# LLM.txt - Website Content Structure
# Generated: 2025-10-09T15:18:01.868Z
# Source: https://institutedfa.com
---
### Page: https://institutedfa.com/
Title: Find a Certified Divorce Financial Analyst (CDFA) Professionals
Meta Description: Discover the Certified Divorce Financial Analyst (CDFA) designation. Learn about the role, certification process, and IDFA's commitment to diversity.
Language: en-US
Canonical URL: https://institutedfa.com/
## Headings Structure:
H1: The Institute for Divorce Financial Analysts (IDFA®) is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena.
The Institute for Divorce Finance Analysts® acknowledges and supports the importance of diversity, equity, inclusion, and belonging within its professional organization.
This support and acknowledgment highlight a commitment to fostering and encouraging a membership culture dedicated to an awareness of the impact of systemic racism, gender inequality, physical, neurodivergent, and emotional disabilities, the LGBTQIA+ community and
other historically underrepresented groups with the goal of embracing the uniqueness of all
individuals.
H2: Already a CDFA?
H2: Become a CDFA
H2: Buy Products
H1: The Institute for Divorce Financial Analysts (IDFA®)
H1: What are you waiting for? Register today to become a CDFA® professional.
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: The Institute for Divorce Financial Analysts (IDFA®) is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena.
The Institute for Divorce Finance Analysts® acknowledges and supports the importance of diversity, equity, inclusion, and belonging within its professional organization.
This support and acknowledgment highlight a commitment to fostering and encouraging a membership culture dedicated to an awareness of the impact of systemic racism, gender inequality, physical, neurodivergent, and emotional disabilities, the LGBTQIA+ community and
other historically underrepresented groups with the goal of embracing the uniqueness of all
individuals.
H2: Already a CDFA?
H2: Become a CDFA
H2: Buy Products
H1: The Institute for Divorce Financial Analysts (IDFA®)
H4: Success Stories
H1: What are you waiting for? Register today to become a CDFA® professional.
The Institute for Divorce Financial Analysts (IDFA®) is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena.
The Institute for Divorce Finance Analysts® acknowledges and supports the importance of diversity, equity, inclusion, and belonging within its professional organization.
This support and acknowledgment highlight a commitment to fostering and encouraging a membership culture dedicated to an awareness of the impact of systemic racism, gender inequality, physical, neurodivergent, and emotional disabilities, the LGBTQIA+ community and
other historically underrepresented groups with the goal of embracing the uniqueness of all
individuals.
CDFA Professionals are in demand! More than two million North Americans will divorce this year and 100% of divorces involve financial settlements.
Find the modules, exams, marketing materials and books that you need to complete the requirements for your IDFA certification.
Founded in 1993, IDFA provides specialized training to accounting, financial, and legal professionals in the field of pre-divorce financial analysis. Over the years, we have certified more than 5,000 professionals in the US and Canada as Certified Divorce Financial Analyst® (CDFA®) professionals.
The Institute provides comprehensive training using a variety of knowledge and skill-building techniques. CDFA candidates learn how to help their clients with financial issues that will affect the rest of their lives, including:
To acquire the designation, a candidate must successfully pass the exam and be in good standing with their Broker/Dealer(if applicable) and the FINRA/SEC or any other licensing or regulatory agency.
-Barbara Shapiro (CFP®, CDFA®, CFS, EdM, MSF), Dedham, MA
---
### Page: https://institutedfa.com/about-cdfa-course/
Title: How To Become A Certified Divorce Financial Analyst - CDFA Training
Meta Description: Divorce Financial Training: CDFA Training Courses, Self-Paced eLearning, Online Classes, Divorce Financial Analysis: Fall 2021, Winter 2022, Spring 2022.
Language: en-US
Canonical URL: https://institutedfa.com/about-cdfa-course/
## Headings Structure:
H1: Become a CDFA Professional
H3: Eligibility Requirements
H3: Non-discrimination
H3: ADA Accommodation Policy and Procedures
H2: Paths to Certification
H3: CDFA® Examination
H3: Learning Objectives
H2: Maintaining Your Designation
H2: Continuing Education (CE) Eligibility
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Become a CDFA Professional
H3: Eligibility Requirements
H3: Non-discrimination
H3: ADA Accommodation Policy and Procedures
H2: Paths to Certification
H3: CDFA® Examination
H3: Learning Objectives
H2: Maintaining Your Designation
H2: Continuing Education (CE) Eligibility
The Certified Divorce Financial Analyst (CDFA®) Program is designed to prepare you as an expert on the financial aspects of divorce. For many clients, divorce is the largest financial transaction of their lives. The role of a CDFA® professional is to address the special financial issues of divorce with data to help achieve equitable settlements.
Candidates must now have a bachelor’s degree with three years of on-the job experience or, if no bachelor’s degree, five years of relevant experience. Experience has been defined as the following:
Experience in three or more of the following:
A candidate will have to report their experience and have it approved prior to using the CDFA marks. Experience will be submitted through the candidate’s profile and will be reviewed by IDFA staff. Divorce Financial Analysis is the application of the discipline of financial planning to settlement strategies in divorce. The process requires the synthesis of tax, insurance, retirement, and other areas of knowledge with their specific application to divorce. The eligibility requirements were established by the Board of Advisors and reflect the fact that this is not an entry-level designation but an advanced program.
IDFA understands that the financial industry encompasses a broad range of organizations. To see the full list of designations recognized by IDFA, see our FAQs page. Divorce industry experience is considered on a case-by-case basis. If you have any questions about this eligibility requirement, please contact support@InstituteDFA.com.
Certitrek and its subsidiaries including FIA dba Institute for Divorce Financial Analysis will admit candidates without regard to age, sex, race color, national origin, disability, religion, sexual orientation, or marital status to all rights, privileges, programs, and examinations. IDFA will not discriminate based on age, sex, race, color, national origin, disability, religion, sexual orientation, or marital status in the administration of its certification and recertification policies.
In compliance with the Americans with Disabilities Act, IDFA will provide reasonable accommodations to disabled candidates except when the accommodation would change the construct being measured and jeopardize the validity of the exam scores. Requests must be made at least 30 days prior to the testing date to: Institute for Divorce Financial Analysts, 3622 Lyckan Parkway, Ste. 3003, Durham, NC 27707 or info@institutedfa.com. The candidate must provide a signed letter from a health care provider or other appropriate professional on the professional’s letterhead (including the title, address, and phone number of the professional) that describes the disability, length of time the candidate has been a patient, and the requested testing accommodation.
All candidates—whether or not they purchase IDFA’s training—are assessed against the same published exam blueprint and psychometrically valid examination. Success depends solely on demonstrated competence, not on participation in IDFA-offered training. The inclusion of exam vouchers within a training package is an administrative convenience only, not a condition of eligibility or advantage in testing Exam vouchers are available directly from Prometric.
There are currently four methods of pursuing the CDFA certification. Here is a brief summary of each option and what is included in the package:
1. Exam Only. You may purchase the exam vouchers from IDFA or Prometric and then schedule and take the examination. A blueprint of the current exam topics is available on our website and there is no requirement that you purchase any texts or testing materials from IDFA. Cost: $495
2. Self Study. You may purchase the textbook (hard copy or pdf). This option includes an exam voucher at no additional cost, access to the IDFA Insider student forum, and is designed for individuals who prefer to read and master the materials independently. Cost: Hard Copy $1,675; PDF $1,600
3. Self-Paced eLearning. This program is divided into ten modules that each include digital text, a video lecture, and a unit quiz. In addition, eLearning provides a calculator tutorial, a 150 question practice exam and the exam voucher. Access to the IDFA Insider Student forum is included with all eLearning programs. Cost: $1,675
4. Virtual Classroom. This program is offered periodically and includes everything in the self-paced learning program supplemented with a weekly live call to review the materials and answer any questions the participants may have. Cost: $1,875
Access to Resources in IDFA Learning
Divorce Financial Analysis Textbook
Interactive eLearning Modules
Downloadable Templates and Job Aids
Links to External Resources
Weekly Live Classes (10)
The examination consists of 150 multiple-choice questions. Candidates have four hours to complete the examination. Candidates must complete the examination with a passing score to receive the CDFA designation.
All exams are taken at a Prometric testing center, which has locations across the United States. To find a testing center in your area, go to www.prometric.com, search 'IDFA,' and then click 'Find a Test Center.' You can also contact us at 800-875-1760 or support@InstituteDFA.com.
CDFA® Exam Blueprint 2024
CDFA candidates will study a broad range of topics regarding the financial aspects of divorce including:• Overview of divorce laws and procedures;• Marital vs. separate property;• Pensions and retirement plans;• Options for the marital home;• Fundamentals of child and spousal support;• Tax issues related to selling or transferring property;• Debt, credit, and bankruptcy;
Once you complete the CDFA® course, your designation is valid for one year, after which you must pay a $345 annual reinstatement fee. To assure continuing competency in tax codes, legislative and other ongoing developments in the field of divorce financial analysis, you must report 30 hours of divorce-related continuing education every two years. In order to maintain the credibility and integrity of the certification process, IDFA reserves the right to verify any information provided on renewal applications. Requests for verification may be made prior to recertification or at a future time. 100% percent of certification renewal applications will be reviewed to ensure that all renewal requirements are met. If any areas of non-compliance are identified within the recertification application, the individual will have 30 days to submit any required information. If the required information is not provided, the individual’s certification will expire at the end of the allowed time or on the normal expiration date (whichever comes last).
Divorce Financial Analysis program qualifies for 20.5 hours of CFP Board Credit. For lawyers and accountants, consider using this course as a CPD learning activity in your Continuing Professional Development Plan.
