As the strictest measures against the COVID-19 pandemic subside, clients may be eager to cut ties with a spouse — the sooner, the better, especially for more complicated marital estates. How can you expedite the divorce process?
Bracing for a Possible Surge
Many people expect an uptick in divorce filings in the near future. One reason is pent-up demand for divorces: The pandemic forced many couples who were contemplating a divorce to postpone their filings for practical reasons. These may include restrictions on court proceedings, child-care issues, health concerns, layoffs and financial uncertainty.
Another reason is that lockdowns may have resulted in too much “together time.” Without the distractions of normal day-to-day activities, some couples realized that they don’t share the same fundamental beliefs on parenting, finances and health-related matters. Living 24/7 in close quarters also has made it harder for spouses to hide mental health issues, extramarital affairs, and gambling or drug addictions.
Financial difficulties were especially pronounced for small businesses that were adversely affected by the pandemic. Examples may include restaurants, gyms, salons, recreational facilities and dry cleaners. Some were forced to close due to loss of a key person from COVID-19 or loss of revenue caused by government-mandated closures and operating restrictions. The stress may have driven many of these business owners to divorce.
Timing the Filing
A fast resolution may be desirable for many reasons. Some couples feel they’ve been stuck in a holding pattern and want a quick, fresh start. For others, timing can impact the effective valuation date of marital assets.
For example, a business owner who’s filed for divorce may not want to share with her spouse any post-pandemic sweat equity that she’s investing in rebuilding her business. Alternatively, someone who’s married to the owner of a struggling business might want a piece of the current value of her spouse’s business interest — before additional market changes further erode the business’s value.
Timing can also affect awards of spousal and child support payments. A recipient of these payments might want a quick resolution if his or her spouse works for a struggling company that’s contemplating layoffs, which could result in lower earnings. Conversely, a payor of support payments might want a quick resolution to minimize the monthly payout if he or she expects to earn more in the future.
Working with an outside financial expert early on can make the settlement process more efficient. During discovery, the expert can provide a comprehensive list of documents and procedures needed to complete the job. This can improve the timeliness and scope of discovery.
If discovery is incomplete, the opposing spouse may be concealing assets or income. In this situation, the scope of an assignment may need to be expanded to investigate financial misstatement and asset misappropriation. It’s better to know about missing or inaccurate financial evidence sooner rather than later.
Additionally, for marital estates that include a private business interest, early involvement of an expert provides adequate time to perform a comprehensive valuation and allocate goodwill, if applicable. A valuation takes time to complete, and courts may be critical of experts who perform rushed analyses.
Out-of-court settlements are generally preferred to court-imposed settlements. First, judges may differ in their interpretations of legal precedent. In addition, they might arbitrarily allocate marital assets to the parties, regardless of the spouses’ personal preferences or the tax consequences.
During settlement negotiations, financial experts can explain complex financial issues, provide summaries of personal income and marital asset values, and evaluate the tax implications of settlement options. They also can help diffuse emotions and focus discussions on valuation and tax matters. Specifically, an expert can pinpoint missing financial information and key valuation discrepancies.
Experts are Valuable Assets in Divorce
Financial experts can help settle complex estates. But they also recognize that settlement isn’t always feasible — and are ready to customize their procedures to handle unexpected developments throughout the divorce process.
TheKFORDgroup litigation team holds extensive knowledge and experience in expert witness engagements, forensic accounting, and business valuations. Our experts are trained and experienced in the litigation process. We can help you or your client from the beginning to the end of the divorce process. For more information, please call us at 210-340-8351.
Additional information included in this report was provided by PDI Global / Thomson Reuters © 2021