A neutral financial professional helps clients identify financial goals and priorities, understand short and long-term implications of dividing marital property, and tax implications. This article briefly touches on the 3 most common finance professionals assisting in divorce - the accountant, financial planner, and certified divorce financial analyst.
In an ideal world every marriage would end with a happily ever after. However, statistics still show that 50% of marriages will end in divorce. The reasons why marriages end in divorce can vary widely. However, money remains one of the most common causes of divorce. In divorces where money isn't the main cause it often surfaces during the divorce process. Finances play a vital role in one’s sense of security and it is a valid concern during the divorce process. Many different finance professionals have assisted spouses during divorce.
A CPA (Certified Public Accountant) has been certified to serve clients as an accounting expert. A CPA helps clients understand past and present-day financial information. They help clients understand the overall tax implications of the divorce settlement. Tax implications can arise when receiving spousal support or dividing a business, retirement accounts, or real estate.
The accountant is usually called upon to understand one specific aspect of the financial settlement. For example, equalizing capital gains tax when dividing investment securities. If an accountant possesses the proper training they can help with the valuation of a business as well. Accountants have also been called upon to find hidden assets in litigated divorces.
A CFP (Certified Financial Planner) has been certified to serve as a financial planner. A financial planner helps clients identify their future goals and develop a plan to achieve those goals. A CFP first seeks to understand their client’s short-term and long-term goals. They then gather information to understand their client’s current situation. Such information includes income, expenses, assets and liabilities. Assumptions such as Inflation, interest, retirement age and investment growth rate are then applied to the current situation to determine a future outcome.
The future outcome is compared to the client’s goals. The financial planner will recommend specific changes if their client is not going to achieve their future goals. For divorcing clients, the financial planner helps them understand the divorce’s impact on financial goals. Both the short and long-term implications of the marital property division are evaluated. Common marital assets include items such as a business, pension, retirement account, cash and the marital home. Common marital debts include items such as a mortgage, home equity line of credit, car loans, business debt, and retirement account loans.
The CDFA™ (Certified Divorce Financial Analyst) typically has a background in accounting or finance and has been certified to serve clients as a divorce, financial expert. A CDFA™ helps clients understand their past, present and future finances as it relates to the decisions made during divorce. A CDFA™ serves as a neutral financial professional in mediation and collaborative divorces. They can also serve as an advisor to one or both spouses during a kitchen table or litigated divorce. When a CDFA™ becomes part of the divorce team they help client(s), attorney(s), or mediator(s) evaluate the overall implications of the divorce, financial settlement.
A CDFA™ will begin by gathering all necessary financial and non-financial information. Such information includes the household budget, income, expenses, assets, liabilities, goals and priorities. Spouses are often unclear about how to begin this discussion and evaluate the marital property. A CDFA™ helps the spouses understand their current, overall financial picture and generates division scenarios that meet each person's goals and priorities. The advisor and spouses review each scenario's income, tax and retirement implications. The spouses then decide which options make the most sense for them and their family. Divorce financial analysts have been called upon to find hidden assets in litigated divorces. If they possess the proper training they have also been called upon to appraise a business.
The financial transition during divorce is personal, unique and often complex. Understanding the ramifications associated with each proposed financial settlement is imperative. These decisions carry a lifelong impact for each spouse. Since there is rarely an opportunity to modify the financial settlement it is very important to get it right the first time. If you would like more information about how a neutral financial professional can help you in your divorce, then please visit our collaborative financial professionals page.