---
### Page: https://institutedfa.com/about-cdfa-professionals/
Title: Become a CDFA Professional
Language: en-US
Canonical URL: https://institutedfa.com/about-cdfa-professionals/
## Headings Structure:
H1: Become a CDFA Professional
H2: Financial Expertise and Strategy
H2: Data Collection and Analysis
H3: Annual Stakeholder Report
H3: A Look At the Niche
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Become a CDFA Professional
H2: Financial Expertise and Strategy
H2: Data Collection and Analysis
H3: Annual Stakeholder Report
H3: A Look At the Niche
A CDFA® professional is a financial professional skilled at analyzing data and providing expertise on the financial issues of divorce. The role of the CDFA® professional is to assist the client and his or her attorney to understand how the decisions he or she makes today will impact the client’s financial future. A CDFA® can take on many roles in the divorce process:
CDFA® professionals provide the client and attorney with data analysis that shows the financial effect of any given settlement. They become part of the divorce team and provide support on financial issues such as:
Much of a CDFA® professional’s role is collect the client’s financial data and perform analysis. CDFAs can help manage a client’s expectations of their financial future by presenting different scenarios and talking through the client’s budget and expenses. CDFAs are trained to:
---
### Page: https://institutedfa.com/about-cdfas/
Title: About CDFA Professionals | Financial Professionals In The Divorce Arena
Meta Description: IDFA™ is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena. Learn more.
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Education providers may register their programs with IDFA. For a full guide to our terms and conditions, please see our CE
Provider Guide.
To get started with listing your CE programs with IDFA, register as a CE provider.
---
### Page: https://institutedfa.com/ce-registration/
Title: CE Sponsor Registration
Meta Description: CE Sponsor Registration
Language: en-US
Canonical URL: https://institutedfa.com/ce-registration/
## Headings Structure:
H1: CE Sponsor Registration
H1: Login Information
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: CE Sponsor Registration
H1: Login Information
---
### Page: https://institutedfa.com/complaint-process
Title: Complaint Process
Language: en-US
Canonical URL: https://institutedfa.com/complaint-process
## Headings Structure:
H1: Complaint Process
H3: Investigation Process
H3: Grounds for Disciplinary Investigation
H3: Forms of Discipline
H3: Reinstatement After Discipline
H3: Confidentiality of Proceedings
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Complaint Process
H3: Investigation Process
H3: Grounds for Disciplinary Investigation
H3: Forms of Discipline
H3: Reinstatement After Discipline
H3: Confidentiality of Proceedings
IDFA’s Ethics Committee investigates complaints against Certified Divorce Financial Analyst (CDFA®) professionals. All letters of complaint should be sent to:Institute for Divorce Financial AnalystsAttention: CEO3622 Lyckan Parkway, Suite 3003Durham, NC 27707Email: Click HereSubject: Complaint against CDFA professional
To determine whether an individual is currently a member in good standing with IDFA, please search the IDFA database at www.institutedfa.com/cdfaSearch.php
IDFA has adopted a “Code of Ethics and Professional Responsibility” (“Code”), which establishes minimum standards of acceptable professional conduct for individuals entitled to use the CDFA certification mark and the marks CDFA and Certified Divorce Financial Analyst (collectively, “the marks”). A CDFA designee’s use of the marks is a proclamation to the public that the CDFA designee is a person that members of the public can trust for advice regarding the financial aspects of divorce. A CDFA designee will be true to that trust, will hold inviolate the confidences of the client, and will competently fulfill his/her responsibilities to the client. Adherence to the Code is mandatory for all CDFA designees, and its provisions will be strictly enforced by the IDFA. Non-compliance may result in certification revocation.
IDFA action as a result of a complaint can result in the following forms of discipline:
The disciplinary action to be taken by the IDFA will be determined by the IDFA on a case-by-case basis in its discretion.
Dismissals and private censures shall be handled confidentially, to the extent possible. The IDFA will make such disclosures as are required in order to satisfy the requirements of law or the lawful orders or processes of the court or other governmental body or agency or as reasonably required for any regulatory compliance. Suspensions and Revocations will be made available to the public at the discretion of the IDFA.
NOTE: This Policy shall be administered in the sole discretion of the IDFA. The IDFA reserves the right to modify this policy at any time in its discretion. This policy replaces any prior policy or policies regarding the same subject matter.
---
### Page: https://institutedfa.com/complaint-process/
Title: Complaint Process
Language: en-US
Canonical URL: https://institutedfa.com/complaint-process/
## Headings Structure:
H1: Complaint Process
H3: Investigation Process
H3: Grounds for Disciplinary Investigation
H3: Forms of Discipline
H3: Reinstatement After Discipline
H3: Confidentiality of Proceedings
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Complaint Process
H3: Investigation Process
H3: Grounds for Disciplinary Investigation
H3: Forms of Discipline
H3: Reinstatement After Discipline
H3: Confidentiality of Proceedings
IDFA’s Ethics Committee investigates complaints against Certified Divorce Financial Analyst (CDFA®) professionals. All letters of complaint should be sent to:Institute for Divorce Financial AnalystsAttention: CEO3622 Lyckan Parkway, Suite 3003Durham, NC 27707Email: Click HereSubject: Complaint against CDFA professional
To determine whether an individual is currently a member in good standing with IDFA, please search the IDFA database at www.institutedfa.com/cdfaSearch.php
IDFA has adopted a “Code of Ethics and Professional Responsibility” (“Code”), which establishes minimum standards of acceptable professional conduct for individuals entitled to use the CDFA certification mark and the marks CDFA and Certified Divorce Financial Analyst (collectively, “the marks”). A CDFA designee’s use of the marks is a proclamation to the public that the CDFA designee is a person that members of the public can trust for advice regarding the financial aspects of divorce. A CDFA designee will be true to that trust, will hold inviolate the confidences of the client, and will competently fulfill his/her responsibilities to the client. Adherence to the Code is mandatory for all CDFA designees, and its provisions will be strictly enforced by the IDFA. Non-compliance may result in certification revocation.
IDFA action as a result of a complaint can result in the following forms of discipline:
The disciplinary action to be taken by the IDFA will be determined by the IDFA on a case-by-case basis in its discretion.
Dismissals and private censures shall be handled confidentially, to the extent possible. The IDFA will make such disclosures as are required in order to satisfy the requirements of law or the lawful orders or processes of the court or other governmental body or agency or as reasonably required for any regulatory compliance. Suspensions and Revocations will be made available to the public at the discretion of the IDFA.
NOTE: This Policy shall be administered in the sole discretion of the IDFA. The IDFA reserves the right to modify this policy at any time in its discretion. This policy replaces any prior policy or policies regarding the same subject matter.
---
### Page: https://institutedfa.com/contact/
Title: Contact Dedicated Professionals at the IDFA Office
Meta Description: Have a question? Or maybe you just want some more information. Reach out to the team at IDFA here!
Language: en-US
Canonical URL: https://institutedfa.com/contact/
## Headings Structure:
H1: Contact
H2: support@institutedfa.com
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Contact
H2: support@institutedfa.com
Head Office:3622 Lyckan Parkway, Suite 3003Durham, NC 27707United States of America
Toll-Free: 800.875.1760
---
### Page: https://institutedfa.com/disciplinary-rules/
Title: IDFA Disciplinary Rules & Procedures
Meta Description: Read the complete statement of IDFA disciplinary rules and procedures.
Language: en-US
Canonical URL: https://institutedfa.com/disciplinary-rules/
## Headings Structure:
H1: Rules & Policies
H2: Introduction
H2: Grounds for Disciplinary Investigation:
H2: Forms of Discipline
H2: Investigation Process:
H2: Reinstatement After Discipline
H2: Confidentiality of Proceedings
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Rules & Policies
H2: Introduction
H2: Grounds for Disciplinary Investigation:
H2: Forms of Discipline
H2: Investigation Process:
H2: Reinstatement After Discipline
H2: Confidentiality of Proceedings
The IDFA has adopted a Code of Ethics and Professional Responsibility (“Code”), which establishes minimum standards of acceptable professional conduct for individuals entitled to use the CDFA certification mark and the marks CDFA and Certified Divorce Financial Analyst (collectively, “the marks”). A CDFA designee’s use of the marks is a proclamation to the public that the CDFA designee is a person that members of the public can trust for advice regarding the financial aspects of divorce. A CDFA designee will be true to that trust, will hold inviolate the confidences of the client, and will competently fulfill his/her responsibilities to the client. Adherence to the Code is mandatory for all CDFA designees, and its provisions will be strictly enforced by the IDFA. Non-compliance may result in certification revocation.
IDFA action as a result of a complaint can result in the following forms of discipline:
The disciplinary action to be taken by the IDFA will be determined by the IDFA on a case by case basis in its discretion.
Dismissals and private censures shall be handled confidentially, to the extent possible. The IDFA will make such disclosures as are required in order to satisfy the requirements of law or the lawful orders or processes of the court or other governmental body or agency or as reasonably required for any regulatory compliance. Suspensions and Revocations will be made available to the public at the discretion of the IDFA.
---
### Page: https://institutedfa.com/divorce-faqs
Title: Divorce FAQs | Certified Divorce Financial Analyst FAQs
Meta Description: From eligibility requirements, exam details to concerns about the CDFA, find answers to FAQs to the Institute for Divorce Financial Analysts (IDFA).
Language: en-US
Canonical URL: https://institutedfa.com/divorce-faqs
## Headings Structure:
H1: FAQs
H3: Investigation Process
H3: Grounds for Disciplinary Investigation
H3: Forms of Discipline
H3: Reinstatement After Discipline
H3: Confidentiality of Proceedings
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: FAQs
H4: How do I become a CDFA® professional?
H4: Are there any eligibility requirements for taking the CDFA® Program?
H4: How long does it take to get the designation?
H4: Is there a time limit for completing the exams?
H4: How do I prepare to take the exam?
