Divorce Fiduciary Audit™ – Fiduciary Expert

Divorce Fiduciary Audit™ evaluates community and or separate property accounts and assets which may require a fiduciary duty whether by a spouse or third party such as a stockbroker, trust company, corporate trustee, investment adviser, financial planner, broker dealer, private equity or hedge fund, foreign or off-shore bank / trust company. Breach of fiduciary duty can impair (besides conceal) community assets and or separate property.

These are the “FIDUCIARY ACCOUNTS”

ALL trust accounts;
ALL IRA, IRA Rollover, 401K rollover accounts;
ALL private, corporate ERISA Qualified pension plan, 401k plan accounts;
ALL public employees’ (state, county, city, agency – fire, police) pension plan accounts;
ALL union (Taft – Hartley Act), collective bargaining or multi – employer pension plan accounts;
ALL non-profits, foundations and endowment accounts, and their 403b plans
HOA Homeowners Association Capital / Reserve investment accounts
UGMA, UTMA, Coogans, 529 Plan accounts
Conservator, Guardian accounts
Note, depending on the unique facts and circumstances, other types of accounts, property, assets, liabilities, investments, loans, insurance, annuities, intellectual property and rights may be deemed a “fiduciary account” or “fiduciary asset”

The community property (or separate property) in divorce often contains one or more of these “fiduciary accounts” or “fiduciary assets”. As noted above, any type of asset, investment, life insurance or annuity in (or in certain cases absent from) these accounts above is covered too.

Divorce Fiduciary Audit™ Traditional asset tracing may uncover the money flows, yet fail to understand or connect the money flow elements implicit in fiduciary standard of care account or asset relationships at any time, in particular when a spouse is self-employed, a family or closely-held business is involved, partnership, family limited partnership (FLP), LLP or LLC.

The nature of creative projects and cross licensing common in the music, film, television, internet video streaming services, theatrical and digital rights business including musicians, artists, authors, producers, screenwriters, directors, production and loan out company arrangements, video game designers and developers pose more complexity. Health care professional’s corporations pose similar fiduciary investigative challenges including medical doctors, dentists, veterinarians, therapists and university professors employer – based income versus consulting – based projects and income.

DUFFY ANALYSIS™

For California divorce, a Duffy Analysis™ helps to spot breach of marital fiduciary duty including, but not limited to, when either spouse works in banking, finance, securities, investment or insurance related field such as stockbroker, financial planner, insurance agent, certified financial planner, financial analyst, securities research analyst, investment adviser, portfolio manager, hedge fund manager, investment banker, securities trader or executive therein. Or when a spouse holds or uses a business credential like MBA.

Marriage of Finby Analysis may be useful to the parties and the court or mediators, as we have over 35 years of direct, hands-on experience with thousands of such situations (all over the US) covering all elements of securities, banking, investment, finance industry personnell such as: banker, financial advisor, CFP, financial planner, wealth manager, etc.) compensation and or remuneration. These elements can include but are not limited to hard and soft dollars spanning salary, draws, commissions, stock, options, stock units, deferred compensation, partnership/team/groups of planners, professional networking, marketing allowances, sales, research and trading support, office space, satellite, remote and or home office (sometimes referred to as OSJ office) space, titles, award clubs recognition rewards, advanced trainings, special conferences, forgivable loans, loan write-offs, loan forgiveness, other perquisites and emoluments compliance (U-4, U-5, Form ADV) and tax reporting, firm and regulatory compliance and marketing related issues, training and learning and development programs, hring and retention awards or bonuses, referral bonuses, sunset or retirement compensation plans and any other type of investment advisor, hedge fund or private equity industry affiliated person, licensed or non-licensed.

The Pepperdine University, Graziadio Business Review states: “Ignoring fiduciary responsibilities is risky business for family business owners/partners. They could be subjected to significant punitive damage claims from the other family member partners or from the non-partner spouse who can claim under community property statutes.”

Trusts and ERISA qualified plans must address the interests of beneficiaries or plan participants; usually a spouse, then children and/or other dependents. Charitable, not-for-profit organizations, known as IRS section 501c-3 tax exempt entities appear increasingly as beneficiaries of family, charitable trusts and or IRA accounts.

Divorce Fiduciary Audit™ examines potential connections to community property when a spouse controls, influences, acts as or is named trustee of a family trust, 2nd family trusts (as in the Dodger’s Murdoch divorce) an ERISA (defined benefit pension, profit sharing, 401k), 403b, 457 plan, union, collective bargaining, multi-employer, Taft-Hartley Act (union, multi-employer pension benefit retirement plan) or public (State, County, city or agency thereof) pension and retirement benefit or supplemental benefit and welfare plan.

The McCourt divorce case shows the need to consider a Divorce Fiduciary Audit™ pre-filing, helping to avoid unwanted publicity (and potential diminution of assets) when airing confidential marital agreements. A Huffington Post article about the McCourt divorce in Los Angeles is here.

Tip for attorney’s consideration – before drawing up a Pre-Nuptial Agreement, Post-Nuptial Agreement or QDRO (Qualified Domestic Relations Order) first review any spouse-controlled community property, bank accounts (including off-shore), trust powers or interests, ERISA qualified plan, family foundation or endowment assets, accounts or investments for potential conflicts or breach of fiduciary duty as well as any and all board memberships or trustee responsibilities (plus connections to aging parents or other family members). A review of any of the above accounts which blindly assumes absence of conflicts of interest,self-dealing, fiduciary compliance, proper accounting or asset performance likely shortchanges both parties, their children and or named charities.

It is still uncommon to find a fully compliant professional fiduciary, so to expect or assume a non-professional knows the duties owed, can lead unfortunately to improper withdrawals, unauthorized trades, transactions, un-repaid or undocumented loans, speculative investments; and fraud, ERISA prohibited transactions and or self-dealing represent a potential theft or diminution of trust, pension plan, community or separate property assets.

In nearly every dispute whether trust or non-trust account, IRA, ERISA pension retirement benefit plan, charity, non-profit, foundation or endowment account, at the outset parties form a trusting relationship, promises are made, expectations are created, reliance and often complacency can take root, disappointments occur, communication wanes, account values continue to suffer, risks increase, prudence gaps manifest then arbitration claims or lawsuits are filed.

Marital property must be determined to be community and or separate property and valued accordingly. This includes book of business / client list inclusions and valuations with supporting schedules. The nuance and background of the financial services industry book of business engagements can upend opinions of values and interests proferred by business valuation experts. Since, besides human error, they may lack the requisite foundational knowledge, education, industry experience and or training causing them to overlook the applicable multi-source compliance and regulatory environments and the changes thereto over the time period in question among other crucial issues.

It’s best if we can be retained prior to the establishment of the new account (or new advisory) relationship to help prevent these types of situations When lawsuits or claims are contemplated we prefer to be involved at the earliest opportunity prior to filing.

For concerns related to breach of fiduciary duty, self-dealing, conflict of interest or malfeasance or violations of FINRA or SEC securities industry rules and regulations please contact us.

contact@fiduciaryexpert.com or (310) 943 – 6509

Divorce Fiduciary Audit™ and Duffy Analysis™ are pending registered trademarks of Chris McConnell & Associates