The financial professional in a collaborative divorce plays a critical role.
There are two financial professional roles and they are distinct, the Certified Divorce Financial Analyst, CDFA® and the Divorce Forensic CPA. This blog will address the role of the CDFA®. A future blog will talk about the role of the Divorce Forensic CPA.
The Certified Divorce Financial Analyst – CDFA®
- This neutral financial professional focuses on the area of helping clients understand the short-term and long-term financial implications of any settlement proposal.
- They help educate clients on the financial decisions that they are being asked to make.
- The CDFA also helps clients understand their investments.
- There are a lot of clients that don’t understand the investments they have, including pensions, 401k’s and investment accounts. Common questions relate to tax implications and how the accounts can be accessed short term and long term.
A CDFA® will often help clients prepare their budgets in their new family structure.
Whether there is one income or two incomes, having two separate households is a different financial structure. For those individuals that have never participated in paying the expenses, the CDFA® can provide education and assistance. Many people don’t operate off of a budget, so, this big transition, the divorce, is an opportunity for them to really understand their finances and start taking an active role in their financial future. The CDFA® helps facilitate their decisions on separating assets and debts. A common question from clients is – is it feasible to keep the family home.
There is a lot of emotion with the family home. Sometimes the decision making is based on emotions and not from actual financial information. Without understanding the long term financial implications, keeping the house can be financially devastating in the future. It is better to know now than wake up five years from now and realize you can’t afford what you agreed to and that you can’t go back and fix it. Once a judgment is signed, you can’t change it. Getting all the education upfront is very important. Understanding what the expense needs are, or the budget, will also help facilitate the conversation around support, and if there are children, how their expenses will be paid.
There are some very particular situations that can be addressed from a planning perspective for clients that are around 60 and older. That stage of life presents some very unique situations. The CDFA®, who takes a financial planning approach to the process, can help address and help develop solutions to those particular needs.
Information is key in the decision making process.
What I have found is many people don’t feel that they have all the information they need to make an effective decision. The CDFA® provides an opportunity to get an education, to see a mini financial plan so to speak, and to take this devastating event in their lives and have something positive come out of it to help them in their new restructured life.