H4: What are the examination and retake fees?
H4: How do I schedule my exams?
H4: How do I reschedule my exams?
H4: Can I get a refund should I decide I am no longer interested in completing the course?
H4: Are there annual fees or Continuing Education (CE) requirements?
H4: Does a CDFA® replace a lawyer in a divorce case?
H4: How do CDFA® professionals fit into the divorce process?
H4: How does the Certified Divorce Financial Analyst’s role differ from that of other financial professionals?
H4: I wish to file a complaint against a CDFA® professional. What is the process for doing so?
H3: Investigation Process
H3: Grounds for Disciplinary Investigation
H3: Forms of Discipline
H3: Reinstatement After Discipline
H3: Confidentiality of Proceedings
H4: I am deploying for military service. How can I maintain my designation?
Candidates become CDFA® professionals by passing the certification examination. Candidates may purchase the exam voucher or purchase the CDFA program which includes the Divorce Analysis text and an exam voucher.The exam includes the following topics:
For a complete list of the exam topics please download the examination blueprint.
Candidates must have a bachelor's degree with three years of on-the job experience or, if no bachelor's degree, five years of relevant experience. Experience has been defined as the following:
Candidates will have to report their experience and have it approved prior to using the CDFA marks. Experience will be submitted through the candidates' profile and will be reviewed by IDFA staff.
Non-discriminationCertitrek and its subsidiaries including FIA dba Institute for Divorce Financial Analysis will admit candidates without regard to age, sex, race color, national origin, disability, religion, sexual orientation, or marital status to all rights, privileges, programs, and examinations. IDFA will not discriminate based on age, sex, race, color, national origin, disability, religion, sexual orientation, or marital status in the administration of its certification and recertification policies.
The program is designed to be completed in one year, most participants complete in three to four months.
The exam fee is included in the purchase of the program. There is no additional charge to take the exam for those individuals that purchase the complete program. If you fail the exam, you may retake it for a fee of $225 each time you retake the exam. There is no limit on the number of times you may retake the exam. However, there is a 30-day waiting period after failing the exam and you may only take the exam three times in any twelve month period. You must complete the waiting period before retaking the exam.
Candidates will need to set up an account with the approved testing provider for IDFA. You will receive information on how to set up your account, as well as authorization code and voucher code when you register for the course.
Contact us to reschedule your exam at support@institutedfa.com or 800-875-1760.
If you are not satisfied with any of the program within 30 days of receiving your materials, you can get your money back minus a service charge fee by:
NO refund will be given after 30 days.
For more information regarding refund, complaint, and/or program cancellation policies, please contact our office at 1-800-875-1760.
Your Certified Divorce Financial Analyst® (CDFA®) designation is valid for one year from your date of certification, after which an annual renewal fee of $345 applies. Additionally, you must obtain 30 hours of divorce-related continuing education (CE) every two years and remain in good standing with IDFA. The two-year period starts the first day of the month in which the participant completes the course and is awarded the CDFA designation. For instance, if you complete the course on 9/18/2015, then you must report to IDFA 30 CE credits for the time period from 9/1/2015 to 9/1/2017. You must report another 30 CE credits for the time period from 9/1/2017 to 9/1/2019, and so on.
One hour of CE credit will be granted by IDFA for each actual hour attended on the topics listed below. Additional CE credits may be obtained by teaching classes on divorce or by completing courses on the subject of divorce. A course or webinar may only be submitted one time per renewal period. In the event that continuing education hours are not accepted, you may request review of the material by emailing proof of attendance and an outline of the material presented to support@institutedfa.com. Incomplete requests for review will not be considered. Continuing education hours must be reported on the IDFA website prior to reinstatement date. Courses related to the following topics are suitable for continuing education credit:
The IDFA also offers an annual conference where you can obtain CE credits for the CDFA designation. This is a great opportunity to:
A Certified Divorce Financial Analyst is not a lawyer, and he/she cannot provide legal advice. Practicing law without a license is a criminal offense! If you do not have a license to practice law, you may not give legal advice or practice law in any other way. As a CDFA professional, your work should be limited to the financial analysis relating to the divorce – leave the legal interpretation and advising to the lawyers.The role of the CDFA professional is to assist the lawyer with financial issues related to the divorce – not to replace the lawyer. The CDFA should always recommend, if not require, that any client should hire legal counsel. It is critical that clients seek their own legal counsel to ensure their interests are properly represented.
A CDFA professional's role is to take information provided by the clients and their lawyers, analyze the proposals, and show them the results of the analysis. A CDFA will also show the financial results of different options that are suggested by their clients and/or lawyers.
A CDFA professional needs to be flexible. There are many different roles they will play in their work with lawyers:
Not only will a CDFA professional be a member of the team, but he/she will be a critical member of that team. At any point in the process, they may play any one or all of the roles depending on when they get involved in the divorce process.
As you can see, there are many roles that the CDFA professional may play in assisting his/her clients and their attorneys achieve the most advantageous settlement. But to be effective in these roles, the CDFA® must have a strong working knowledge of the financial issues related to divorce.
There are many designations for a financial expert, including: financial planner, Certified Financial Planner™ (CFP®), Chartered Financial Consultant (ChFC®), Certified Public Accountant (CPA), Chartered Accountant (CA), Certified General Accountant (CGA), accountant, and Certified Divorce Financial Analyst® (CDFA®).
The role of the financial planner, CFP®, or ChFC® is to help people achieve their financial goals regardless of whether they are divorcing or happily married. After determining the client’s goals, the next step is to take an inventory of current assets and liabilities and then the planner looks at what needs to be done to achieve the client’s goals.
These goals can be from one year to 50 years in the future. To look that far into the future, certain assumptions need to be made. Assumptions include income, expenses, inflation rates, interest rates, and rates of return on investments. The assumptions need to be reviewed on a regular basis. If during the review process the planner determines that the client is not on track, the planner will then make recommendations as to what changes need to be made to get back on track. In other words, the financial planner looks at financial results in the future based on certain assumptions made today to see if the client is on track to meet their stated goals and objectives.
Conversely, an accountant typically looks at the details of the scenario as it is today and makes no future projections. In a divorce, they are hired to calculate the tax effect of dividing property and the effect of spousal and child support for one or two years. They typically do not project further into the future. They may also be retained to perform an audit of account activity or to perform forensic accounting functions to help find “hidden assets”.
To best meet the needs of divorcing clients, you need a blend of these two ideologies; the CDFA designation was created to fill this need. The role of the CDFA professional is to assist the client and his/her attorney to understand how the financial decisions he/she makes today will impact the client’s financial future based on certain assumptions.
A CDFA professional is someone who comes from a financial planning, accounting, or legal background and goes through an intensive training program to become skilled at analyzing and providing expertise on the financial issues of divorce. The CDFA professional:
IDFA’s Ethics Committee investigates complaints against Certified Divorce Financial Analyst (CDFA) professionals. All letters of complaint should be sent to: Institute for Divorce Financial Analysts Attention: CEO3622 Lyckan Parkway, Suite 3003 Durham, NC 27707 Email: Click Here Subject: Complaint against CDFA professional
To determine whether an individual is currently a member in good standing with IDFA, please search the IDFA database at www.institutedfa.com/cdfaSearch.php
IDFA has adopted a “Code of Ethics and Professional Responsibility” (“Code”), which establishes minimum standards of acceptable professional conduct for individuals entitled to use the CDFA certification mark and the marks CDFA and Certified Divorce Financial Analyst (collectively, “the marks”). A CDFA designee’s use of the marks is a proclamation to the public that the CDFA designee is a person that members of the public can trust for advice regarding the financial aspects of divorce. A CDFA designee will be true to that trust, will hold inviolate the confidences of the client, and will competently fulfill his/her responsibilities to the client. Adherence to the Code is mandatory for all CDFA designees, and its provisions will be strictly enforced by the IDFA. Non-compliance may result in certification revocation.
IDFA action as a result of a complaint can result in the following forms of discipline:
The disciplinary action to be taken by the IDFA will be determined by the IDFA on a case-by-case basis in its discretion.
Dismissals and private censures shall be handled confidentially, to the extent possible. The IDFA will make such disclosures as are required in order to satisfy the requirements of law or the lawful orders or processes of the court or other governmental body or agency or as reasonably required for any regulatory compliance. Suspensions and Revocations will be made available to the public at the discretion of the IDFA.
NOTE: This Policy shall be administered in the sole discretion of the IDFA. The IDFA reserves the right to modify this policy at any time in its discretion. This policy replaces any prior policy or policies regarding the same subject matter.
IDFA will waive annual CDFA dues for any members of the military while they are deployed to active service. However, these CDFA professionals must complete all CE requirements to remain in good standing.
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### Page: https://institutedfa.com/divorce-faqs/
Title: Divorce FAQs | Certified Divorce Financial Analyst FAQs
Meta Description: From eligibility requirements, exam details to concerns about the CDFA, find answers to FAQs to the Institute for Divorce Financial Analysts (IDFA).
Language: en-US
Canonical URL: https://institutedfa.com/divorce-faqs/
## Headings Structure:
H1: FAQs
H3: Investigation Process
H3: Grounds for Disciplinary Investigation
H3: Forms of Discipline
H3: Reinstatement After Discipline
H3: Confidentiality of Proceedings
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: FAQs
H4: How do I become a CDFA® professional?
H4: Are there any eligibility requirements for taking the CDFA® Program?
H4: How long does it take to get the designation?
H4: Is there a time limit for completing the exams?
H4: How do I prepare to take the exam?
H4: What are the examination and retake fees?
H4: How do I schedule my exams?
H4: How do I reschedule my exams?
H4: Can I get a refund should I decide I am no longer interested in completing the course?
H4: Are there annual fees or Continuing Education (CE) requirements?
