Financial Decisions During Divorce: How a CDFA Can Help
A divorce will present you with many financial decisions as you work the process. Even just deciding how you handle your divorce case has huge financial implications to it.
No matter how you approach it, a divorce will cost money. But depending on how you approach it, the costs can be managed in a way that won't leave you with enormous financial burdens to bear for years moving forward.
For those who aren't well versed in finance, making money decisions on your own can feel beyond intimidating. Instead of going it all alone, consider working with a financial professional who can help you make the best decisions for you and your future.
Getting Financial Help During Divorce
A Certified Divorce Financial Analyst (CDFA) professional can answer your critical financial questions and offering indispensable guidance on money matters during your divorce.
CDFAs go through specialized training focused on the financial aspects of a divorce. It's difficult for almost any person to not let emotions get in the way of decision making during this trying time, but a CDFA professional will see your situation from a neutral stance and help guide you towards making the right decisions for you.
“You are likely most emotional and least rational during your divorce,” says Tina Tenret, a Certified Divorce Financial Analyst and Certified Financial Planner™.
“Making lasting decisions under duress without a financial expert can cost you thousands of dollars—if not more—each year for the rest of your life. While your attorney knows the law, your CDFA specializes in the financial impacts and insights that save you money.”
The Role of a CDFA
When asked questions about the role of a CDFA professional in a divorce case, Tina discussed how they will help clients determine the best moves to make towards a better financial future after divorce. She explains how a CDFA professional will work to:
- Determine what you own, as well as the advantages and disadvantages of dividing assets and debts in different ways
- Analyze various options to divide a 401(K) or pension
- Decide what investment and support options will best provide financial security
- Analyze income tax returns and financial statements to find hidden assets, if any
- Ensure the settlement drives to the heart of what matters most to you
- Consider the financial pros and cons of lump sum alimony
- Revise your will or trust documents after the divorce with an estate attorney
Families and Divorce
A divorce can become costly not only on a monetary level but also on an emotional level. The ladder cost is often paid by the entire family, children included.
One piece of crucial advice that Tina gives to nearly all co-parents is to stay out of court if possible. "Protect your children, your privacy, and your finances. Avoid the agony and stress, delays and unpredictability of a court battle,” she says.
Litigated divorce cases can often be dramatic and expensive, all while running the risk of ending up with an outcome that you had little to no say in determining. Also, litigated divorce files are open to the public, and this allows for your financial information and allegations made during your trial to be exposed.
Litigation may be appropriate in some instances such as in cases where domestic violence is an issue. But for many others, there are several ways to approach a divorce while staying outside of the courtroom. One such approach that Tina suggests is a collaborative divorce.
“Collaborative divorce allows you to create a customized settlement with the help of an attorney and a neutral financial expert without the delays, mounting costs, risks, legal restrictions, and increased hatred that results in a courtroom,” explains Tina.
She also explained how collaborative divorce allows parents the opportunity to deal with issues that they might otherwise not have the chance to in the courtroom such as college-related costs.
“Addressing priorities that matter to you is one advantage of choosing collaborative divorce, where your attorney and neutral experts help craft an agreement that works for you and your family, without being dismissed in a cookie-cutter fashion by a judge.”
FAQ's for a CDFA
Divorcing parents will undoubtedly have money-related questions as work through the process, and a CDFA professional is the right person to help answer those. Tina says that many parents have concerns regarding who keeps the marital home but that the cost of doing so can be steeper than it seems.
"For example," she explains, "if you trade your share of liquid investments in order to keep the marital home, your spouse may enjoy far more financial freedom and flexibility, without worrying about mortgage payments, rising property taxes, maintenance costs and repair bills."
She continues, "This leaves you the responsibility and risks of owning a home that may be too big or too burdensome for your new lifestyle. Making such an emotional decision without a CDFA expert can devastate your finances."
Tina says that she is frequently asked by clients how to invest money so that they do not end up running out. As a CDFA professional, Tina will help her clients during the divorce process, and then she can help her clients choose a Certified Financial Planner™ (CFP®) who can assist the client with financial planning after divorce.
In working with a CFP®, Tina explains, "This should include working alongside you to identify your specific needs and goals, then build a customized financial plan that addresses not only investments, but also cash flow, retirement, estate and education planning, as well as your additional priorities."
Money Management Post-Divorce
Keeping track of money after divorce is vital for any person, but it is especially important if you have kids. As a way for co-parents to keep track of shared parenting expenses, Tina suggests using OurFamilyWizard.
The expense and payment tracking tools on OurFamilyWizard allow co-parents to maintain a detailed record of shared parenting costs plus details about what has been reimbursed and what is still owed between parents.
Parents can schedule payments for items ranging from recurring child support to one-time reimbursements for single items. Also, both parents can upload and access important details regarding financial information specific to their kids.
Having access to all of this information from one secure, online creates an effective way for divorced parents to keep track of their money and to share relevant information with less conflict.
Having the right support through a divorce can help you to make the best present and long-term decisions for you. If you find yourself in a position where you are faced with the task of making big financial decisions during a divorce or legal separation, don't hesitate to seek guidance from an expert.
Working with a CDFA professional can help you to work through your case by answering your pressing questions and offering valuable financial advice during the time that you need it most.
Tina Tenret is a Certified Financial Planner™ and Certified Divorce Financial Analyst. Learn more about Tina and her work at TheTenretCompany.com