Divorce is a complicated, emotionally draining, and wilder step of life with many long-term ramifications. This is the most sensitive stage of life when emotions are at their peak; thus, making the right decisions and considering other aspects of post-divorce decisions can be challenging for couples suffering.
While traditional financial advisors can assist you in developing a financial plan, decoupling assets when two become one requires a different level of expertise, which can only be obtained from a specialized group of divorce financial advisors.
Here the question is, what is divorce financial planning, and how can financial advisors help? This is what an insightful blog post entails. Stay tuned; you might be just a step away from resolving your financial issues in a divorce plan.
What is divorce financial planning?
Divorce financial planning emphasizes developing personal and business financial strategies to assist an individual in obtaining the best divorce settlement possible. Just like a family law attorney focusing on legal issues and other resources help you with emotional support issues, similarly with a divorce financial advisor, you can make the best possible financial decisions concerned to divorce.
Divorce financial planning aims to educate you on your options, the actual value of your assets, and how your divorce decisions will affect your finances.
What is a Divorce Financial Advisor?
A divorce financial advisor has more experience and credentials than a traditional financial advisor in navigating the financial aspects of divorce, according to Samantha Garcia, a certified divorce financial analyst and wealth advisor at Halbert Hargrove. “Divorce has many aspects, and not all advisors know what questions to ask or suggestions to offer when clients are going through a divorce.”
Divorce advisors assist you with three distinct divorce areas: asset division, spousal maintenance, and child support. They are also familiar with the three stages of divorce: emotional, physical, and financial.
The certified divorce financial advisor /analyst often identifies a divorce financial advisor. They are specifically trained to value assets and the issues arising when dividing property in a divorce. Examples include:
- Valuing future pension payments
- Calculating the capital gains from selling the marital home
- Calculating the tax implications of dividing stock options.
What Does a Divorce Financial Advisor Do?
A divorce financial advisor can assist you in navigating the financial aspects and ramifications of a divorce. While attorneys work to get you what you want and mediators work to help a couple agree on assets or custody schedules, a divorce financial advisor can help you understand the financial ramifications of your options and work to get you a fair settlement.”
This process typically begins with establishing your goals and priorities in any settlement. Your divorce financial advisor will then assist you in gathering and organizing financial information and becoming aware of the financial options available.
According to Davis, CDFAs can help with valuing assets and debt, dividing retirement and pension accounts, alimony, the tax implications of property division, and establishing a realistic budget post-divorce.
When Do You Need a Certified Divorce Financial Analyst?
While not everyone requires a CDFA, they must understand the divorce process and their financial options to assess the impact on their post-divorce life. Those with larger or more complicated assets may find a CDFA extremely valuable in assisting in scenario projections during negotiations.
Similarly, if you’re going through a high-conflict divorce, she suggests hiring a CDFA to help you focus on making critical financial decisions. “In that case, the divorce financial advisor’s role is to assist the less knowledgeable spouse in understanding various financial aspects of the family, such as the amount and types of assets owned, the types of income earned by the family, and the family expenses.”
When emotions run high, having a proficient divorce financial advisor with you can help you navigate the difficult road ahead. “It’s nearly impossible to understand what is separate property, what is marital property, and the potential legal, tax, and long-term ramifications of a proposed division.
On top of that, the emotional stress that comes with even the most amicable divorces, most people will find peace of mind knowing they have had an expert assist them through the process.
What Includes in Divorce Financial Planning?
Divorce financial planning caters: to asset distribution, tax implications, financial support for the spouse, children, and potential spousal Social Security benefits. Below are the following steps for divorce financing:
Step 1: Get organized and Gather Important financial documents
To prepare for the legal process, gather copies of current and previous financial statements to fully understand the accounts you and your partner hold jointly and individual funds.
Some common documents that may be relevant to you are:
- Home, land, and vehicles are examples of property.
- Debts include credit cards, lines of credit, and mortgages.
- Checking, savings, and investment accounts are examples of assets.
- Telephone, Internet, and insurance are examples of household expenses.
- IRAs, 401k plans, and pensions are all types of retirement accounts.
Step 2: Understand what you own
After gathering your key documents, determine what is owned, owed and where changes may be required. Consider the following:
- Decide whether to keep or close joint or individual accounts.
- Determine where name or address changes may be necessary.
- Determine whether any new individual accounts are required. It should be noted that some charges may need to be re-qualified.
- Check the beneficiaries on all accounts for any updates that may be required.
- Consider changing and securing your individual account and card passwords and PINs.
