Family Law Services Handbook

Donald A. Glenn, CPA, CFE, ABV, CFF, CVA, is a nationally known lecturer to judges, attorneys, CPAs and other groups on Forensic Accounting and has authored hundreds of articles in the forensic area and on family law. He has over 30 years of experience in family law and is the co-author of the AICPA publication A CPA's Guide to Forensic Accounting for Divorce Engagements, 2005, and has authored several CPA courses covering family law and marital fraud.  Glenn is a Partner with Glenn & Dawson LLP.  He has served on the National Board of Directors of the Institute of Management Accountants (IMA) and has participated as faculty expert in the U. of California Hastings Law School trial advocacy program. He has served on numerous AICPA litigation and family law committees and is frequently appointed as Court's expert in family law matters. Thomas Burrage, CPA, is Principal in Charge of Litigation and Valuation, Burrage & Johnson, CPAs, PLC. He performs expert witness in cases fraud malpractice, minority shareholder, economic damages and family law. He is co-author of Wiley's Divorce and Domestic Relations Litigation, and AICPA's CPA's Guide to Family Law Services, and a contributing editor to PPC divorce taxation publications.Donald J. DeGrazia, CPA, ABV, is senior shareholder in the firm, Gold Meltzer Plasky & Wise, specializing in federal and state taxation, multi-state taxation, and matrimonial taxation. He is also Chairman of Integra International, Inc. He provides various court and arbitration testimony, including matrimonial expert witness.William B. Stewart, CPA/ABV, CVA, CFE, is principal of William B. Stewart CPA firm, specializing in forensic accounting. His expertise includes business valuations, family law, mediation consulting, and business advisory services. He has been appointed by the courts as an auditor, expert and receiver in large commercial litigation, and family law cases. He is a frequent speaker to legal and accounting organizations.

• Preface xviiAcknowledgments xixPart One Family Law Litigation and Financial Experts 11 Introduction 31.1 Introduction 31.2 Development of Property Law 31.3 U.S. Property Systems 41.4 Role of Fault in Divorce 41.5 Support 41.6 Property Valuation 41.7 Property Division 41.8 Income Tax 51.9 Marital Fraud 51.10 Conclusion 52 Divorce Assignments and the Financial Expert 62.1 Initial Contact 62.2 Engagement Terms and Conditions 122.3 Case Management 142.4 List of Cases 182.5 Notes 213 Planning and Coordinating Discovery 223.1 Introduction 223.2 Forms of Discovery 243.3 Financial Experts 253.4 Expert Discovery 273.5 Evaluation of Adverse Expert 283.6 Conclusion 29Part Two Child and Spousal Support 314 Child and Spousal Support 334.1 Introduction 334.2 Child Support Factors 344.3 Child Support Guidelines 354.4 College and Other Extraneous Expenses 364.5 Uniform Interstate Family Support Act 374.6 Full Faith and Credit for Child Support Orders Act 384.7 Introduction to Spousal Support (Alimony) 384.8 Spousal Support Factors 384.9 Types of Alimony 414.10 Income Available for Support 424.11 Imputation of Income: Ability to Earn 454.12 Imputation of Income: Assets 474.13 Double Dipping 474.14 Conclusion 484.15 Notes 49Part Three Character of Property 515 Community Property or Equitable Distribution 535.1 Introduction 535.2 Definition of Property 545.3 Characterization of Property 555.4 Division of Community or Marital Property 575.5 Transmutation Agreements 585.6 Premarital Agreements 595.7 Tracing and Apportionment 615.8 Notes 626 Tracing Bank and Investment Accounts 646.1 Introduction: Circumstances and Objectives of Tracing 646.2 What Constitutes Separate Property and Community Property? 