Financial Experts In An Illinois Divorce

The cartoon character Scrooge McDuck would keep all his wealth in one place: a giant vault. Scrooge would then swim in the money he had amassed in order to count it. In real life, wealth is never kept in one place. Often, wealth is not even money. Wealth is usually interests in assets balanced by obligations in debts.

How is the humble soon-to-be divorcee supposed to understand their and their spouse’s assets and debts for the purposes of dividing those assets and debts in an Illinois divorce?

Wealthy people divorcing in Illinois do not need, personally, to accurately account for every last penny. Instead, the wealthy typically hire financial experts to determine and explain exactly what are the marriage’s assets and debts.

As my rich aunt used to say, “There are people for that.”

Do You Need A Financial Expert In An Illinois Divorce?

Before an expert is appointed to determine a couple’s financial situation, each party to an Illinois divorce is supposed to at least estimate their debts and assets almost immediately after filing the Petition for Dissolution of Marriage.

“In all pre-judgment proceedings in which a party is seeking division of the marital estate, to establish, modify or enforce an order for maintenance, child support, or educational expenses pursuant to Section 513 of the Illinois Marriage and Dissolution of Marriage Act, support for a non-minor child with a disability pursuant to Section 513.5 of the Illinois Marriage and Dissolution of Marriage Act, disposition of property in a civil union, retroactive child support in parentage matters, or  attorney’s fees and costs against the other party, each party shall serve a completed  affidavit of incomes, expenses, debts, and assets  (“Financial Affidavit”) upon the other party on forms approved by the court. The service of the “Financial Affidavit” shall be as follows:

(i)The Petitioner shall serve the completed “Financial Affidavit” not later than thirty (30) days after service of the initial pleading and the Respondent shall serve the completed “Financial Affidavit” not later than thirty (30) days after the filing of the Responding party’s appearance” Cook County Court Rule 13.3.1(a)

“One form of financial affidavit, as determined by the Supreme Court, shall be used statewide” 750 ILCS 5/501(a)(1) 

The Illinois Supreme Court’s website then directs us to this financial affidavit form for divorce & family law cases.

The information on the financial affidavit is either in your head or in the supporting documents that are to be attached to the financial affidavit.

“The financial affidavit shall be supported by documentary evidence including, but not limited to, income tax returns, pay stubs, and banking statements.” 750 ILCS 5/501(a)(1)

If you do not know the answer to a space on the financial affidavit and cannot verify the answer via the supporting documents just write “unknown.” Your Illinois divorce judge does not expect you to be an accountant.

However, you must be honest regarding what you actually know on that financial affidavit. “If a party intentionally or recklessly files an inaccurate or misleading financial affidavit, the court shall impose significant penalties and sanctions including, but not limited to, costs and attorney’s fees resulting from the improper representation.” 750 ILCS 5/501

If you have a lot of unknowns on your financial affidavit…or your spouse has a lot of unknowns, you will probably need a financial expert.

Court Appointed Financial Experts In An Illinois Divorce

No one practices divorce law in order to fulfill their dream of comparative accounting. Two divorce lawyers and a judge are probably the worst possible team of people to determine what someone actually owns and what those assets are worth.

So, courts are quick to appoint a financial expert if there is any level of complexity or obfuscation in a divorcing couple’s finances.

“The court may seek the advice of financial experts or other professionals, whether or not employed by the court on a regular basis. The advice given shall be in writing and made available by the court to counsel. Counsel may examine as a witness any professional consulted by the court designated as the court’s witness. Professional personnel consulted by the court are subject to subpoena for the purposes of discovery, trial, or both.” 750 ILCS 5/503(l)

The only reason a court would NOT appoint a financial expert is if the parties cannot afford that financial expert’s services. If cannot afford a financial expert…your assets probably are not worth enough to fight over anyways.

If the parties CAN afford a financial expert, the court will order one or both of the parties to pay the expert.

“The court shall allocate the costs and fees of those professional personnel between the parties based upon the financial ability of each party and any other criteria the court considers appropriate, and the allocation is subject to reallocation under subsection (a) of Section 508. Upon the request of any party or upon the court’s own motion, the court may conduct a hearing as to the reasonableness of those fees and costs.” 750 ILCS 5/503(l)

Illinois divorce judges will often appoint experts with whom they are familiar. I regularly appoint Jennifer Fletchall as a financial expert in my Illinois divorce cases. Jennifer Fletchall is a Certified Public Accountant and an experienced family law attorney all while being an honest, thorough professional.

