Divorce can be a painful and exhausting process both emotionally and financially. The way it shakes also affects the rest of your life.
“Because divorce can be complicated, emotionally charged and have lasting consequences, getting qualified advice in a timely manner can provide many short- and long-term benefits,” says Jeff Spivack, senior financial planner at Citizens Securities.
While traditional financial counselors are ready to help you create a financial plan, the process of decoupling assets when two become one requires a different kind of expertise – that obtained from a specialized group of divorce financial counsellors.
What is a financial divorce counselor?
A financial divorce counselor has experience and credentials related to navigating the financial aspects of divorce beyond that of your traditional financial counselor, says Samantha Garcia, Certified Divorce Financial Analyst and Wealth Counselor at Halbert Hargrove. “There are many aspects that come into play in divorce, and not all counselors are qualified to know what questions to ask or what suggestions to offer when clients are going through a divorce.”
Take, for example, asset splitting: “It’s important to understand the tax ramifications of each asset when the funds are to be used and to calculate those costs,” says Garcia. “While things can often look even on paper, sometimes one spouse can end up with more than the other when you take into account certain tax ramifications.”
These counselors are ready to help you with three distinct areas of divorce: asset division, spousal support, and child support, says Renee Hanson, private wealth counselor at Ameriprise Financial. They also include the three phases of divorce: emotional, physical and financial.
A financial divorce counselor is specifically trained in how to assess assets and the issues that can arise when dividing assets in a divorce, says Sarah Keys, senior vice president and financial counselor at Wealth Enhancement Group. Examples of this could include assessing future retirement payments, the tax implications of splitting stock options, or calculating capital gains from the sale of the marital home.
You can often recognize a financial divorce counselor by the designation of Certified Divorce Financial Analyst (CDFA) after their name. While not all counselors with divorce expertise earn this designation, a CDFA mark is a clear sign that a counselor has the expertise to provide divorce financial planning advice.
“CDFAs are trained specifically in the financial aspects of divorce and must have several years of relevant experience and pass an exam designed and regulated by the Institute for Divorce Financial Analysts,” says Kimberlee Davis, Certified Divorce Financial Analyst and Partner. and manager. Director of the Bahnsen Group. “CDFAs use their knowledge of tax law, asset distribution, financial planning, and retirement planning to help couples and their attorneys work out an equitable division of marital property in a decoupling. “
What does a financial divorce counselor do?
“A financial divorce counselor can help you manage the financial aspects and repercussions of a divorce,” says Garcia. “While lawyers try to get you what you want and mediators try to help a couple agree on assets or a custody schedule, a financial divorce counselor can help you understand the financial ramifications of your choices and work to get you a fair settlement.”
This process typically begins with establishing your goals and priorities in any settlement, says Susan Miller, Certified Divorce Financial Analyst, Senior Wealth Advisor and Managing Director of Dispute Resolution at The Colony Group. Your financial divorce counselor will then help you collect and organize financial information and learn about the options available to you financially.
CDFAs provide guidance on many financial areas of divorce, Davis says, such as valuation of assets and debts, division of retirement and pension accounts, spousal support, tax implications of property division and establishing a realistic budget after the divorce.
“CDFAs are also adept at uncovering assets that a client’s future ex-spouse may be hiding,” she adds. “This is often the case in situations where a person has a business and is not transparent about the profitability of the business.”
A counselor can prepare projections that illustrate how you and your spouse will fare in the long term using specialized software to help determine if the settlement is fair for both parties, Miller says.
A financial divorce counselor will also help ensure that your post-divorce budget will provide you with financial stability, Spivack says. “Post-divorce expenses are often underestimated; creating a realistic budget that incorporates a reasonable rate of inflation is an important step.”
Be aware that the role of a financial divorce counselor is not to provide legal or tax advice, notes Spivack. Rather, the advisor is there to help coordinate the advice you receive and present questions to other experts on your finance team, such as your lawyer, accountant, and mediator.
“In many cases, the financial adviser is the liaison, working to coordinate each (expert)’s instructions for the benefit of the client,” he says.
When do you need a financial divorce counselor?
“While not everyone needs a CDFA, they need to know about the divorce process and understand their financial options to assess the impact on their post-divorce life,” says Hanson. “Those with larger or more complex assets may find great value in a CDFA to aid in scenario projections during negotiations.”
Likewise, if you’re going through a high-conflict divorce, you may benefit from a CDFA that can help you focus on making important financial decisions, she says. “The role of the financial divorce counselor in this case is to help the less knowledgeable spouse understand various financial aspects of the family such as the amount and types of assets owned, types of income the family earns, as well as family spending structure,” Hanson says.
When emotions are running high, it can be helpful to have a financial divorce counselor on your team to help you navigate the bumpy road ahead. “Understanding what separate property is, what marital property is, and the potential legal, tax and long-term ramifications of a proposed split is virtually impossible,” Keys said. “Add in the emotional stress that accompanies even the friendliest of divorces, and most people will find peace of mind knowing an expert has helped them through the process.”
Another circumstance where a financial divorce counselor may be needed is if one spouse has more knowledge about family finances, which creates an imbalance in the ability to negotiate, Miller says. If you or your spouse have complicated compensation structures or large investments in private equity or other hard-to-value assets, she says you should probably work with a financial divorce counselor.
In the meantime, if you and your future ex-spouse both understand the family’s assets and income structure and can come to a resolution on how to divide them, you may not need a financial advisor. in divorce, says Miller.
How to Find a Financial Divorce Counselor
The Institute for Divorce Financial Analysts, which provides the CDFA designation, is one of the best places to find a financial divorce counselor. The institute’s website includes a search engine where you can find a CDFA in your area.
Another good resource is the Association of Divorce Financial Planners, or ADFP, a membership organization for divorce finance professionals, says Garcia.
“Many states also have professional organizations that include divorce finance specialists such as state bar associations and family mediation groups,” Miller said.
You can also ask friends, family members, colleagues, or other financial professionals you work with to recommend a good financial divorce counselor.
What to Look for in a Financial Divorce Counselor
When considering a financial divorce counselor, Miller advises looking for someone who has exceptional listening skills and can create options that meet disparate goals and priorities.
- What experience does the counselor have in divorce financial planning?
- Does she specialize in divorce financial planning?
- What is their average customer profile?
What’s most important is that you feel you can trust the counselor both financially and emotionally. “The divorce process is often very painful for one or both parties, and emotions can run high during interactions between them, as well as with counselors,” Miller says. “The key thing to remember is: don’t take it personally; it’s not about you.”