Step 3: Know what bills are due and protect your credit
If your spouse shares credit accounts, you might also share debts — regardless of who makes the purchases. Remember that timely bill payments account for 35% of your credit score:
- Determine who will pay what and, if possible, closely monitor that progress to protect your credit history. Set up account alerts2 to avoid missing payments.
It’s also good to check your credit report regularly to spot any remaining accounts in your name, as you could be held legally responsible for those debts.
Credit Close-Up provides free and easy access to your FICO monthly updates, Credit Score, and personalized tips to help you maintain or improve your credit rating.
Step 4: Create your go-forward budget
- Because your income and expenses will likely change after your divorce is finalized, making a new budget can help you feel more prepared.
- Examine current household expenses and identify items that may change, such as childcare or insurance premiums that may arise following a divorce, as well as ways to adjust.
- If you need more assistance, our Budget Watch tool helps you set goals and alerts you when you’re approaching your spending limit.
What to Look For in a Certified Divorce Financial Advisor?
When looking for a certified divorce financial advisor, look for someone who can create options that address disparate goals and priorities. Don’t hesitate to ask the advisor the following questions:
- What experience does the advisor have in divorce financial planning?
- Is she specialized in divorce financial planning?
- What is the typical client profile?
Moreover, divorce financial advisors in Massachusetts use particular software programs to help them analyze assets like:
- Real property
- Retirement accounts
- Life insurance
Example of a Certified Divorce Financial Analyst (CDFA)
A certified divorce financial analyst (CDFA) is a financially trained professional who can assist you with the financial aspects of divorce. They frequently collaborate with your divorce lawyer and typically come from a background such as:
- Planning your finances
- Divorce legislation
To provide expertise in the financial implications of divorce, a CDFA must undergo training and certification. Their areas of expertise include anything that could have an impact on your long-term financial situation, such as:
- Child support vs. alimony
- Personal vs. marital property division
- calculating the future worth of retirement and pension funds
- Making any divorce payments
- Divorce Taxation
How to find a certified divorce financial analyst?
What should a person consider before choosing a CDFA? How should they find one, what questions should they ask to ensure a good fit, and what expectations should they have of their CDFA as they begin working with them?
When looking for a financial expert to help you with your divorce, ensure you work with a certified divorce financial analyst. Additional divorce-specific training and standard certifications, such as a CFP or CPA, lead to certification.
Q1 – What exactly is a financial advisor for a divorced woman?
A CDFA has specialized financial knowledge that may benefit you if you are going through a divorce. They may only work with you or as a go-between for you and your spouse. You can rely on them to assist you in dividing assets and ensuring that you understand how they will affect your financial situation.
Q2 – What is the cost of a CDFA?
How Much Does Working with a CDFA Cost? Typically works hourly, though some may charge a flat fee for a set number of hours. Working with a CDFA® typically costs between $250 and $400 per hour, depending on experience and the complexity of the case.
Q3 – Who suffers the most financially during a divorce?
According to statistics, while women initiate divorce at nearly twice the rate of men, they are also much more likely to struggle financially after divorce, especially when children are involved.
Q4 – How much money do you need to hire a financial advisor?
Depending on the net worth advisor you choose, you should generally consider hiring an advisor when you have $50,000 – $1,000,000 in liquid assets, but most prefer to begin working with clients when they have $100,000 – $500,000 in liquid assets.
Still, searching for a reputable Divorce Financial Planner Near Me? We are here!
Allan L. Baron is a CDFA (Certified Divorce Financial Analyst) through the Institute of Divorce Financial Analysts. CDFAs work with you to identify and explain what financial decisions must be made and to help you understand your options clearly.
At Baron Law Mediation, our qualified divorce financial advisors will help you make educated financial decisions about your divorce that will impact you and your children for years. You can understand and negotiate your divorce agreement by consulting a Certified Divorce Financial Analyst.
Our certified divorce financial analysts are ready to assist you with the following divorce financial services:
- Obtaining the required divorce financial documents
- Making a “needs budget” to determine your monetary requirements “now” and in the future
- Reports and graphs are created to show you various scenarios for dividing assets and liabilities and the resulting consequences.
- Future income needs projection and how this will affect your ability to keep your assets in place.
- Give you the required information about the martial home.
- Topics for divorce financial discussions and divorce financial planning include:
- Property Management (residential and rental income)
- Non-retirement assets include cash, savings, stocks, bonds, and investments.
- Retirement assets include IRAs, 401Ks, pensions, and so on.
Download our free Ebook to learn more about our divorce financial advisors, or contact us for financial assistance; we can help anyway!