686.3 The Community Property Presumption and the Burden on Separate Property 696.4 Intent and Fiduciary Duty 706.5 Tracing Menu Choices in California 716.6 Putting on Tracing Evidence at Trial 757 Real Property 777.1 Real Property in Divorce 777.2 Personal Residence 787.3 Real Estate Investments 807.4 Apportionment of Separate Property Interests 827.5 Allocation of Income and Deductions during Pendente Lite Period 847.6 Notes 858 Retirement and Pension Plans in Divorce 868.1 Definitions 868.2 Defined Benefit Plans 888.3 Defined Contribution Plans 928.4 Hybrid Plans 968.5 Other Retirement Accounts: Individual Retirement Accounts 968.6 Annuities in Divorce 978.7 Keogh (or HR-10) Plans 1039 QDROs 1049.1 Retirement Plan Basics 1049.2 Common QDRO Issues and Problems 1089.3 Conclusion 1129.4 Notes 11210 Equity-Based Compensation: Stock Options 11310.1 Introduction 11310.2 Fundamental Issues that Need to Be Addressed 11410.3 What Are Stock Options? 11410.4 Option Valuation Overview 11510.5 A Black-Scholes Valuation Exercise 11610.6 Options as Marital Property 11810.7 Taxation of Options 12010.8 Distribution of Options 12110.9 Conclusion 12210.10 Resources 12310.11 Notes 12311 Separate Business Interests 12511.1 Introduction 12511.2 Investment of Community Funds 12611.3 Personal Efforts during Marriage 12611.4 Reasonable Compensation Method in California: VAN CAMP Apportionment of Community and Separate Property Interests 12911.5 Postseparation Change in Value 13011.6 Selection of Method: PEREIRA or VAN CAMP 13011.7 Equitable Apportionment 13111.8 Notes 132Part Four Business Valuations 13312 Professional Standards 13512.1 Introduction 13612.2 The Early Years 13712.3 Other Valuation Standards 13712.4 Application of Standards to Valuations for Family Law 13712.5 Details of the Consulting Standard 13812.6 AICPA General Professional Standards 13912.7 Statement of Standards for Valuation Services No. 1 14012.8 Developmental Standards 14512.9 Reporting Standards 14612.10 Reporting Exemption for Certain Controversy Proceedings 14812.11 Appendices and Interpretation 1-01 to SSVS 1 14812.12 Accreditation of Valuation Experts 14912.13 The Future 14912.14 Notes 15013 Premise and Standards of Value 15113.1 Premise of Value 15113.2 Standard of Value 15213.3 Notes 15614 Determining Enterprise Value 15814.1 Determining the Subject Company Equity Value 15814.2 Valuation Approaches and Methods 15814.3 Qualitative and Quantitative Analysis 16414.4 Normalizing the Benefit Stream 16614.5 Developing the Discount Rate Using the Buildup Method 16714.6 Developing the Discount Rate Using the Modified Capital Asset Pricing Model 17314.7 Difference between the Capitalization and Discount Rate 17314.8 Long-Term, Sustainable (Perpetual) Growth Rate 17314.9 Reconciling the Results 17414.10 Nonoperating Assets and Liabilities 17514.11 Notes 17615 Enterprise, Personal, Business, and Celebrity Goodwill 17815.1 Definitions of Enterprise and Personal Goodwill 17815.2 Difference between Goodwill and Other Types of Intangible Assets 17915.3 Why the Need to Differentiate 17915.4 Differing Standards of Value and Their Effect on the Goodwill Issue 18015.5 Qualitative Differences between Personal and Enterprise Goodwill 18515.6 Quantitative Analysis: Allocating between Personal and Enterprise Goodwill 18815.7 Celebrity Goodwill 19115.8 Conclusion 19215.9 Notes 19216 Owner Agreements’ Impact on Business Value 19616.1 Overview 19616.2 Legal Entities 19716.3 Customary Terms to Agreements 19816.4 Premises and Standards of Value 19916.5 Controlling and Noncontrolling Equity Interests 20016.6 Impact of Agreement Terms on Value and Examples 20016.7 Summary 20916.8 Notes 21017 Premiums and Discounts 21117.1 Introduction 21117.2 Entity-Level and Shareholder-Level Valuation Adjustments 21217.3 Control and Discount for Lack of Control or Minority Interest Discount 21417.4 Elements of Control 21517.5 Market Evidence for Control and Acquisition Premiums 21517.6 Marketability and Liquidity 21717.7 Discount for Lack of Marketability 22017.8 Conclusions 22517.9 Notes 225Part Five Trial or Settlement 22918 Dividing the Marital Estate 23118.1 Introduction 23118.2 Important Dates 23518.3 Marital Balance Sheet and Proposed Property Division Schedules 23618.4 Property Disposition Options: Settlement versus at Trial 24018.5 Other Specific Issues and Considerations 24418.6 Conclusion 24618.7 Notes 24719 Preparing for Trial 24819.1 Introduction 24819.2 Expert Depositions 24819.3 Pretrial Motions 25019.4 Voir Dire and Methodology 25219.5 Preparing for Expert Witness Testimony 25319.6 Conclusion 26119.7 Notes 261Part Six Alternative Dispute Resolution 26320 Court