The financial expert will then tabulate, calculate and, possibly, appraise the parties’ assets and debts in a report that the parties, divorce attorneys and the judge can make sense of. Accounting for court purposes is called “forensic accounting.” Forensic accounting is “the application of accountancy principles to monetary issues that arise in courts, as in the apportionment of funds and of financial responsibilities upon a divorce or dissolution of partnership.” Black’s Law Dictionary (11th ed. 2019)

The financial expert’s accounting is then distributed to all parties and the divorce judge. “The advice given shall be in writing and made available by the court to counsel” 750 ILCS 5/503(l)

While the financial expert organizes the parties’ assets and debts so the attorneys and judge can make proper sense of the marital estate and its subsequent division, financial experts are usually retained to value the parties’ assets that don’t have explicit, ascertainable values.

Valuing assets can only be done with evidence.

“[T]he court is not required to place a specific value on each item of property; rather, only competent evidence of the value supported by evidence of that valuation is required for a property division. Further, it is the obligation of the parties in a dissolution proceeding to present the court with sufficient evidence of the value of the property.” In re Marriage of Courtright, 507 NE 2d 891 – Ill: Appellate Court, 3rd Dist. 1987

The financial expert is the person who provides that evidence of value.

Every type of asset usually has an established method of determining that particular asset’s value. Whether referring to a Kelly blue book or calculating a capitalization rate, a financial expert must explain what the value of an asset is and how they arrived at that value.

Furthermore, your divorce attorney must be able to understand those valuations their underlying calculations in order to buttress your position as to the values and dismantle your spouse’s position as to the values.

Does your divorce lawyer own Shannon Pratt’s “Valuing a Business” or the McKinsey guide “Valuation: Measuring and Managing the Value Of Companies”? If your divorce attorney does NOT have those on his or her bookshelf…I hope they do not charge very much.

In addition to determining what assets exist, a financial expert can also determine what happened to assets that are no longer in the possession or control of the parties. This forensic accounting investigation helps account for the dissipation of marital assets.

What If I Do Not Agree With The Financial Expert?

If the results of the financial expert’s report are not to your liking, you can find out how the financial expert arrived at those unwanted results.

“Professional personnel consulted by the court are subject to subpoena for the purposes of discovery, trial, or both.” 750 ILCS 5/503(l)

You can then hire your own professional financial expert to review those numbers and the court appointed financial expert’s findings.

Your financial expert and their expert opinions can then be presented as evidence to counter the court appointed financial expert’s findings.

“A witness may thus testify as an expert if he or she has knowledge and experience beyond the average citizen that would assist the [finder of fact] in evaluating the evidence. There is no particular way in which that expertise had to be acquired; it could have come through formal study, training, or research, or through practical experience, in the relevant specialized field.” People v. Loggins, 130 NE 3d 432 – Ill: Appellate Court, 1st Dist., 3rd Div. 2019 (Citations Omitted)

Your financial expert is your “controlled witness” and it must be disclosed to the other side well in advance of trial.

“Upon written interrogatory, a party must furnish the identities and addresses of witnesses who will testify at trial and must provide the following information:

Controlled Expert Witnesses. A “controlled expert witness” is a person giving expert testimony who is the party, the party’s current employee, or the party’s retained expert. For each controlled expert witness, the party must identify: (i) the subject matter on which the witness will testify; (ii) the conclusions and opinions of the witness and the bases therefor; (iii) the qualifications of the witness; and (iv) any reports prepared by the witness about the case.” Ill. Sup. Ct. R. 213

It is possible that both parties to an Illinois divorce would disagree with the court appointed financial expert and want their own respective expert opinions.

Both the court appointed financial advisor and the controlled expert(s) can expect to be deposed by the other side to pick apart their opinions.

If the case goes to trial, the controlled expert’s opinion and report is presumably automatically admitted into evidence.

“The [court appointed] advice given shall be in writing and made available by the court to counsel”

Meanwhile, the controlled experts will present their version of the couple’s finances to the judge…and be subject to the rules of evidence. An expert’s financial reports are demonstrative evidence which must be submitted properly.

The court appointed financial expert was chosen by the judge and doesn’t have to go through evidentiary hoops to submit their opinion. Meanwhile, the controlled expert is a stranger to the court who must establish their credentials and then properly authenticate their data and the opinion that is based on that data. Therefore, a controlled expert must be more qualified, more engaging and more credible than the court’s appointed expert if you expect the court to adopt your controlled expert’s opinion.

If you are hiring a financial expert, you need the best financial expert. To get the best financial expert your divorce attorney needs to know how to vet your proposed experts…and discredit your spouse’s experts. To talk with a divorce attorney who has experience doing both, schedule a free consultation with Russell Knight.

source https://rdklegal.com/financial-experts-in-an-illinois-divorce/