H4: Does a CDFA® replace a lawyer in a divorce case?
H4: How do CDFA® professionals fit into the divorce process?
H4: How does the Certified Divorce Financial Analyst’s role differ from that of other financial professionals?
H4: I wish to file a complaint against a CDFA® professional. What is the process for doing so?
H3: Investigation Process
H3: Grounds for Disciplinary Investigation
H3: Forms of Discipline
H3: Reinstatement After Discipline
H3: Confidentiality of Proceedings
H4: I am deploying for military service. How can I maintain my designation?
Candidates become CDFA® professionals by passing the certification examination. Candidates may purchase the exam voucher or purchase the CDFA program which includes the Divorce Analysis text and an exam voucher.The exam includes the following topics:
For a complete list of the exam topics please download the examination blueprint.
Candidates must have a bachelor's degree with three years of on-the job experience or, if no bachelor's degree, five years of relevant experience. Experience has been defined as the following:
Candidates will have to report their experience and have it approved prior to using the CDFA marks. Experience will be submitted through the candidates' profile and will be reviewed by IDFA staff.
Non-discriminationCertitrek and its subsidiaries including FIA dba Institute for Divorce Financial Analysis will admit candidates without regard to age, sex, race color, national origin, disability, religion, sexual orientation, or marital status to all rights, privileges, programs, and examinations. IDFA will not discriminate based on age, sex, race, color, national origin, disability, religion, sexual orientation, or marital status in the administration of its certification and recertification policies.
The program is designed to be completed in one year, most participants complete in three to four months.
The exam fee is included in the purchase of the program. There is no additional charge to take the exam for those individuals that purchase the complete program. If you fail the exam, you may retake it for a fee of $225 each time you retake the exam. There is no limit on the number of times you may retake the exam. However, there is a 30-day waiting period after failing the exam and you may only take the exam three times in any twelve month period. You must complete the waiting period before retaking the exam.
Candidates will need to set up an account with the approved testing provider for IDFA. You will receive information on how to set up your account, as well as authorization code and voucher code when you register for the course.
Contact us to reschedule your exam at support@institutedfa.com or 800-875-1760.
If you are not satisfied with any of the program within 30 days of receiving your materials, you can get your money back minus a service charge fee by:
NO refund will be given after 30 days.
For more information regarding refund, complaint, and/or program cancellation policies, please contact our office at 1-800-875-1760.
Your Certified Divorce Financial Analyst® (CDFA®) designation is valid for one year from your date of certification, after which an annual renewal fee of $345 applies. Additionally, you must obtain 30 hours of divorce-related continuing education (CE) every two years and remain in good standing with IDFA. The two-year period starts the first day of the month in which the participant completes the course and is awarded the CDFA designation. For instance, if you complete the course on 9/18/2015, then you must report to IDFA 30 CE credits for the time period from 9/1/2015 to 9/1/2017. You must report another 30 CE credits for the time period from 9/1/2017 to 9/1/2019, and so on.
One hour of CE credit will be granted by IDFA for each actual hour attended on the topics listed below. Additional CE credits may be obtained by teaching classes on divorce or by completing courses on the subject of divorce. A course or webinar may only be submitted one time per renewal period. In the event that continuing education hours are not accepted, you may request review of the material by emailing proof of attendance and an outline of the material presented to support@institutedfa.com. Incomplete requests for review will not be considered. Continuing education hours must be reported on the IDFA website prior to reinstatement date. Courses related to the following topics are suitable for continuing education credit:
The IDFA also offers an annual conference where you can obtain CE credits for the CDFA designation. This is a great opportunity to:
A Certified Divorce Financial Analyst is not a lawyer, and he/she cannot provide legal advice. Practicing law without a license is a criminal offense! If you do not have a license to practice law, you may not give legal advice or practice law in any other way. As a CDFA professional, your work should be limited to the financial analysis relating to the divorce – leave the legal interpretation and advising to the lawyers.The role of the CDFA professional is to assist the lawyer with financial issues related to the divorce – not to replace the lawyer. The CDFA should always recommend, if not require, that any client should hire legal counsel. It is critical that clients seek their own legal counsel to ensure their interests are properly represented.
A CDFA professional's role is to take information provided by the clients and their lawyers, analyze the proposals, and show them the results of the analysis. A CDFA will also show the financial results of different options that are suggested by their clients and/or lawyers.
A CDFA professional needs to be flexible. There are many different roles they will play in their work with lawyers:
Not only will a CDFA professional be a member of the team, but he/she will be a critical member of that team. At any point in the process, they may play any one or all of the roles depending on when they get involved in the divorce process.
As you can see, there are many roles that the CDFA professional may play in assisting his/her clients and their attorneys achieve the most advantageous settlement. But to be effective in these roles, the CDFA® must have a strong working knowledge of the financial issues related to divorce.
There are many designations for a financial expert, including: financial planner, Certified Financial Planner™ (CFP®), Chartered Financial Consultant (ChFC®), Certified Public Accountant (CPA), Chartered Accountant (CA), Certified General Accountant (CGA), accountant, and Certified Divorce Financial Analyst® (CDFA®).
The role of the financial planner, CFP®, or ChFC® is to help people achieve their financial goals regardless of whether they are divorcing or happily married. After determining the client’s goals, the next step is to take an inventory of current assets and liabilities and then the planner looks at what needs to be done to achieve the client’s goals.
These goals can be from one year to 50 years in the future. To look that far into the future, certain assumptions need to be made. Assumptions include income, expenses, inflation rates, interest rates, and rates of return on investments. The assumptions need to be reviewed on a regular basis. If during the review process the planner determines that the client is not on track, the planner will then make recommendations as to what changes need to be made to get back on track. In other words, the financial planner looks at financial results in the future based on certain assumptions made today to see if the client is on track to meet their stated goals and objectives.
Conversely, an accountant typically looks at the details of the scenario as it is today and makes no future projections. In a divorce, they are hired to calculate the tax effect of dividing property and the effect of spousal and child support for one or two years. They typically do not project further into the future. They may also be retained to perform an audit of account activity or to perform forensic accounting functions to help find “hidden assets”.
To best meet the needs of divorcing clients, you need a blend of these two ideologies; the CDFA designation was created to fill this need. The role of the CDFA professional is to assist the client and his/her attorney to understand how the financial decisions he/she makes today will impact the client’s financial future based on certain assumptions.
A CDFA professional is someone who comes from a financial planning, accounting, or legal background and goes through an intensive training program to become skilled at analyzing and providing expertise on the financial issues of divorce. The CDFA professional:
IDFA’s Ethics Committee investigates complaints against Certified Divorce Financial Analyst (CDFA) professionals. All letters of complaint should be sent to: Institute for Divorce Financial Analysts Attention: CEO3622 Lyckan Parkway, Suite 3003 Durham, NC 27707 Email: Click Here Subject: Complaint against CDFA professional
To determine whether an individual is currently a member in good standing with IDFA, please search the IDFA database at www.institutedfa.com/cdfaSearch.php
IDFA has adopted a “Code of Ethics and Professional Responsibility” (“Code”), which establishes minimum standards of acceptable professional conduct for individuals entitled to use the CDFA certification mark and the marks CDFA and Certified Divorce Financial Analyst (collectively, “the marks”). A CDFA designee’s use of the marks is a proclamation to the public that the CDFA designee is a person that members of the public can trust for advice regarding the financial aspects of divorce. A CDFA designee will be true to that trust, will hold inviolate the confidences of the client, and will competently fulfill his/her responsibilities to the client. Adherence to the Code is mandatory for all CDFA designees, and its provisions will be strictly enforced by the IDFA. Non-compliance may result in certification revocation.
IDFA action as a result of a complaint can result in the following forms of discipline:
The disciplinary action to be taken by the IDFA will be determined by the IDFA on a case-by-case basis in its discretion.
Dismissals and private censures shall be handled confidentially, to the extent possible. The IDFA will make such disclosures as are required in order to satisfy the requirements of law or the lawful orders or processes of the court or other governmental body or agency or as reasonably required for any regulatory compliance. Suspensions and Revocations will be made available to the public at the discretion of the IDFA.
NOTE: This Policy shall be administered in the sole discretion of the IDFA. The IDFA reserves the right to modify this policy at any time in its discretion. This policy replaces any prior policy or policies regarding the same subject matter.
IDFA will waive annual CDFA dues for any members of the military while they are deployed to active service. However, these CDFA professionals must complete all CE requirements to remain in good standing.
---
### Page: https://institutedfa.com/divorce-financial-advisor-practice-standards/
Title: Divorce Financial Advisor Practice Standards | Professional CDFA Standards
Meta Description: The divorce financial advisor practice standards establish the level of professionalism that is expected of Certified Divorce Financial Analyst® (CDFA®) practitioners.
Language: en-US
Canonical URL: https://institutedfa.com/divorce-financial-advisor-practice-standards/
## Headings Structure:
H1: Rules & Policies
H3: Experience
H3: Education
H3: Divorce Financial Analyst Examination
H3: Ethics
H3: Ongoing CDFA Certification Requirements
H2: Divorce Financial Analyst Process
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Rules & Policies
H3: Experience
H3: Education
H3: Divorce Financial Analyst Examination
H3: Ethics
H3: Ongoing CDFA Certification Requirements
H2: Divorce Financial Analyst Process
The Divorce Financial Advisor Practice Standards establish the level of professionalism that is expected of Certified Divorce Financial Analyst® (CDFA®) practitioners. These principles-based Standards have been developed to provide guidance to those involved in divorce financial analyst services.
The Certified Divorce Financial Analyst certification process conveys to the public that those individuals who have been authorized to use the CDFA designation have met stringent professional standards and have agreed to adhere to the Code of Ethics and Professional Responsibility.
