Many times we read about the use of forensic accountants in Family Law proceedings, to either establish the marital standard of living, or income available for support or to value the community interest in a business. However, that largely looks into the past for analysis; as counsel, I believe we need to let clients know that we need to look at their financial future, as well.
Many times clients are determined to hang onto the former family residence at all costs, through the dissolution proceeding. However, on many occasions, I have observed, to my sorrow, that these clients then often lost or were forced to sell the former family residence, as their post-judgment income wouldn’t support payments on the house for mortgage, taxes, interest, insurance, maintenance… and so on.
As a result, at Hartley Maxwell & Castellano we have developed relationships with financial professionals who can assist our clients with planning their post-judgment future, in addition to analyzing the pre-separation past.
Three distinctly different groups of family law related financial professionals exist, and each has his/her own area of expertise. These financial professionals are often (and incorrectly) used interchangeably:
- Forensic Accountants
- Divorce Financial Planners
- Forensic Financial Planners
Forensic Accounting is a more backward-looking process that focuses on finding, characterizing and valuing assets and income. The education and experience of the forensic accountant are generally more focused on a more limited set of divorce-related issues such as business valuation, fraud or the discovery of hidden assets. These professionals are also skilled in determining income available for support in child support cases independent of divorce, and in reaching a determination as to the marital standard of living.
Divorce Financial Planning, on the other hand, is a forward-looking process that focuses on lifestyle issues relevant to divorce or separation, issues such as the respective post-separation needs and paying abilities of the parties or the financial workability of potential outcomes. Divorce financial planner is a generalist with a broad background in personal financial planning issues like investments, insurance, retirement planning, and estate planning.
Finally, a Forensic Financial Planner testifies in court on behalf of divorcing clients on numerous financial issues related to imputed interest calculation on assets available for support, retirement plan analysis in divorce, financial planning, life insurance ownership issues in corporate and trustee/trustor settings, and standard of care issues in the investment and insurance communities.
As discussed above, you should know what your future might look like before deciding to hang onto the house that used to hold your entire family, particularly if some of those children are grown. Above all, you should have a serious discussion with your attorney, or a Divorce Financial Planner, about whether it’s even wise to hang onto non-income-producing assets when you could receive an income-producing asset.