Accounting, auditing and tax expertise – as well as objectivity – are important qualities CPAs have traditionally used to assist divorcing parties. However, an innovative new option in Michigan – utilizing collaborative law – may create more opportunities for CPAs to provide advisory services as part of a team approach to “no-court” divorce settlements.

Traditional Divorce Consulting
In an October 2003 Journal of Accountancy article titled, “Starting Over,” Thomas Burrage pointed out several key areas in which CPAs historically have played significant roles in the area of divorce consulting.

• Analysis of financial data according to a range of statutes, regulations, rulings and case law. CPAs do NOT and cannot practice law. However they must have a general knowledge of local matrimonial statutes and case law in order to engage in divorce relations consulting.
• Organization of financial issues related to property settlements and support awards.
• Examination of a couple’s financial records to determine the value of their net assets, jointly and individually; whether assets are encumbered; who earns how much; how much income should be attributed to each spouse, particularly self-employed individuals.
• Addressing the tax consequences of various forms of support and property division.
• Discovery of assets that were not disclosed by one of the parties either intentionally or because of lack of knowledge. Executive benefit and compensation plans can present these kinds of issues in a matrimonial dispute.
• Assessment of value of certain financial assets like business interests, retirement plans and notes are frequently performed by CPAs who are certified by the AICPA as Accredited in Business Valuation.

What is Collaborative Law?
Collaborative law is an innovative new approach of handling family dispute resolution. It brings together an inter-disciplinary team of the best legal, financial and mental health professionals to produce a “no-court” settlement agreement that is comprehensive, cost effective and generates the least amount of emotional upheaval to all family members.

Collaborative law originated in the 1990s. But, Michigan just recently became the 19th state to establish a collaborative divorce law institute – appropriately named the Collaborative Law Institute of Michigan (CLIM).

This project was spearheaded by Ann Arbor family law attorney Margaret Nichols, with Nichols, Sacks, Slank, Sendelbach & Buiteweg, P.C. Last spring, about 60 participants from all over the state representing multiple disciplines – attorneys, child specialists, divorce coaches, financial consultants and mediators – gathered for extensive training, and were certified as collaborative law practitioners. Regional groups have been established in Oakland, Wayne, Ingham, Clinton and Washtenaw Counties.

How Is it Different from Mediation?
In a Michigan Lawyers Weekly article, Nichols explained, “At the first meeting, the parties and their attorneys sign a document in which they agree to certain principals. The primary goal of which is to work toward a resolution that is good for both parties. The parties also understand that if the matter must be litigated, both attorneys and any retained professionals must step aside.”

Up front in this original agreement, the parties waive their right to litigate with the original participating parties. So, according to Nichols, “The monetary investment that will be vested should the process derail is a strong incentive to ensure the participants will work hard toward resolution.”

Financial Professionals in the Collaborative Process
All collaborative teams do not look alike, and CPAs can play various roles, including:

• Financial coach to only one party if that party needs one-on-one financial education;
• Financial specialist, a neutral for both parties; or
• Mediator or co-mediator with another mediator.

The collaborative financial coach is a licensed accounting professional who helps one member of the couple and the attorney to:

1. Understand the extent and value of the marital estate.
2. Request financial documents.
3. Understand the financial documents provided by the other spouse.
4. Comply with requests to produce financial documents.
5. Identify and prioritize financial needs.
6. Create a realistic budget.
7. Work on short and long range financial planning.
8. Create and evaluate options for settlement.
9. Understand tax consequences of settlement options.
10. Participate as financially informed team members.

The collaborative financial specialist is a neutral licensed financial member of the team who may:

1. Assess the level of financial understanding of each spouse, and educate each accordingly.
2. Identify financial issues specific to the case.
3. Help each member of the couple manage financial expectations.
4. Work as a neutral financial analyst, creating income and expense projections for the near and longer term.
5. Interpret appraisals.
6. Assist with the discovery process by gathering documentation of income, expenses, assets, and debts.
7. As a neutral, provide some or all of the services listed above for the Financial Coach.

The collaborative financial mediator or co-mediator is a neutral facilitator, who:

1. Helps the parties identify the financial issues they will work on during team meetings.
2. Facilitates communication about these issues during team meetings.
3. Helps the parties and attorneys decide which other professionals to add to the collaborative team.
4. Serves as a case manager, often essential to keeping the process moving forward towards resolution.
5. Drafts relevant financial parts of the settlement agreement.

The role of the financial professional depends on the specifics of each case. The addition of particular interdisciplinary professionals also is a function of the specific need presented by the couple and their family or finances.

Special Considerations for CPAs Engaged as Neutrals
With these roles in mind, CPAs who wish to become trained in collaborative practice will want to pay special attention to the particular ethical considerations for CPAs that do not apply to other professional team members.

In all types of divorce advisory engagements, a CPA should get an engagement letter as evidence of the client’s understanding of what services are to be performed, what services are not to be performed, for whom the CPA is working, and the financial payment arrangement.

When CPAs are engaged as neutrals, it is very important to point out in the engagement letter all potential conflicts of interest, if known, particularly when the CPA has a prior working relationship with the couple. Most teams will avoid involving anyone as a neutral who has a prior history with the couple.

If a CPA is asked to serve in such a capacity, however, it’s important to understand how advice that is good for one party may be detrimental to the other party. Potential conflict of interest situations could occur. An example of this would be if a CPA has had a prior business relationship with one or both of the spouses, or has been an accountant for a business that is involved in the asset structure of the marriage, and then is asked to be a neutral while performing a business valuation, recommending retirement plan options, or arriving at an income number that represents a party’s ability to pay alimony and child support.

The engagement letter should state that the parties have been informed as to any potential conflicts of interest, and the parties nonetheless wish to engage the CPA to perform these consulting services related to the financial and accounting issues including, but not limited to, for example, the value of the widget business. In addition, the parties release the CPA from any claim or liability for damages resulting from any perceived or actual conflict of interest.

About the Author
Kathleen M. Wright, CPA, is a member of the MACPA, the AICPA and the Collaborative Law Institute of Michigan. For more information on how to be a Collaborative Divorce Financial Consultant, visit www.collaborativelawmichigan.com.

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