Candidates must have a bachelor's degree with three years of on-the job experience or if no bachelor's degree, five years of relevant experience. Experience has been defined as the following:
Candidates may petition the Board of Advisors for an exception to the eligibility requirements by writing to: Institute for Divorce Financial Analysts, 3622 Lyckan Parkway, Suite 3003, Durham NC 27707.
CDFA candidates must also develop their theoretical and practical understanding and knowledge of the financial aspects of divorce by completing a comprehensive course of study approved by the Institute for Divorce Financial Analysts™ (IDFA™).
CDFA candidates must complete a four-part Educational Curriculum and Certification Exam that tests their understanding and knowledge of the financial aspects of divorce. The candidate must also demonstrate the practical application of this knowledge in the divorce process by completing a comprehensive case study.
CDFA practitioners agree to abide by a strict code of professional conduct known as the IDFA Code of Ethics and Professional Responsibility, which sets forth their ethical responsibilities to the public, clients, employers and other professionals. The IDFA may perform a background check during this process and each CDFA candidate must disclose any investigations or legal proceedings relating to his or her professional or business conduct.
CDFA practitioners are required to maintain technical competence and to fulfill ethical obligations. Practitioners must pay an annual recertification fee of $345. Every two years, they must complete a minimum of thirty (30) hours of continuing education specifically related to the field of divorce.
In addition to the biennial continuing education requirement, all CDFA practitioners must voluntarily disclose any public, civil, criminal, or disciplinary actions that may have been taken against them during the past two years as part of the renewal process.
Although the scope of service for divorce financial engagements will vary, CDFA practitioners should use the following process:
Step #1: Establish and Define the Relationship with Client or Prospective Client
Step #2: Gather client data and information relevant to the engagement
Step #3: Completion of Analysis / Assignment
Step #4: Presentation and delivery of the work product / assignment
Step #5: Completion of Engagement
---
### Page: https://institutedfa.com/divorce-planning-code-ethics/
Title: Code of Ethics for Certified Divorce Financial Analysts®
Meta Description: The code of ethics applies to every Certified Divorce Financial Analyst designee and candidate in conducting divorce-analysis work. Read the full statement.
Language: en-US
Canonical URL: https://institutedfa.com/divorce-planning-code-ethics/
## Headings Structure:
H1: Rules & Policies
H3: Preamble
H3: Principles of Ethical Conduct
H3: Enforcement and Accountability
H3: Best Practices
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Rules & Policies
H3: Preamble
H3: Principles of Ethical Conduct
H3: Enforcement and Accountability
H3: Best Practices
H5: When Existing Clients Divorce
H5: General Best Practices
Divorce professionals serve individuals and families navigating one of life’s most challenging transitions. To uphold the integrity of our profession and protect those we serve, we adhere to the highest ethical standards. This Code of Ethics establishes principles to ensure confidentiality, professionalism, and the responsible provision of services.
The Code of Ethics and Professional Responsibility is provided as an expression of the ethical standards that the Institute for Divorce Financial Analysts® has adopted and every Certified Divorce Financial Analyst (CDFA®) has agreed to abide by. The code applies to every CDFA designee and candidate in conducting divorce-analysis work.
Ethics Rule 1. Integrity
Maintain the highest standard of honesty and integrity when dealing with colleagues, the IDFA, clients, or attorneys.
Avoid practices that would dishonor the profession, IDFA, or any of its members and employees
Ethics Rule 2. Confidentiality
CDFA professionals must maintain strict confidentiality regarding all client communications, records, and information, except where disclosure is required by law.
Reasonable measures must be taken to ensure data security and prevent unauthorized access to client information.
A CDFA professional shall hold client information to the highest standard of confidentiality. Short of client consent, IDFA disciplinary procedures or appropriate legal process, a CDFA professional shall not release any information about their client before, during, or after the divorce.
Ethics Rule 3. Avoidance of Legal Advice
CDFA professionals shall not provide legal advice under any circumstances. Clients seeking legal guidance must be directed to a qualified attorney.
Any legal information shared must be general in nature and not specific to an individual case.
CDFA Professionals must avoid any actions that could be construed as the unauthorized practice of law and proper disclosures should be included in emails and marketing materials.
A CDFA professional understands that, in order to practice law, one must be licensed. Under no circumstances will a CDFA professional represent that the CDFA certification is a license to practice law.
Ethics Rule 4. Competence
CDFA professionals must maintain a high level of competency in their respective fields through continuing education and professional development.
Services should only be provided within the CDFA professional’s scope of expertise.
CDFA professionals must recognize the limits of their expertise and refer clients to appropriate specialists when necessary.
Every CDFA should serve their clients competently, acquiring the knowledge and skill necessary to do so in the area of divorce financial analysis.
Ethics Rule 5. Objectivity
CDFA professionals must remain neutral and unbiased when assisting clients when hired as a neutral.
Conflicts of interest must be disclosed immediately, and appropriate steps must be taken to mitigate them.
CDFA professionals should not engage in any behavior that could create the appearance of favoritism or partiality when serving as a neutral or mediator.
CDFA professionals should not accept even nominal gifts when acting as a neutral.
CDFA professionals must make divorce financial analysis recommendations independent of the potential financial planning or investment management relationship to avoid conflicts of interest.
Ethics Rule 6. Professionalism
CDFA professionals must conduct themselves with honesty, integrity, and professionalism in all interactions.
False, misleading, or exaggerated claims about services or qualifications must not be made.
Professional boundaries must be respected at all times to maintain the integrity of the profession.
Whether dealing with clients, attorneys, IDFA, or any of its partners or subsidiaries, a CDFA professional will behave in a professional manner, especially given that divorces can be emotionally charged and sometimes combative situations.
Ethics Rule 7. Compliance
CDFA professionals must comply with all applicable laws, regulations, and professional standards governing their practice.
Ethical violations and misconduct should be reported to the appropriate regulatory bodies or professional organizations.
CDFA professionals should engage in ethical marketing and advertising practices that align with industry standards.
A CDFA professional will comply with any requests from the IDFA for information regarding complaints and adhere to IDFA’s disciplinary actions when necessary.
Failure to adhere to this Code of Ethics may result in disciplinary action, including censure, suspension or revocation of membership, as determined by the Institute for Divorce Financial Analysts. Ethical concerns and violations should be addressed through established review and enforcement procedures.
CDFA professionals must treat both clients equally and objectively.
One method, which is not required but may be considered, is to refer both clients to a CDFA professional outside their practice to ensure impartiality.
If continuing with both clients, ensure all correspondence and work are shared equally and maintain a neutral stance. Ask clients to sign a document agreeing that all correspondence and information will be shared equally.
Clearly outline the scope of engagement, including start and end dates, and avoid investment services until after the conclusion of the divorce engagement.
Obtain consent from both parties if entering an engagement with either party after the divorce.
If practicing in a Collaborative Group: be aware of Collaborative Divorce practice standards, which may limit post-divorce engagements.
Avoid discussing investment or insurance services during the divorce process unless legally required.
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### Page: https://institutedfa.com/find-a-cdfa
Title: Find a Certified Divorce Financial Analyst (CDFA) Professionals
Meta Description: Verify a divorce financial planner's certification with the Institute for Divorce Financial Analysts (IDFA). Find a CDFA® professional in your area.
Language: en-US
Canonical URL: https://institutedfa.com/find-a-cdfa
## Headings Structure:
H1: Find a CDFA® Professional
H2: Search for a CDFA® professional in your area.
H2: Verify a CDFA
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Find a CDFA® Professional
H2: Search for a CDFA® professional in your area.
H2: Verify a CDFA
This information is used only to verify an individual's certification status with the Institute for Divorce Financial Analysts and is not meant as an endorsement. IDFA encourages the public to avail itself of additional resources such as FINRA Broker Check https://brokercheck.finra.org/, the IIROC website www.iiroc.ca or most state insurance offices have an area on their website where you can check the license status of your agent, and some will also allow you to check if there are any complaints.
Enter city or zip/postal code or city to find nearby CDFAs:
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### Page: https://institutedfa.com/find-a-cdfa/
Title: Find a Certified Divorce Financial Analyst (CDFA) Professionals
Meta Description: Verify a divorce financial planner's certification with the Institute for Divorce Financial Analysts (IDFA). Find a CDFA® professional in your area.
Language: en-US
Canonical URL: https://institutedfa.com/find-a-cdfa/
## Headings Structure:
H1: Find a CDFA® Professional
H2: Search for a CDFA® professional in your area.
H2: Verify a CDFA
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Find a CDFA® Professional
H2: Search for a CDFA® professional in your area.
H2: Verify a CDFA
This information is used only to verify an individual's certification status with the Institute for Divorce Financial Analysts and is not meant as an endorsement. IDFA encourages the public to avail itself of additional resources such as FINRA Broker Check https://brokercheck.finra.org/, the IIROC website www.iiroc.ca or most state insurance offices have an area on their website where you can check the license status of your agent, and some will also allow you to check if there are any complaints.
