On May 8-10, 2019, Chris Mercer, Scott Womack, and I attended the 2019 AAML/BVR National Divorce Conference in Las Vegas. This was the first biannual National Divorce Conference on cutting edge tax, valuation, and financial issues co-sponsored by the American Academy of Matrimonial Lawyers and Business Valuation Resources, LLC.
In attendance were family law attorneys, general practice attorneys, CPAs, business valuators, and other financial professionals. Total attendance was approximately 300 individuals, split about 50/50 between attorneys and financial professionals. Sessions covered topics including updates on standards of value, cryptocurrencies and their impact on divorce, tax law changes and their impact on family law, and how to best present your case to the courtroom, among others.
We have chosen four sessions that we thought would be of interest to this newsletter’s audience.
In “Blockchain/Crypto: Dividing Digital Assets,” Ed Kainen and Richard West provided a brief history of money– from the development of various forms of currencies and eventually to Bitcoin and other cryptocurrencies. In addition to providing a comprehensive glossary of essential terminology, the speakers also covered how Bitcoin and cryptocurrencies are transacted and explained the mechanics of Bitcoin technology upon which cryptocurrencies rely. A history of Bitcoin, as well as the benefits, determinants and consequences associated with the use of these cryptocurrencies was addressed. The session also covered how all of the foregoing impacts divorce and family law litigation, both issues of valuation and essentials of discovery, as well as the potential for malpractice pitfalls and how to avoid them.
Z. Christopher Mercer, FASA, CFA, ABAR, Founder and CEO of Mercer Capital
In “How to Present Complex Finance to Judges: K.I.S.S.,” Chris Mercer addressed the question of how to K.I.S.S. (keep it simple, stupid) in a litigation setting, as the K.I.S.S. principle is one of the key ideas of effective communication. Mr. Mercer drew on over 30 years of experience in presenting complex valuation and damages issues to judges and juries while sharing the techniques and templates necessary to communicate one’s position and the opponent’s position in such a way that judges can understand key information and why it is important.
James R. Hitchner, CPA, ABV, CFF, ASA, Managing Director of Financial Valuation Advisors
In this session, Jim Hitcher posed the question: Have you ever read a business valuation report where you knew the valuation was rigged to obtain a higher or lower value? During his session, he provided tricks of the trade to identify how some valuation analysts can manipulate the process in order to please their client and/or win at all costs. Mr. Hitchner also provided tips on how to attack biases including three areas with the most frequent biases such as multiples, growth factors, and the specific company risk premium/risk factor.
In this session, Peter Gladstone and Robert Stone provided background on equity awards and options as the increase of startups precipitated by the tech boom of the 1990s has led to increasing popularity of stock options, restricted stock units (“RSUs”), and similar types of equity-based compensation. These forms of executive compensation have become common in both privately held and publically traded companies.
Designed to both reward and retain talented employees, these benefits can be difficult to understand and value, particularly at a random moment that, while relevant to one’s divorce, might seem arbitrary in the context of a business. Just as the value of closely held businesses presents challenging issues over which business valuation experts often disagree, equity-based compensation plans and their values (or future income stream) represent ground for a divergence of opinions among forensic accountants supporting counsel on behalf of their divorce clients.
During the session, the speakers examined the various characteristics of stock options, RSUs, both vested and unvested; their tax implications; and the challenges typically encountered in valuing and equitably distributing these valuable and highly guarded assets of a marital estate.
All the sessions were well-received, and we recommend these presentations and their authors’ publications to anyone interested. We’re looking forward to next year’s event and hope to see you there.
Originally published in Mercer Capital’s Tennessee Family Law Newsletter, Second Quarter 2019.