Why do we have to hire 2 experts? Do we have to pay for both?

I work with business owners and entrepreneurs in every stage of the divorce process, whether in mediation, collaborative divorce or litigation. There are many questions and myths about what happens in a divorce when you own a business.

Here is a top valuation issue every business owner should know before you file for divorce.

One question people will ask is

Why do we have to hire two experts? Do I have to pay for both?

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Well, most of the time both people will hire an attorney and an expert to testify to the value of the business and potentially develop alimony and child support scenarios for the court. Unfortunately, many times this results in one expert value in the business really high and another expert value in the business really low. This is because there are times when the judge, we'll see 2 experts who have extensive backgrounds and who appear to know what they're doing or maybe it's just a really complicated business, and the judge believes that both experts have reasonable values.

The problem is those values are millions of dollars apart and so instead of going just with one expert the court could average the two values or split it down the middle. So, this means that if one expert said that the business is worth a million dollars and the other experts said that the business is worth nothing then the court could just say it's worth 500,000. As much as this doesn't seem reasonable to the business owner this is a possibility of what could happen at trial.

In an ideal world each attorney is hiring an expert so that they understand what the value of the company is and what are some of the risks in going to court. So are there some risks that the business could be separate and therefore not a divisible asset in court period are there risks that the business could be worth nothing and there would be nothing to split in court. Or are there any risks that the attorney cannot identify without using a valuation expert to go through the historical financials and help them to become smarter about the current situation.

Now if the situation is such that you have one primary business owner who makes the money for the marriage and one of the spouses stay home or are not the primary wage earner then you have a situation where both experts are going to be paid out of marital money. So, in some cases yes if you are the main wage earner you could be paying for both experts. There are times when main wage earning spouse and their attorney we'll go in and ask the court for the fees for the other expert comma and they are requesting that payment come from the business owner or the person who is making the most money in the situation or in the divorce. In some other situations each person is going to be responsible for their attorney’s fees and their expert fees, but if you consider that those fees are going to be paid when all of the assets or property and debts are split between the two parties then those expenses are really going to come out of marital money as well.

So are there ways that you can hire one expert to determine the value and save some time effort and money, yes of course there is, but you both have to agree to hire one person. Most of the time this will happen when both attorneys not the same expert and believe that this expert is reasonable and impartial. Typically, this valuation expert will work for both parties and be able to work through the valuation and present the numbers to both the couple and the attorneys at the same time. There is a process and a strategy around being the one valuation expert hired by both people. not all experts are capable and effective at this role. There could be times where each side offers up its Top 2 or 3 experts and hopefully there is one expert that is on both lists and therefore can be utilized by both parties. 

So, I am considering filing for divorce, but want to be prepared - What should I do next?

Give us a call! No really, you should reach out to someone who specializes in valuations for the purpose of divorce. There may be many valuation companies near you, but do they understand the divorce court system in your state? That would be a good first question to ask. Then see how many times they have testified. Are they trained as a mediator? Do they understand how to negotiate settlements with other experts?

If you have any additional questions or would like to talk about your specific situation, please give us a call or text us at 314 541 8163 or check out our website at ValuationMediation.com.

Click here for our next video in our series for business owners + divorce.