Enter city or zip/postal code or city to find nearby CDFAs:
---
### Page: https://institutedfa.com/forgot-password/
Title: Forgot Password
Meta Description: Forgot Password
Language: en-US
Canonical URL: https://institutedfa.com/forgot-password/
## Headings Structure:
H1: Forgot Password
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Forgot Password
---
### Page: https://institutedfa.com/idfa-blog/
Title: IDFA Blog
Meta Description: IDFA Blog
Language: en-US
Canonical URL: https://institutedfa.com/idfa-blog/
## Headings Structure:
H1: IDFA Blog (US)
H2: Divorce & Dollars: 7 Smart Financial Planning Tips for a New Start
H3: How Financial Planning Month Empowers You to Navigate Divorce with Confidence
H2: Hidden Costs You May Not Have Considered When Moving During Divorce
H2: Sudden Income Deficit Syndrome: Recognizing and Addressing Manipulated Income in Divorce
H2: 10 Red Flags That Could Signal Financial Deception in Divorce
H2: Alimony: A Dual Challenge for Both Spouses
H2: Keys to Helping Improve Finances for Single Parents
H2: Embracing Financial Wellness After Divorce
H2: Finding Your Strength, Security, and a Little Sparkle
H2: How Retirement Impacts Spousal Support: What Every Client Should Know
H2: Egos, Sandboxes, and the Art of Playing Well With Others
H2: Divorce, Drive, and the Power of a Comeback: What F1 Racing Can Teach Us About Starting Over
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: IDFA Blog (US)
H2: Divorce & Dollars: 7 Smart Financial Planning Tips for a New Start
H3: How Financial Planning Month Empowers You to Navigate Divorce with Confidence
H2: Hidden Costs You May Not Have Considered When Moving During Divorce
H2: Sudden Income Deficit Syndrome: Recognizing and Addressing Manipulated Income in Divorce
H2: 10 Red Flags That Could Signal Financial Deception in Divorce
H2: Alimony: A Dual Challenge for Both Spouses
H2: Keys to Helping Improve Finances for Single Parents
H2: Embracing Financial Wellness After Divorce
H2: Finding Your Strength, Security, and a Little Sparkle
H2: How Retirement Impacts Spousal Support: What Every Client Should Know
H2: Egos, Sandboxes, and the Art of Playing Well With Others
H2: Divorce, Drive, and the Power of a Comeback: What F1 Racing Can Teach Us About Starting Over
Moving and divorce—they’re both life experiences that bring a lot of change, likely a lot of stress, and a lot of financial questions. And when these two events coincide, the change, stress, and money issues can start to pile up.
But there are proactive measures you can take to reduce the pressure and put yourself in the best financial position possible.
Divorce cases are rarely straightforward when it comes to finances, but few issues present as consistent and frustrating a challenge for practitioners as Sudden Income Deficit Syndrome. This phenomenon refers to the sharp and often suspicious decline in reported income by one spouse—typically coinciding with the onset of divorce. While the drop may be explained away as coincidental or circumstantial, more often than not it reflects a deliberate strategy designed to influence support calculations and asset division.
For attorneys, financial experts, and valuation professionals, understanding how Sudden Income Deficit Syndrome presents itself, why it occurs, and what forensic tools can expose it is essential for equitable outcomes.
Divorce requires honesty and transparency, especially when it comes to money. Unfortunately, not every spouse plays fair. Hidden accounts manipulated business records, or undisclosed debts can all skew the financial picture and leave one party at a disadvantage.
The good news? There are warning signs. By recognizing the red flags of financial deception early, you can take steps to uncover the truth and protect your client’s share of the marital estate.
Divorce is never just a legal process—it’s a life transition. When spousal support, or alimony, enters the picture, the stakes and emotions run even higher. Both the spouse paying and the spouse receiving face financial uncertainty, fear, and a need for clarity. As divorce professionals, our role is to help both sides move from overwhelm to empowerment with fair, informed, and sustainable solutions.
Single parents often face unique challenges, not just raising kids, but also creating a financial path toward success. With the cost of health care, food, school, and more ever increasing, being successful on one income is a huge barrier for more than 37 million parents — or roughly 30% of households in the United States.¹
While many moms and dads report struggles with finances, there are ways to help improve your finances and be proactive with your financial future in the short- and long-term.
I’ll never forget the first time I balanced my checkbook after my divorce—sitting at my kitchen table, coffee in hand, staring at numbers that felt like a foreign language. It wasn’t just about dollars and cents; it was about reclaiming my independence and rewriting the story of my life. Financial wellness, I soon learned, is not just for accountants and investment gurus. It’s for every woman who’s ever stared down a stack of bills and wondered, “Now what?”
If you’re over 45 and recently divorced, you’re not alone—and you’re not defeated. In fact, you’re standing on the edge of a new chapter, and your financial well-being is the key to unlocking it. I know it might sound daunting, but let’s sprinkle a little humor in here: If you can survive a family holiday dinner, you can tackle a budget spreadsheet.
When I walked out of the new F1 movie, I didn’t expect to be thinking about divorce - but I was. Not because the film had anything to do with family law or financial settlements, but because it captured something essential about the human spirit: the power of a comeback.
Whether you're a client navigating the difficult turns of divorce or a professional guiding others through the journey, there are powerful parallels between racing and reinventing your life.
A reminder that no matter where you are in life, or how far off-track you feel, you can start again.
---
### Page: https://institutedfa.com/idfa-blog/?author_match=IDFA
Title: IDFA Blog
Meta Description: IDFA Blog
Language: en-US
Canonical URL: https://institutedfa.com/idfa-blog/?author_match=IDFA
## Headings Structure:
H1: IDFA Blog (US)
H2: Entering the Divorce Niche: Advice from the Experts
H2: Top Ten Financial Errors in Divorce
H2: Top Ten Divorce Terms to Know
H2: Survey: Separated People now Contacting CDFA® Professionals before Lawyers
H2: Survey: CDFA Professionals Reveal the Leading Causes of Divorce
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: IDFA Blog (US)
H2: Entering the Divorce Niche: Advice from the Experts
H2: Top Ten Financial Errors in Divorce
H2: Top Ten Divorce Terms to Know
H2: Survey: Separated People now Contacting CDFA® Professionals before Lawyers
H2: Survey: CDFA Professionals Reveal the Leading Causes of Divorce
Divorce is a fast-paced niche in which to set up a business. Newcomers to the profession can often be overwhelmed with all the industry dos and don’ts. We asked seasoned divorce professionals from across the country and Canada what they believe newcomers to the industry should know.
CDFA® professionals from across the USA share some of the worst financial mistakes they’ve seen in their practices.
One of the many things that makes divorce such a complicated and notoriously confusing business is the array of new terms, acronyms, and phrases tossed around throughout the process. Divorce has its own language, and it is important to be able to talk the talk with family lawyers, judges, collaborative divorce professionals, and clients. Here are ten divorce terms to jumpstart your journey to divorce literacy.
People at the beginning of the divorce process now recognize that the financial issues they’re facing are as important as the legal ones—and many of them are now seeking financial advice about their situation before they enter a lawyer’s office.
According to a recent survey of 191 CDFA® professionals from across North America, the three leading causes of divorce are "basic incompatibility" (43%), "infidelity" (28%), and "money issues" (22%). "Emotional and/or physical abuse" lagged far behind (5.8%), and "parenting issues/arguments" and "addiction and/or alcoholism issues" received only .5% each.
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### Page: https://institutedfa.com/index.php
Title: Find a Certified Divorce Financial Analyst (CDFA) Professionals
Meta Description: Discover the Certified Divorce Financial Analyst (CDFA) designation. Learn about the role, certification process, and IDFA's commitment to diversity.
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## Headings Structure:
H1: The Institute for Divorce Financial Analysts (IDFA®) is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena.
The Institute for Divorce Finance Analysts® acknowledges and supports the importance of diversity, equity, inclusion, and belonging within its professional organization.
This support and acknowledgment highlight a commitment to fostering and encouraging a membership culture dedicated to an awareness of the impact of systemic racism, gender inequality, physical, neurodivergent, and emotional disabilities, the LGBTQIA+ community and
other historically underrepresented groups with the goal of embracing the uniqueness of all
individuals.
H2: Already a CDFA?
H2: Become a CDFA
H2: Buy Products
H1: The Institute for Divorce Financial Analysts (IDFA®)
H1: What are you waiting for? Register today to become a CDFA® professional.
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: The Institute for Divorce Financial Analysts (IDFA®) is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena.
The Institute for Divorce Finance Analysts® acknowledges and supports the importance of diversity, equity, inclusion, and belonging within its professional organization.
This support and acknowledgment highlight a commitment to fostering and encouraging a membership culture dedicated to an awareness of the impact of systemic racism, gender inequality, physical, neurodivergent, and emotional disabilities, the LGBTQIA+ community and
other historically underrepresented groups with the goal of embracing the uniqueness of all
individuals.
H2: Already a CDFA?
H2: Become a CDFA
H2: Buy Products
H1: The Institute for Divorce Financial Analysts (IDFA®)
H4: Success Stories
H1: What are you waiting for? Register today to become a CDFA® professional.
The Institute for Divorce Financial Analysts (IDFA®) is the premier national organization dedicated to the certification, education and promotion of the use of financial professionals in the divorce arena.
The Institute for Divorce Finance Analysts® acknowledges and supports the importance of diversity, equity, inclusion, and belonging within its professional organization.
This support and acknowledgment highlight a commitment to fostering and encouraging a membership culture dedicated to an awareness of the impact of systemic racism, gender inequality, physical, neurodivergent, and emotional disabilities, the LGBTQIA+ community and
other historically underrepresented groups with the goal of embracing the uniqueness of all
individuals.
CDFA Professionals are in demand! More than two million North Americans will divorce this year and 100% of divorces involve financial settlements.
Find the modules, exams, marketing materials and books that you need to complete the requirements for your IDFA certification.
Founded in 1993, IDFA provides specialized training to accounting, financial, and legal professionals in the field of pre-divorce financial analysis. Over the years, we have certified more than 5,000 professionals in the US and Canada as Certified Divorce Financial Analyst® (CDFA®) professionals.
The Institute provides comprehensive training using a variety of knowledge and skill-building techniques. CDFA candidates learn how to help their clients with financial issues that will affect the rest of their lives, including:
To acquire the designation, a candidate must successfully pass the exam and be in good standing with their Broker/Dealer(if applicable) and the FINRA/SEC or any other licensing or regulatory agency.
