Pension Valuation: Role of the Expert Witness

The expert testimony of a forensic economist or accountant is required for proper trial preparation when the valuation of a pension is at issue. Only through expert testimony will the evidence of the value of most defined benefit plans be admissible. Even though a pension can be legally divided without a valuation, the evidence of the valuation is required because the division of the balance of the marital estate will be materially affected. The more subtle opportunity for exploitation of an expert's powerful skills arise, however, much earlier than trial.

First, the expert can help determine whether or not a pension or retirement asset can be divided. Some cannot. If an asset cannot be divided, property division must be considered carefully. Second, the forensic economist or accountant ascertains either a reasonable range or a specific present value for benefits due the former employee from the retirement asset. This provides useful information to the attorney and client from the very beginning. A skilled forensic economist or accountant provides valuable advice and insight, adding to the legal team's expertise, often even discovering an issue or argument of which the lawyer might not be aware. When this occurs, more often than not, the value of this "extra weapon" offsets or exceeds the expert's fees by providing additional negotiating leverage, whether or not the expert has been disclosed. Because of the expert's obvious importance to successful litigation of divorces involving significant retirement assets, it is essential that counsel have solid relationships with several forensic economists or accountants with exceptional reputations.

In general, forensic economists or accountants offer analysis consisting of several steps, assisting at all phases of the litigation. First, the expert may develop a ball park present value, commonly described as a "quick and dirty," to assist counsel and the client in the very beginning in understanding the scope of the engagement and the relative importance of the asset in relation to the entire marital estate. Sometimes, even before a complaint is filed, the expert can estimate the present value of the asset, enabling counsel to use the preliminary report for settlement purposes. Later, during the discovery phase, the expert may then interview the client, really focus on the detail, and begin to prepare the formal report. Then, if and when settlement opportunities become exhausted, the formal report can be issued, and preparation for deposition and trial begin. The economist or accountant can assist in the review of documents and the opposing party's expert's report, helping the attorney develop deposition questions. In the post-discovery settlement and pre-trial phase, the expert can assist in evaluating final settlement offers. Should the case go to trial, the expert will assist with trial preparations, including exhibits and cross-examination scripts. At trial, the forensic economist or accountant will present his report, testify in support of his position, and refute the opposing party's expert's position.

When retaining a forensic economist or accountant, the attorney will check with the economist or accountant for conflicts of interest and prepare or review a written agreement concerning the scope of the work, fees, expenses, and retainer. For more information, see the web sites listed below. If the expert selected is a forensic economist, this person will be a member of at least one of the following associations:

National Association of Forensic Economics
American Economic Association

These organizations have excellent web sites with an extraordinary amount of helpful information about resources, the profession, trends, and sub-specialties. Certifications a forensic accountant may possess include:

Certified Public Accountant (CPA)
Certified Financial Planner (CFP)
Certified Valuation Analyst (CVA)