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A Financial Neutral Adds Tremendous Value in Divorce Matters
By: Beth F. McCormack, Partner
BeermannLLP
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| The United States has witnessed a vast rise in business creation and ownership over the past several decades. This influx can be attributed to expansion of entrepreneurial business, developments within the areas of corporate and tax law, and technological advancements. These have all made business ownership more attainable for the average person.
As a result, business ownership and matrimonial law worlds frequently collide. Those involved within the practice are confronted with an increasing number of disputes arising out of the complexities associated with business ownership and its relationship to the marital estate.
The marital estate is often intertwined with, and dependent upon, the family business. Accordingly, in order to obtain an equitable outcome for all parties involved, knowledge of the business value is imperative.
A business evaluator is a crucial professional in divorce matters involving a business. Regardless of whether divorce is sought through collaborative efforts, or litigation within the court system, a neutral third party business evaluator is essential.
When to Engage a Business Evaluator?
The “earlier the better” says Christiana Zouzias, a financial analyst and business evaluator with extensive experience in collaborative law and matrimonial litigation. She explained that business valuation is not an overnight process and it can take a great deal of time. Additionally, a business evaluator can determine whether the business at issue even necessitates valuation.
Depending on a number of factors including company size, ownership structure, and operation type, the business evaluator may advise against expending costs for a valuation, as the costs would far outweigh the benefits to the parties. Thus, when the parties know that a business makes up some part of the marital estate, it is advantageous to involve a business evaluator from the beginning of the divorce process. Moreover, engaging a business evaluator can establish cooperation and transparency at the beginning of the divorce.
Neutrality in Business Valuation
One of the challenges in a divorce is the issue of neutrality. A business evaluator can add neutrality to the process leading to a fair and equitable result for both parties. According to Zouzias, neutrality is critical for a successful valuation.
Attaining neutrality is based on a number of key factors. One of those many factors, if attainable, is an agreement by the parties on the use of a single business evaluator. If the parties can agree on one evaluator, it establishes an initial foundation of cooperation, as both parties share interest in the evaluator’s opinion, avoiding a battle of the experts.
Additionally, Zouzias explained that experience is key, not simply experience in financial and business valuations, but experience within the family law field. Understanding client expectations and how to communicate with the parties comes through experience in litigated, mediated or collaborative divorces.
Parties often attempt to manage the business evaluator, but one armed with experience in matrimonial law and divorce, can stay the course of neutrality delivering a comprehensive analysis of the business for the benefit of both parties.
Involvement With Attorneys
In order to ensure transparency and fair disclosures from both sides, a business evaluator should be extensively involved with both party’s attorneys. Open communication with the attorneys helps expedite the valuation process, the free-flow of information, and limits any misrepresentations.
The successful relationship between the business evaluator and the attorneys aids client communication. The evaluator can advise the client with his or her attorney. A business evaluator often looks to the attorneys to aid in the effective explanation of the business’s strengths and weaknesses as well as the current economic trends.
Because the valuation process can be extremely costly, frequent communication between the parties’ attorneys and the business evaluator are critical in determining the extensiveness of the evaluation and the payment of fees associated with it. The business evaluator’s involvement with the attorneys provides for the most comprehensive and thorough valuation for the parties.
In a collaborative divorce, the business evaluator’s role is especially critical. The evaluator is key to determining not only the marital estate, but significant other financial determinations, including the proper income, distribution of maintenance, and even child support. At times, the evaluator acts as a mediator between all parties involved, including the attorneys, in order to come to the most equitable resolution for the entire family.
How long does the process take and what can be expected?
As in all things, the answer is “it depends.” A valuation process can take anywhere from several weeks to “a couple of months or more,” said Zouzias. The amount of information coming from a valuation can be extremely important to several aspects of the divorce process. Therefore, if the parties agree at the outset to engage a single evaluator, the process will flow with greater ease and will help to keep the divorce process moving.
According to Zouzias, engaging a single business evaluator also limits the need for all of the “bells and whistles.” Using a single evaluator typically means that the valuation need not incorporate a full, extensive appraisal ending in a voluminous final report. Rather, it allows the parties to agree on a valuation option that is less costly while still producing enough information to make important financial decisions.
Regardless of whether a single evaluator is chosen, or whether each party hires his or her own, the findings at the end of the valuation process give a solid foundation for the parties, allowing the parties to come to a conclusive and equitable agreement.
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| For more information, please contact any of the professionals at DiMeo Schneider & Associates, L.L.C.
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About the Author Beth F. McCormack grew up in Gibson City, Illinois, and now resides in Northfield, Illinois with her husband, Marc, and beautiful daughter, Lucy.
Before obtaining her college degree, Beth worked as a legal secretary. While working for Judge J.G. Townsend in Champaign County, Beth witnessed the devastating impact domestic violence had on families. It was then that Beth decided to become an attorney.
Beth received her Juris Doctorate from The John Marshall Law School in 1992. It was while she was in law school that Beth recognized her passion and desire to work in family law. Beth was admitted to the Illinois Bar in 1992 and has been sharing her knowledge of the law with all those around her since.
Beth’s maternal instincts and vast family law experience enable her to handle and settle complex and sophisticated issues many families face. She is an unwavering advocate for the best interests of children, and Beth easily navigates families through the highly emotional nature of the divorce process.
Beth’s commitment and dedication to her own family and career have helped her achieve a successful work-life-balance. Beth is one of the most influential attorneys in Chicago and a mentor to many professionals in the various areas she serves.
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| While this article addresses generally held investment philosophies of DiMeo Schneider & Associates, L.L.C., it does not represent a specific investment recommendation for any individual client or prospective client. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Information has been obtained from a variety of sources believed to be reliable but not independently verified. Past performance does not indicate future performance.
This report is intended for the exclusive use of clients or prospective clients of DiMeo Schneider & Associates, L.L.C. Content is privileged and confidential. Any dissemination or distribution is strictly prohibited.
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