When Mark and Kelly decided to get divorced, she suggested that they “just split everything 50-50.” She offered to take certain assets as her half and let Mark have everything else. He agreed, seeing the arrangement as fair.
Unfortunately, what he didn’t realize was that he would have to pay taxes on his assets whenever he wanted to access them, unlike Kelly, who could touch hers tax-free. What sounded like a fair and equitable division ended up costing Mark $15,000 in taxes. Had he received professional financial advice before the divorce was finalized, he would have realized how problematic the settlement was.
When you are dealing with the emotional stress of divorce, giving your financial future the attention it deserves can be next to impossible. A certified divorce financial analyst can take a lot of weight off your shoulders by showing you the best way to divide your assets and avoid costly tax consequences.
What is a Certified Divorce Financial Analyst?
Also known as divorce financial specialists, a certified divorce financial analyst, or CDFA, has extensive knowledge of financial planning, asset distribution, and tax law in a divorce context. They will provide you with a clearer picture of your financial situation so that you can make the right decisions, advise you of any tax ramifications that may arise from a settlement, and calculate how much money you will need to maintain your current lifestyle and educate your children after the divorce.
Examples of services include:
- Accurate valuation of marital assets and debts
- Assistance in preparing a budget for your life after divorce
- Calculating the amount and duration of spousal support
- Providing guidance on the division of pensions and retirement accounts
When Should You Hire a CDFA?
While any divorcing couple can benefit from professional financial guidance, certified divorce financial analysts are especially recommended if you and your spouse own a business together or have significant assets such as a real estate portfolio or multiple investments.
Many couples are unaware of what their marital assets are actually worth, and a CDFA will provide necessary clarification. Moreover, you or your spouse may have a preconceived idea of how much money you want as part of the divorce settlement, even if it is more than you are entitled to. By showing you what expenses you actually need to cover after the divorce, a financial specialist can instil reasonable expectations in both spouses and make it easier to reach an acceptable compromise.
Certified Divorce Financial Analysts and Mediation
When a couple opts to mediate their divorce, the CDFA serves as a neutral financial professional. They prepare projections that show each spouse what their financial position will be like immediately after the divorce and in the years that follow it, and explain the tax implications of all settlement options on the table. In a supportive yet neutral fashion, they help the couple look for options that deliver the best financial outcome.
Certified Divorce Financial Analysts and Collaborative Law
CDFAs are also neutral parties in the collaborative law environment, but in this instance they are members of a team that includes attorneys, divorce coaches, and other professionals dedicated to helping both spouses reach a settlement agreement that addresses their respective needs and goals. They focus on educating the couple so that the latter can make informed financial decisions about their futures.
Divorce requires you to make decisions that affect your future, and without guidance from the right professional, you could end up harming your prospects instead of helping them. At Haas Tharrington, we will ensure that you have the advice you need to identify your financial goals and craft a settlement that supports them. To schedule a consultation, contact us today.