Certified Divorce Financial Analyst® is the only profession qualified to give financial advice during a divorce.
Once a marriage has broken down and a decision is made by one or both parties to divorce, the impact can be devastating. Divorce is devastating – not only to the individuals, but also to the children, family friends, and employers of the divorcing couple. Divorce not only has a traumatic emotional impact, but a financial impact as well. We try to mitigate the impact of divorce on both parties’ financial situation by acting as a knowledgeable neutral in the process.
Because of the financial complexity of many divorces, more and more financial professionals are being asked to play an active role helping individuals and attorneys sort through the financial issues related to divorce. Attorneys are also looking for new ways to help their clients obtain an equitable financial settlement. Attorneys, mediators, arbitrators, and judges are looking for experts that are knowledgeable about the financial issues of divorce.
Only a CDFA® professional has the training and expertise specifically related to the financial issues of divorce. When a client or prospective client asks them for assistance, many financial planners and accountants are unable to provide the information the client needs – or even worse, they are unaware that they do not have the required knowledge and end up finding out what they should have known after the divorce has been finalized. Not only does the client potentially suffer, but the financial expert’s career has been put in jeopardy.
The financial pitfalls of divorce. Common mistakes include (but unfortunately are not limited to):
- Negotiation to retain the marital home when the client cannot afford it
- Not obtaining complete information on all retirement plans, employee benefits, and stock options
- Not evaluating the defined benefit pension plan correctly
- Thinking that retirement assets have the same value as an equal dollar amount of non-retirement assets
- Not understand the different division methods of a retirement asset and not knowing which one is in the client’s best interest
- Not understanding the purpose of a Qualified Domestic Relations Order (QDRO) or the need to get it completed and filed at the time of the divorce or immediately after the divorce is final
- Not looking at the long-term impact of a financial settlement
- Failure to factor in inflation and investment returns when looking at the long-term impact of a settlement, or using unrealistic numbers in the evaluation
- Not being aware that it is possible to take a distribution from a retirement plan prior to age 59 ½ and avoid the 10% penalty
- Not protecting the survivor benefits for the non-employee spouse
- Not protecting spousal and child support payments through life insurance
- Not understanding the importance of making the spouse who receives the spousal and child support payments the owner of a life insurance contract
- Improperly structuring spousal or child support payments
- Using a QDRO to divide an IRA
- Making isolated financial decisions versus looking at the big picture and analyzing how each financial decision impacts other decisions
- Not taking into account transaction costs when evaluating a settlement offer
- Failing to understand the tax implications of alimony payments versus child support payments
- Believing that a 50/50 division of property is an equitable division of property
- Not understand methods or tax implications of dividing stock options
- Failing to consider the cost basis of property
- Not understanding the capital gain taxes upon the sale of the marital home or how the sale can impact each party
- Not understanding how to divide debt
- Not taking into account the effect of deferred taxes when dividing the assets
- Failing to properly oversee valuation of assets.