-Barbara Shapiro (CFP®, CDFA®, CFS, EdM, MSF), Dedham, MA
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### Page: https://institutedfa.com/learning-center/
Title: Learning Center
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H1: Learning Center
H3: Resources
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H3: Contact Info
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H1: Learning Center
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### Page: https://institutedfa.com/learning-center/2018-tax-law-and-divorce/
Title: Financial Issues of Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/2018-tax-law-and-divorce/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Tick, Tock: Impact of the New Tax Law on Alimony and Divorce
H3: Current Law
H3: The New Tax Law and Alimony
H3: Why divorcing couples (especially the recipient of alimony) should care about the tax law change
H3: When is the timer set to go off?
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Tick, Tock: Impact of the New Tax Law on Alimony and Divorce
H3: Current Law
H4: How does this work in the real world?
H3: The New Tax Law and Alimony
H3: Why divorcing couples (especially the recipient of alimony) should care about the tax law change
H3: When is the timer set to go off?
Getting divorced in 2018 and planning to pay or receive alimony? You may not realize it, but there’s a tax “timer” hanging over your head and the buzzer is set to go off.
Based on current tax law, the payer of alimony may deduct the full amount from their taxable income which, in turn requires the recipient to treat it as taxable income.
Suppose Harry pays Sally $5,000 per month in alimony. Sally doesn’t get to keep $5,000 because it’s treated as taxable income to her. Based on her tax bracket, her actual monthly net is $3,750. Conversely, since Harry is in a higher tax bracket than Sally, when he writes a check to Sally for $5,000, the deduction translates to an out-of-pocket cost to him of $3,000.
What about the difference between the $3,750 that Sally nets and the $3,000 that it costs Harry? Uncle Sam has been footing the bill on the $750 differential in tax revenue. That is exactly what this new regulation is structured to eliminate.
The new tax law does away with the tax deduction for alimony. Of course, alimony also won’t be treated as taxable income to the recipient. The new law goes into effect for divorce cases finalized (not filed) with the Court after December 31, 2018. Cases finalized by December 31, 2018 will be grandfathered into the old tax law.
In practical terms, taxable alimony shifts income from a high tax bracket to a lower one. Some have argued that it gives divorced couples an unfair financial advantage not available to married couples. However, for the past 75 years, the tax deduction has made alimony a valuable negotiation tool used by attorneys across the country to help settle divorce cases. In fact, it’s often one of the only ways to provide a guaranteed win/win during a difficult financial time for both parties.
Although divorce attorneys and their clients may think they have until year-end before they need to worry about the changes, many states have a mandatory cooling off period once the case has been filed with the Court. Michigan, for example has a 60 day waiting period however, for couples with minor children, the waiting period is typically extended to 180 days. Therefore, depending on where you live and if you have minor children, you may only have until the end of June 2018 to file and take advantage of tax deductible alimony.
As always, every case is different. Consult with a tax preparer, attorney and/or divorce financial expert to help you understand how the tax law changes may affect your divorce.
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### Page: https://institutedfa.com/learning-center/529-plans-divorce-worth-second-look/
Title: Financial Issues of Divorce
Meta Description: 529 Plans in Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/529-plans-divorce-worth-second-look/
## Headings Structure:
H1: Financial Issues of Divorce
H1: 529 Plans in Divorce: Worth a Second Look
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: 529 Plans in Divorce: Worth a Second Look
When considering the financial aspects of a divorce, every asset is worth a second look. In many cases, the parties have 529 plans for their children’s college education. In most mediated settlements, the parties put the 529 plan in the children’s column and there is little discussion over which parent will manage the account. Most clients are not familiar with the rules and regulations that govern 529 plans.
Depending on your client’s financial situation, a 529 account can be a valuable asset. Obviously, most parents want their children to have the opportunity to attend college. However, the reality is 529 accounts are marital funds and the parties may need those funds now for a variety of reasons. A child may qualify for a student loan at a later date, but your client can’t get a loan for their rent, food, or healthcare coverage. If your clients are forced to put their living expenses on credit cards due to their separation and divorce, they may get themselves into a debt situation in which they can’t provide for the children’s basic needs – let alone college. Student loans typically have an interest rate of 7 to 8 percent while most credit cards have an interest rate of 12 to 24 percent. The reality is that 529 plans contain marital funds, and the parties may need these funds for a variety of reasons.
The funds in a 529 plan can only be used without penalty for certain qualifying expenses such as tuition. If you take a nonqualified distribution, the earnings portion of that distribution will be taxed as ordinary income and could incur a 10 percent federal tax penalty. However, the penalty may be waived if there are extenuating circumstances, such as the disability or death of the beneficiary, or if the child receives a scholarship, veterans’ education assistance, or other nontaxable education payment that is not a gift or inheritance. Also keep in mind that the state income tax, in many states, may be due on the amount you withdraw, and your state may impose an additional 10 percent penalty on earnings for nonqualified withdrawals.
Essentially, a 10 percent penalty is not that bad. We all have clients who choose to incur a penalty to cash out their IRAs. According to Amy Dieffenbach, CPA, you contribute to a 529 on an after-tax basis, so only the earnings from the 529 are taxable upon withdrawal (if not used for educational purposes), not the principal. If the 529 has earned money, your client incurs a 10 percent penalty on any earnings you withdraw (if not for educational purposes), and the earnings you withdraw will also be taxed as ordinary income at both the federal and state level. If you received a state tax deduction for your contributions, you may be required to pay taxes on the deductions as well, but only at the state level. If your 529 plan has lost money and you cash out the plan entirely, the IRS allows you to claim the loss as an itemized deduction. Basically, the custodian of the account has the ability to cash out the 529 plan for a penalty that is less than the interest rates on most credit cards. Are you writing language into your agreement that covers this possibility?
Here’s another thing to consider. In my state of North Carolina, residents who contribute to a North Carolina 529 plan receive a state income tax deduction of up to $2,500 per contributor. This means that even if a North Carolina resident contributes more than $2,500 on behalf of multiple children, they are still only allowed to deduct a maximum of $2,500 on their return. Only one divorced spouse is permitted to be the custodian of the account. Is this tax deduction important to your client? Which parties have the ability and/or plan to continue to contribute to the plan? Did you even ask?
Most separation agreements require that the funds in a 529 plan be used for the children’s education, but what happens if the money is not used for the child’s education for one reason or another? Don’t forget, we learned above that if your child gets a scholarship, the 10 percent penalty is waived so an ex-spouse who is custodian of the account could withdraw the funds without penalty and potentially keep the funds without consequence. The spouse in charge of the account also has the option to change the designated beneficiary to another member of the original beneficiary’s family. Under this provision, your client’s 529 plan which was meant for the benefit of the children could be used by an ex-spouse for one of their other children or step-children. Does the language in your agreement prevent this?
If your client takes money out of a 529 account for anything other than a qualifying expense, they will incur penalties. However, if they are in need of money now, it might be worth talking to an accountant to determine the exact penalty that your client will incur if they take a non-qualified distribution. A 10 percent penalty, for example, is a valid option when facing a financial crisis due to your separation and divorce.
It is important to discuss these various scenarios with your clients and determine the exact tax penalties for their given situation in order for them to be fully informed about their options. If your client has a 529 plan, it shouldn’t just be assigned to the children, and a custodian of the account shouldn’t be assigned arbitrarily. Some of your clients may have significant assets in their 529 accounts or they could desperately be in need of these funds right now for a number of reasons. Either way, 529 plans deserve a second look.
Kristen Shearin, attorney and CDFA, is a partner at Passenant & Shearin Law, a family law practice in Charlotte, NC. For more about Kristen, visit www.psfamilylaw.com.
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### Page: https://institutedfa.com/learning-center/avoiding-common-divorce-pitfalls-1/
Title: Avoiding Common Divorce Pitfalls
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/avoiding-common-divorce-pitfalls-1/
## Headings Structure:
H1: Basics of Divorce
H1: Avoiding Common Divorce Pitfalls
H1: Certified Divorce Financial Analysts offer their best tips to help you avoid some of the most common mistakes made by divorcing people.
H3: Understand your financial and emotional limits.
H3: Settle out of court.
H3: Know what you have – and what you need.
H3: Identify your priorities.
H3: Do your financial homework.
H3: Pensions can be worth more than houses.
H3: Make the best use of your lawyer.
H3: Take a "Big Picture" approach.
H3: Plan for tomorrow today.
H3: Four keys to survive divorce.
H3: Understand your disposable income after divorce.
H3: Don’t let your emotions rule your divorce
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Avoiding Common Divorce Pitfalls
H1: Certified Divorce Financial Analysts offer their best tips to help you avoid some of the most common mistakes made by divorcing people.
H3: Understand your financial and emotional limits.
H3: Settle out of court.
H3: Know what you have – and what you need.
H3: Identify your priorities.
H3: Do your financial homework.
H3: Pensions can be worth more than houses.
H3: Make the best use of your lawyer.
H3: Take a "Big Picture" approach.
H3: Plan for tomorrow today.
H3: Four keys to survive divorce.
H3: Understand your disposable income after divorce.
H3: Don’t let your emotions rule your divorce
When you understand yourself, you are better equipped to be objective. This saves time, which leads to cost savings. If you are not prepared to look at reality – without the emotional entanglements – the outcome will never be what you need, let alone what you want. Instead of asking “why” questions, which lead to people becoming defensive, try asking questions that start with “how.” For instance, asking, “How did you come to that conclusion?” leads to a discussion about process. It allows both people to step back from the brink and look at things as they are.
Armand D’Alo (CFP®, CDFA®) of Oak Tree Advisory Services has worked as a financial analyst in private practice for more than 25 years. Located in Carlsbad, CA, he holds a degree in finance and family counseling from Brigham Young University. He can be reached at info@oaktreeadvisory.com.
