Planning and Coordinating Discovery

by Miod and Company

Discovery is, for our purposes, the process used to identify and quantify the assets of a party in a divorce. This is necessary for obvious reasons: it would be impossible to accurately and adequately divide up assets if you weren’t aware of them or of their worth. 

Discovery can vary in complexity depending on the specific case taking place, but in almost every case, it follows a standard four-step process. First, the assets must be identified. After that, the assets must be assigned values reflective of their worth. Next, they must be placed into one of three estates: the wife’s, the husband’s, or the community/joint estate. 

The final step is to determine the distribution of all assets. This part of the process is the most complex. Things that must be taken into consideration include the nature of the asset and the laws in the jurisdiction in which the divorce is taking place. 

If the discovery process is left incomplete, it can be difficult or impossible to create a fair settlement. Thus, this process is of great importance. Various items are utilized to complete and verify the discovery process.

Documentation

To find information about assets, it is necessary to have documentation of their existence. Documents such as tax returns are invaluable to this end. These provide a record of the nature and value of assets such as investments, business interests, and bank and brokerage accounts, as these types of assets are reflected on the tax return.

Other types of useful documentation include:

  • Net worth/financial statements
  • Retirement plans and plan descriptions
  • Life insurance policies and account statements
  • Employment agreements, shareholder or partnership agreements, and/or buy/sell agreements

In order to procure these documents, it can be necessary depending on jurisdiction to create a disclosure form, filed under oath. This is not the case everywhere, so understanding local laws is as important as always. 

Liabilities

Among the necessary things to identify are any potential liabilities. These can be understood through a process of scouring the aforementioned documents, as well as other documents such as mortgage and loan applications, credit card statements, and personal guarantees.

Income Vs. Expenses

The income and expenses of the divorcing parties are other aspects that need to be investigated. Income can be verified using documents such as tax returns. The approximate budget of the couple’s expenses (which include things like food, housing, medical payments, etc.) can be investigated via documents like bank account statements and credit card bills.

A thorough understanding of the couples’ income and expenses is necessary to determine things like spousal and child support. 

Forms of Discovery

There are a few different ways information for discovery can be obtained. These are:

  1. Interrogatories- written questions answered under oath by the litigant.
  2. Demands for production of documents- demands that the litigant show copies of documents that reflect notable financial realities.
  3. Subpoenas- if the documents demanded are under control of a third party, then a subpoena may be filed in order to compel the production of that information.
  4. Depositions- oral testimonies made under oath in the event that further clarification of finances is needed

The Role of the Financial Expert

A financial expert should be called into the game as soon as possible in order to aid in the discovery process. Their role includes drafting discovery requests. Typical sorts of experts who come into play include Certified Public Accountants, financial planners and analysts, and economists. 

Whether the divorce is simple or complex, a financial expert should be involved. They provide a variety of services in these cases, including but not limited to:

  • Evaluating assets
  • Determining income
  • Analyzing the parties’ lifestyle
  • Structuring settlements for ideal tax results
  • Counteranalyzing the opposing expert

The expert can serve multiple legal roles, depending on the needs of the case. These include the role of the consultant, who is protected by privilege, neutral expert, who is stipulated by both attorneys, or mediator.

The knowledge and information held by the consultant is protected by privilege, whereas that of an expert witness is not. Knowing your role in your specific case is vital.

Adverse Experts

Oftentimes, you will find the financial reports produced by the opposition in a case to be unacceptable. When this occurs it is sometimes necessary to pull in another opinion and set of eyes, in the form of another financial expert. Clients are sometimes wary of putting money into the hiring of a secondary expert, but doing so in a timely manner can be critical.

Takeaways

All aspects of the discovery process require planning and careful thought. A thorough understanding of the process, your client’s needs, and the requirements present in your jurisdiction, is crucial to creating the most favorable outcome possible for your client.

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