out different transactions to figure out if a piece is marital or not marital. The reason why that’s important is a non-marital asset though the valuation is still important into consideration at trial and settlement, it is not to be allocated between the parties. The person who owns the non-marital asset will be awarded at the said asset. The income generated from that is a different story, but we have hired different people to go through corporate books, certificate chairs, bank accounts, names going in and out. Sometimes it’s the business valuation person. Someone from their office who can do it forensically, but otherwise it could be even yet another professional that’s brought in to ascertain whether or not there are certain pieces that are subjective classification issues.
Tom: As Jessica said, it’s typically a forensic accountant that’ll come in and help us with those. If we go back again our hypothetical, if the husband had acquired any portion of that business interest in the closely held company prior to the date of the marriage, there’s likely a non-marital component. Unless he somehow commingled in with any additional acquired shares in the business after the date of the marriage. That’s something that the records don’t always easily bear out. Those forensic experts will come in and it doesn’t even necessarily have to be a business. It can be investment accounts. It could be actual investments in other business interests or privately-held investments like private equity. Those forensic accountants will often come in and help trace out to the best of their ability based on records that are available so that they can help us with characterization issues.
If we shift to property, if we’re talking real property, we’re talking about ascribing values to real estate. That’s something that is commonly done in our cases. I would say probably 90% of the time we’re hiring a real estate appraiser to come in and put a value on whether it’s personal, real estate or business real estate so that we can accurately assess that value on a balance sheet. I don’t know that there’s more that we need to necessarily say about those particular experts other than the ones that we tend to use our well-credentialed and have experience testifying in court in the event that we need them.In a divorce, the person who owns the non-marital asset will be awarded said asset, but the income generated from that is another issue. Click To Tweet
Jessica, did you say that both parties will hire experts? If the wife’s attorney hires a real estate appraiser, does the husband’s attorney also hire one?
Jessica: It depends. You can hire one jointly with the option that if one of the parties does not like that value that they can go hire their own at which time if that value comes in a higher or lower than the other person than they’ll want to have their own. There are times where people will say, “We’re doing a joint appraiser. We agree that it’s binding.” One and done and that’s all, and there are the circumstances where each of them gets their own. If they’re close enough, you average the values. If they’re too far, sometimes you get a third expert to come in again and you average either all three or you average the two appraisals that are the closest, etc.
There’s a myriad of ways of doing it. The more appraisals you have, the more costly it is. One of the other professionals that we lean on, I don’t know if you would call them experts because they can’t necessarily testify in all circumstances to value at trial, but were very helpful to even real estate agents or us. They can’t testify to what the value is, but they can give you insight into what the market looks like. Other properties have been selling for in the neighboring communities. You could end up having two appraisals that are done by a certified real estate appraiser, and then you can ask your real estate agent to do a market analysis to see where those values come in and if they’re close to the different appraisals that have been done. There are other professionals that we do lean on and gather information from albeit, may not be accredited as an expert at a trial, but have a lot of helpful information that we can use as markers when looking at values.
Tom: If we’re staying on the topic of residential or even commercial real estate, mortgage brokers tend to be people that our clients and we rely on pretty routinely for a few different purposes. One, if we’re transitioning property from both parties to one party. We’re not selling it, but we’re giving it to one party on the balance sheet. The party who’s getting off that title and the mortgage on that property needs it to be refinanced so that they can get off it. We’re often dealing with a mortgage expert to come in and give us an idea. Can they refinance the person off that wants to get off the mortgage? What is the rate going to look like so that we can project the cost on a monthly basis to the party who’s staying there? That’s another person that is going to get engaged frequently to assist us.
The divorce lawyers, as I keep doing these episodes, are very strategic in their approach, never wing anything.
Tom: We wear a lot of hats and we didn’t even cover all the different people that we typically will get involved with. There are other experts as far as children that we do engage from time to time, whether they be court-appointed or not, to do valuations for custody purposes. Therapists that help us out with child-related issues, frequently varying types or their occupational therapists or just pediatric therapists. I know Jessica and I talked about mediation, mediators and first arbitrators. I don’t know if you want to hit that briefly.
Jessica: We use as often as we can in the appropriate circumstances mediators to mediate the case. A lot of times clients will come in and say, “I want to do arbitration.” You have to explain, “There’s a difference between mediation and arbitration.” Mediation, the third-party there to facilitate communication between the parties to create an amicable resolution hopefully. Arbitration is similar to a court, but you’re not in court such that that third party makes a decision instead of a mediator who’s getting there to facilitate communication. The arbitrator makes a decision for you after presenting the different evidence from both parties. There are lots of people, lots of experts. We have a very long list of people that we use often who have helped us create wonderful results.
Thank you so much for your time. This has been interesting and enlightening as always. If you liked this episode, please subscribe to our podcast channel. Please like us on Facebook and LinkedIn where you can always stay abreast of all the latest episodes. This isn’t the last of Tom or Jessica. They’ll be back discussing another divorce topic. Until then, thank you.
About Thomas T. Field
Thomas T. Field practices in the areas of matrimonial and family law, primarily in Cook and Lake Counties in Illinois, and where his expertise is of particular value throughout the State of Illinois. He is currently the Head of the firm’s Family Law Practice Group.
Mr. Field’s experience includes having been lead counsel in numerous trials, litigation of custody disputes, relocation actions (including interstate and international matters involving the Hague convention), and resolution of post-dissolution conflicts. He offers specialized knowledge in the analysis of complex financial matters including executive compensation, closely-held businesses, and real estate holdings. He further offers significant experience in negotiating and drafting pre-and post-nuptial agreements and litigation of dissolution matters involving pre- and post-nuptial agreements as well as all family law related matters for same-sex couples. Additionally, Mr. Field offers expertise in navigating the unique complexities involved when medical needs, disability, domestic violence, substance abuse, dependent adult children, or other complicating factors are present in a client’s family.
About Jessica Winkler Boike
Jessica Winkler Boike practices in the areas of commercial litigation, appeals and family law. Ms. Boike counsels clients on a wide range of divorce-related issues such as child custody, visitation, child support, distribution of marital estates and maintenance. Ms. Boike is also a certified mediator, having completed extensive training at the Chicago-based Center for Conflict Resolution; earned a Certificate in Litigation and Alternative Dispute Resolution from Chicago-Kent College of Law; and mediated multiple small claims cases at the Richard J. Daley Center in Chicago.
Ms. Boike has been named a Rising Star in the area of Family Law by Super Lawyers Magazine, a designation reserved for the top 2.5% of all Illinois attorneys under 40, and named an Emerging Lawyer by Leading Lawyers, a designation given to fewer than 2% of the attorneys in Illinois.
The content of Beermann LLP podcasts is intended for general information only, and is not intended to be construed as legal advice regarding any specific case or situation. If you have any questions regarding the content of this podcast and you are currently represented by counsel, we recommend that you address your questions to your attorney. If not, we suggest you contact our offices.