or Neutral Expert 26520.1 Introduction: Role of the Neutral, Joint, or Court Expert 26520.2 Considerations before the Expert Accepts the Engagement 26820.3 Considerations while Serving as the Court’s Expert 26820.4 Considerations When Delivering Findings 26920.5 Practical Tips 27020.6 Language and Content of Court Orders 27120.7 Conclusion 27220.8 List of Cases 27220.9 Sample 730 Order 27320.10 Notes 27721 Mediation and Dispute Resolution 27821.1 Introduction 27821.2 Forms of Dispute: Resolution and Mediation 27921.3 Fundamental Mediation Blocks 28021.4 Programs and Providers 28321.5 Preparation and Participation 28421.6 Conclusion 28721.7 Notes 28722 Collaborative Law 28822.1 Introduction 28822.2 The Collaborative Process: Isn’t This Just like Mediation? 28922.3 Collaborative Professionals: Building a Professional Team 29022.4 Financial Professional 29222.5 Collaborative Contract 29222.6 Disclosure in the Collaborative Process 29323 Private Judging 29423.1 Introduction 29423.2 What Is a Private Judge? 29423.3 What Factors Should Be Considered in the Decision to Go Private? 29523.4 What Does a Private Judge Offer? 29623.5 How the Private Process Is Different from the Public Courts 29723.6 Ethical Considerations 29723.7 Statutory Authority 29823.8 Preparation and Participation 29823.9 Conclusion 30723.10 Notes 307Part Seven Income Tax 30924 Income Tax: General Rules 31124.1 Introduction 31124.2 Child Support 31124.3 Filing Status 31224.4 Dependency Exemption 31324.5 Miscellaneous Issues 31524.6 Notes 31925 Tax Consequences of Property Division: IRC Section 1041 32025.1 Introduction 32025.2 Section 1041 of the Internal Revenue Code 32125.3 Transfers of Property between Spouses or Former Spouses Incident to a Divorce 32125.4 Tax Basis of Assets Transferred under Section 1041 32325.5 Conflicts with Section 1041 32425.6 Transfers of Stock Options and Deferred Compensation in Divorce 32525.7 Stock Redemptions in Divorce 32725.8 Interest Paid and Received on Deferred Equitable or Community Distribution Payments 32925.9 Preventing Unintended Outcomes 33125.10 Notes 33126 Tax Issues of Child and Spousal Support 33226.1 Support: General Discussion 33226.2 Definition of Alimony 33426.3 Definition of Child Support 33526.4 Key State and U.S. Tax Court Cases Addressing Unallocated Alimony and Child Support 33626.5 Alimony Recapture 33726.6 Nunc Pro Tunc 33926.7 Payments to Third Parties 34026.8 Temporary Support Issues 34026.9 Conflict between Family and Tax Law 34126.10 Support Arrearages 34126.11 What Agreements Must Say to Qualify as Alimony 34126.12 Nontaxable and Nonincludable Alimony and Strategies 34226.13 Payments after Death 34226.14 Alimony and Expense Issues of a Jointly Owned Home 34226.15 Child Contingency Issues and Traps 34326.16 Substitute Payments 34726.17 Reviewing Divorce Agreements 34726.18 Internal Revenue Ruling Publications 34726.19 Notes 350Part Eight Marital Investigations and Fraud 35127 Marital Fraud 35327.1 What’s Love Got to Do with It? 35327.2 Value in Fraud 35427.3 Data Gathering 35527.4 Business Entity And Marital Fraud 35827.5 Common Frauds and How to Identify Them 36227.6 Divorce Planning Strategies to Affect Business Values and Income 36627.7 Conclusion 36627.8 Bibliography 36727.9 List of Cases 36727.10 Sample Document Request 36727.11 Notes 36928 Searching Public Information 37028.1 Privacy Laws and Asset Searches: Introduction 37028.2 Asset Searches 37128.3 Hidden Assets 37128.4 Databases 37328.5 Search Engines, Meta-Search Engines, and Directories 37428.6 Alternatives in Searching 37528.7 Privacy Laws 37728.8 Conclusion 38128.9 Notes 38229 Bankruptcy and Insolvency in Divorce 38329.1 Introduction 38329.2 Overview of Chapter 7 Bankruptcy 38429.3 Overview of Chapter 13 Bankruptcy 38629.4 Protecting Domestic Support Obligations in Divorce 38829.5 Protecting Property Settlements in Divorce 38929.6 Automatic Stay and Divorce Exceptions 39029.7 Priority of Obligations 39129.8 Effect of Bankruptcy Filing on Divorce Decree 39129.9 Certain Obligations 39229.10 Dismissal 39329.11 Revocation of Discharge 39429.12 List of Cases 39429.13 Notes 394Glossary 399About the Editors 409About the Contributors 413Index 423