March 1, 2014
Divorces have been happening in the United States for hundreds of years – in fact the first recorded case of a legal divorce in the American colonies took place on January 5, 1643.
While couples have been splitting up for hundreds of years, it is only recently that a financial professional has been included in the process. Dividing the parties’ financial assets was simple in the old days when financial assets were straightforward and included property such as land, houses and gold coins. But over the last 200 years financial capital has evolved to include stocks, bonds and other instruments, and we now have retirement accounts and pension plans to divvy up. In addition our tax code has changed so that the consequences of property transfers and income payments to ex-spouses has become more complicated and can have a bigger impact on a spouse’s lifestyle. Finally the make-up of the family has changed to include working mothers and stay-at-home dads, and the needs of each family member must now be considered.
Hopefully you have been reading my newsletters and are gaining an acute awareness of the complicated financial issues that can arise in a divorce. Creating a fair and equitable division is not always as simple as drawing a line down the middle of the page and putting half of everything into each spouse’s column. Doing so might create a big tax liability for one party, or leave a spouse with insufficient income to live on.
Utilizing the services of a Certified Divorce Financial Analyst complements the skillset of the divorce attorney. In addition to the planner’s general financial planning knowledge, A CDFA has training and expertise in the tax and financial issues particular to divorce. A CDFA works with the attorney and the client (or both parties in a collaborative divorce) from the outset of the case right through to the end. This work can include:
Divorce financial planning succeeds in every type of divorce whether it is litigated, mediated or worked through collaboratively. Often the client(s) meet with the CDFA to work through financial issues and questions before they begin serious negotiations. The CDFA can also participate in mediation meetings: having a CDFA right there at the table during negotiations means you and your client are getting valuable financial information immediately as needed.
The additional expense of using a CDFA’s services can be quite cost-effective in the end, because an educated client makes better, faster decisions and spends less time fighting about unimportant issues.
The CDFA also assists the client post-divorce to follow through with dividing and transferring assets and adjusting to their new lifestyle.
In summary, your practice will surely benefit by including a divorce financial planner in the divorce process: When clients increase their awareness of important financial planning issues, they can more efficiently make reasoned financial decisions that also helps speed up the entire process. And you as their attorney, in consultation with a divorce financial planner who has the specific knowledge and expertise, are better equipped to recommend actions that serve your clients best both now and after their divorce.