Divorce is a time of great emotion, transition, and planning. Your client may be the initiator of the divorce or the party who is on the receiving end of notice – but either way, the financial union is soon to be over, and your client will need expert financial guidance. Most likely, you will need to provide advice, either by outsourcing to an experienced divorce financial planner or by acquiring new skills yourself.
Divorce financial planning is an evolving niche practice in which financial advisors work with clients and allied divorce professionals before, during and after divorce. A divorce financial planner is a fee-only practitioner who charges an hourly fee for unbiased and objective financial expertise. Like a NAPFA-Registered Financial Advisor(TM), a divorce financial planner places the clients’ interests first and provides comprehensive financial planning that guides individuals to a reasonable, practical and workable outcome. Combining a CFP(r) with additional certification, a Certified Divorce Financial Advisor ™ is trained specifically in the financial issues of divorce and has an interdisciplinary knowledge of practical standards and state divorce laws.
Divorce financial planning is similar to financial planning, but with the added challenges of highly charged emotional and unique divorce laws of the jurisdiction in which parties live. A divorce financial planner works within a legal setting, as we supplement the efforts of the legal professional in litigation, mediation, or collaborative divorce.
Our skills might be called upon from the outset of the divorce process (or even in the preparation for a divorce), at any point during the process, or post-divorce to assist with implementing the terms of the agreement. Therefore, it is important for the planner to define the scope of the engagement and the tasks to be performed, and to have all parties acknowledge and confirm that agreement. (The tasks may change over time, as new needs arise.)
A divorce financial planner can help a client with these tasks as well as others:
- Gathering, organizing, and preparing documentation of income, expenses, assets, and liabilities:
- Preparing financial reports within the context of divorce laws specific to a state;
- Providing ongoing financial education, guidance, and analysis throughout the divorce process;
- Making and explaining projections for the long-term impact of financial decisions and related tax implications; and
- Assisting the client with post-divorce asset transfers, estate planning, and development of the long-term financial planning goals.
In a divorce, each party experiences a significant shift in their financial situation.
Without assistance, the changes that occur can greatly affect a client’s financial well-being. That’s why a divorce financial planner will help a client answer questions such as:
- How much house can I afford?
- How much life insurance do I need?
- How do I prioritize which debts to pay first?
- How do I protect my credit rating from my spouse’s negative actions?
- Is the spouse’s share of a pension limited to the amount of earnings during the marriage only, or will it be increased by work after the divorce?
- What are the guidelines for dividing assets during a divorce?
- What does it mean to hide assets, and how do we find the assets?
- How much may “fault” for the divorce influence a financial settlement?
- What are the tax implications of child support, alimony, or unallocated support?
- How do I plan for the unexpected? How do I plan for my future?
- What are the financial priorities post-divorce? Is there a checklist of common tasks?
A divorce financial planner is the point person for pulling all of the historic information together, as well as for making specific financial recommendations that enable an individual to move forward post-divorce with a sense of confidence and security. Ultimately, a divorce financial planner can educate clients, manage their financial expectations, ensure they make well-informed decisions, give peace of mind that the settlement is practical, and increase the clients’ satisfaction with legal process.
ASSN. of Divorce Financial Professionals Host Conference in September: Discount for NAPFA Members:
Obtaining the skills to be an effective divorce financial planner can require specialized training, continuing education, knowledge on how to use specialized software, and pertinent credentials and designations. These have been defined by the Association of Divorce Financial Planners (ADFP) for those aspiring to do this work in any legal setting. The mission of the ADFP (www.divorceandfinance.org) is to heighten awareness of the benefits of divorce financial planning so that it becomes an integral part of the divorce process and to establish protocols and standards for divorce financial planners.
To learn more about divorce financial planning, attend the 10th Annual Conference of the ADFP on September 21-22 at the Doral Arrowwood resort in Ryebrook, NY. NAPFA members will be offered the ADFP membership rate for conference registration.