Ask anyone who’s been there, certain things are given about divorce: It’s an uphill battle, fought in language you don’t understand, using money you can’t spare, for a prize that’s only half of what you had before. An attorney will guide you through the legal aspects of divorce, and a good therapist will provide emotional support. What about the financial impact of your divorce? Given those harsh money realities, what can you do to make sure your newly-overhauled financial ship doesn’t sink?
It’s not easy to foresee what a proposed division of assets during divorce will mean for you in the years ahead. The more you know about your pre-divorce financial picture, the better. Knowing what is most important to you and being willing to compromise are valuable tools. But how do you decide what constitutes a fair share of the assets for each spouse? That’s where a financial advisor who specializes in divorce comes in. What’s missing in most divorce processes is financial expertise, the input of a professional who can help you determine the best settlement options for you.
Seeking the help of a Certified Divorce Financial Analyst (CDFA™), a financial professional trained to forecast the long-term effects of a proposed settlement, gives both parties a clearer view of what lies ahead financially after divorce. How, for example, will your finances look in years ahead as spousal support, child support, retirement benefit payments change?
CDFA professionals can provide valuable information on financial matters related to your divorce, such as tax consequences, pension plan division, health care coverage, and more. CDFA professionals don’t replace attorneys; they provide assistance to attorneys by helping clients make financial sense of proposed settlements and providing information needed to help attorneys prove their case.
Given the financial complexities of divorce, and the impact your divorce settlement will have on your financial future, there are a number of things you’ll want to consider in deciding how the services of a CDFA could help you.
Here are just a few of them:
- Divorce laws vary from state to state. How you divide your property will probably depend on the laws of your state. In most cases, equitable-distribution laws apply. That means each spouse gets a fair share of marital assets. It’s not always 50/50. The problem is that some assets are easier to divvy up than others. Things like pension plans and securities can be tricky to split, especially when you take timing and tax considerations into account.
- The three most important words during divorce are: document, document, document. When you divorce, you must identify the assets you and your husband have accumulated and establish their value. Even if your husband was in charge of the finances while you were married, it’s now up to you to find those records. You are entitled to your share of any marital property you find, and any additional income you discover may increase the amount of earnings that are used to calculate alimony and child support.
- Though divorce is not a taxable event you have to report on your tax return, it can still have tax consequences. If real estate, rental real estate, retirement plans, securities such as stock options, annuities, life insurance policies, and vacation homes are part of your marital property, there are tax considerations involved in the valuing of these assets.
Considering the importance of the decisions you make during the divorce process, and the impact on your economic future, the help of a financial professional can be invaluable. While you may not be able to make your divorce less painful, you want to do all you can to make your new life ahead as stable, secure, and promising as possible.