It goes without saying that a divorce can be a stressful time in someone’s life. No matter what the reasons, it’s frequently complex, with money and emotion entangled in a way that can make decisions difficult. I’m a Certified Divorce Financial Analyst (CDFA®) and that means I’ve helped many people navigate these choppy waters with the help of divorce financial planning.
A CDFA® specializes in helping individuals and couples understand the financial aspects of divorce and may help find the best solution for dividing assets. We must pass a final exam that covers topics such property characterization, tax issues, estate planning, and other types of financial planning through the context of divorce.
Everyone has preconceived notions about divorce, and there are many myths and misconceptions that circulate on the internet, among acquaintances, etc. A friend might tell you one thing, your aunt might have her own anecdote, while the internet has literally millions of people’s opinions about the topic. What you’ll want are the real facts that are relevant to you. How does divorce work in your state? What are you entitled to? What is realistic? These are all things that a CDFA knows and can help you understand.
My first session with a new client is generally devoted to education around their situation and laying the groundwork for what’s coming up. In addition to “myth busting,” I sit down with what I call the divorce menu -- a list of all assets, debts, income and expenses for both parties. I evaluate each of these items, and give my client a complete picture that allows them to start making informed decisions.
Often the largest assets a couple owns can be difficult to divide. For example, a house still likely has a mortgage on it and whoever keeps the home must qualify for that mortgage in its entirety on their own. Large retirement accounts such as 401ks will have to be split with a separate legal document and an agreed upon calculation. Throughout all of this, there are also tax implications to consider.
A CDFA® focuses on the details and consequences of all of these matters and can work as a team with your divorce attorney or mediator to create a strategy based on your short and long-term needs and goals.
The most important thing you can do when moving through your divorce process is to try to separate emotion from the financial matters. I know this can sound impossible, but that’s why you hire professionals to handle the technical aspects of your divorce. Many of my clients are stay-at-home moms and other people who have trusted the other party to handle money matters for them. Now, they feel lost and worried about their financial futures. Where are they going to find enough income to live on moving forward?
In my role as a CDFA®, here at EP our process includes an assessment of cash flow to plan ahead to assess your future living expenses which include 5, 10, 20 years and beyond. By doing this I help provide my clients with a roadmap to their financial future beyond divorce.
In addition to hiring a divorce attorney and CDFA®, I recommend that my clients seek the assistance of people who can help with their emotional journey. Family and friends can carry some of this burden, but a specialist like a Parenting coach can offer the balance of professionalism and personal support to make this process less painful.
To learn more about what a CDFA® like me can do to help you before, during, and after divorce, review our Life Transition Financial Planning services and schedule an appointment to talk to an EP Wealth Advisor.
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