When given the choice to go to settle at mediation or settle at trial, always try to for the former for two reasons. First, going to trial is very expensive: typically, the only ones who win are the lawyers and experts, which leaves a smaller “pie” for the divorcing husband and wife to divide. Second, going to trial is risky because all of the decisions are left to the judge who has known the parties for a few hours at most; in mediation, the divorcing parties still have 100% control over how things will be settled (assuming they can come to an agreement).
Joseph P. Mirandi (CPA, CVA, CDFA®, MST) devotes a large portion of his practice in Lakeland, FL to assisting lawyers and their clients in divorce-related matters. He also has an extensive tax practice, and is certified in preparing business valuations. He can be reached at (863) 607-4222 or via www.huttomirandi.com.
It is very important to know what assets you own, the value of those assets, and were they are held. This should cover everything from retirements to investment to bank accounts, as well as future pensions and social security. Make copies of your and your spouse’s tax returns. These returns can help explain to a financial advisor a lot more than your income and taxes paid: they can help find assets, capital gains and losses, depreciation, and business expenses. The tax returns are also helpful in uncovering assets that a spouse might have hidden.
Before splitting your assets is made, you should think about what you need: you must create a budget, identify which assets will help ensure your financial security, and negotiate for this.
Jim Newman (AWMA, CSA, CDFA®) is the Senior Vice President – Wealth Management at Janney Montgomery Scott in Ponte Vedra Beach, FL. He can be reached at (866) 226-9935.
It’s important to be frugal given that you have to manage the cost of separation and divorce, along with meeting your basic life needs. Try to follow a balanced approach, and don’t let your pride get in the way of accepting and/or asking for help from family and friends when you really need it. If your ex-to-be is prone to unpredictable behavior, you must find a safe place for you and your children to live. Don’t forego your personal security; prioritize this above other more “materialistic” items.
Dr. Linda Cousineau (Ph.D., CDFA®) is a divorce survivor who is committed to helping others through the separation and divorce process through education and financial advice. In practice in Toronto, ON, she can be reached at (416) 988-2399 or via drcousineau@rogers.com.
If you do your financial homework, you will be able to recognize a fair offer rather than settling for too little or rejecting a reasonable offer. Even if you have never seen a retirement plan, investment account, or bank statement, information is available if you know where to look. Contact the Human Resources Department at your spouse’s employer and ask about any and all benefits. As a spouse, you are entitled to know about current and future benefits; be sure to ask if there’s a pension plan in place. Review your last two or three tax returns, which will list any interest earnings, dividends, or capital gains that were reported. By comparing the financial affidavit to the tax return, you can reconcile assets and look for omissions. Finally, prepare yourself for the post-divorce lifestyle change by figuring out what your long-term needs will be and making a budget.
Gina Gallo (CFP®, CDFA®) provides objective financial consultations for an hourly fee in Melbourne, FL. She can be contacted via ggallo@galloandrussell.com or www.galloandrussell.com.
Trading their share of a spouse’s pension for the marital home is one of the most common mistakes divorcing people make. The marital home and the retirement plans are likely to be the largest assets in your marriage. Many people have such an emotional attachment to their home that they cannot fathom life in another house. The house, though, usually comes with high mortgage payments, maintenance and repair bills that can devastate a person’s finances. Even though the value of the house might be equal to the value of the pension at the time of divorce, they are apples and oranges. A house requires income to pay for repairs, maintenance, improvements, property taxes, and assessments; a pension, however, produces income without costing income. A 50/50 division of assets may sound equal, and it may in fact be equal in value as of the date of divorce, but it may not meet your long-term needs. You cannot sell a windowpane to put food on your table during your retirement years. It’s not how many assets you have – it’s what you can do with the value of those assets that matters most.
Garrick G. Zielinski (CFP®, CDFA®) is president of Divorce Financial Solutions in Milwaukee, WI. He has been providing divorce financial counseling and divorce financial analysis to individuals and attorneys since 1986 and has testified as an expert witness in many court cases relating to the financial aspects of divorce. He can be reached at web@divfinsolutions.com.
You can help your lawyer (and cut your costs) by making sure you have copies of all important financial documents related to your marriage, and by keeping track of expenses during the divorce process. Remember that your lawyer is not your psychiatrist: there is no point in telling your lawyer all the feelings you have towards your soon-to-be-ex-spouse. Letting your lawyer hear about your feelings will only make your wallet thinner. If you need to talk to someone, hire a psychiatrist – or talk to a friend if you don’t need professional help. Finally, ask your lawyer and/or financial advisor to help you identify which decisions absolutely need to be made now, and which can wait until your emotions are under control. Big decisions made in an emotionally unstable state of mind usually turn out to be expensive and non-sustainable ones.
Stacy Francis (CFP®, CDFA®) practices in New York, NY. She can be reached at (212) 374-9008.
Clarify the issues that are most important to you and keep your primary focus there. These issues should concern both finances and parenting. Consider refining these issues with the help of a financial or mental-health professional who can provide the focus, objectivity, and long-term vision that may be difficult for you at this tumultuous time. By clearly articulating your needs and goals, you will expend less time, money, and emotional capital over the small stuff – or by seeking to redress emotional hurts in ways that the divorce process really can’t address.
Amy Whitlatch (CFP®, CDFA®) has been specializing in divorce issues since 1998. Based in Cincinnati, OH, she has assisted in more than 300 cases; she can be reached via www.amywhitlatch.com.
Plan for your children's contingencies today to avoid going back to court annually. For instance, who will be paying for college? How much? What happens when the kids get to be drivers? Who will buy the car, paying for insurance, etc.? Who will pay for her prom dress or his tuxedo rental? Some of these items may seem trivial, but they can all lead to continuing litigation. Finally, make sure you and your children are covered by health insurance, and agree as to payment for the short and the long-term.
Roy Kramer (CPA, CDFA®) is a recognized expert in taxation related to marital dissolutions. In practice with Brown Smith Wallace in St. Louis, MO, he can be reached at (314)-983-1200 or via RKramer@bswllc.com
There are four basic things that you will need to survive divorce: a place to live, little or no debt, retirement assets, and liquid money. You should strive for a balance of each of these. You need a mix of each of these categories – not an abundance of one category and none in the others. There are three different general phases of the divorce process: the beginning, the middle, and after the divorce. In each of these stages, your budget may be different, so you should make sure that you have liquid money available at all times. In the beginning, you will need liquid money for the retainer to hire a lawyer. You should consider putting this liquid money in a money market account rather than a savings or checking account; this is a vehicle where you are able to earn more interest on your money. Make sure you understand what a money market account is and what it can do for you before making any decisions.
Nicole N. Middendorf (CDFA®, LPL Financial Advisor) focuses on divorce and retirement planning in Plymouth, MN. She can be reached at (763) 231-9500.
After divorce, you may be receiving different types of income – employment earnings, spousal, or perhaps child support – some of which will probably be taxable. In the midst of support negotiations, you need to know how much you’ll actually be left with each month to understand the impact of a proposed settlement. To figure this out, you first need to separate the taxable and tax-free income amounts you will be receiving. Total all your taxable income, estimate and subtract the tax payable, and then add the tax-free income amount to the after-tax figure. Be aware that additional taxable income may move you to a different tax bracket, so be mindful of the tax rate you use. Compare your after-tax income to your expenses to create your new budget. If you’re not sure how to do this, get help from a financial professional. Calculating your net disposal income is critical to helping you budget and to understand your new financial reality after divorce.
Eva Sachs (CFP®, CDFA®) is the founder of Women in Divorce Financial, located in Toronto, ON. She can be reached via www.womenindivorce.ca.
Going through divorce can make you feel like the captain of a leaky boat on stormy seas – there seems to be a new crisis at every turn. But don’t let uncertainty whip you into an emotional tizzy: the more frenzied your emotions, the longer the proceedings and the more costly the divorce. Here are five strategies to help you separate emotions from economics:
Ginita Wall (CPA, CFP®, CDFA®) is the author of several books, including The Way To Save, The Way To Invest, and Your Next Fifty Years. She also originated the “Second Saturday” workshop on divorce, and is the co-founder of www.wife.org (the Women’s Institute for Financial Education). In practice in San Diego, CA, she can be reached at (858) 792-0524 or via www.planforwealth.com.
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### Page: https://institutedfa.com/learning-center/avoiding-financial-disaster-divorce-1/
Title: Avoiding Financial Disaster in Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/avoiding-financial-disaster-divorce-1/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Avoiding Financial Disaster in Divorce
H1: Tips to help avoid making disastrous mistakes during divorce
H3: The Grasshopper and the Ant, Post-Divorce
H3: Not All Assets are Equal
H3: The Family Home
H3: Choose Your Battles
H3: Forgettable Assets
H3: Credit Rating and Debt
H3: Back to Work or Back to School?
H3: The Bottom Line
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Avoiding Financial Disaster in Divorce
H1: Tips to help avoid making disastrous mistakes during divorce
H3: The Grasshopper and the Ant, Post-Divorce
H3: Not All Assets are Equal
H3: The Family Home
H3: Choose Your Battles
H3: Forgettable Assets
H3: Credit Rating and Debt
H3: Back to Work or Back to School?
H3: The Bottom Line
Many couples face financial uncertainty after they divorce. This is often the result of using the same income to pay expenses to operate two households instead of one. For instance, you’re now faced with two mortgage or rent payments; utilities, furniture, appliances, and supplies for two homes… The expenses add up.
If only one ex-spouse works outside of the home, then he or she may have to pay both spousal and child support, which will negatively affect the payor’s cash flow. If both spouses work outside of the home, then each would have only a portion of their combined income to use to pay for their individual household expenses.
Separation or divorce is a time when both of you should reduce your spending and make an effort to live within your individual means. For instance, if you’re not working, can you really afford the country-club dues or fresh flowers every week?
One common pitfall is considering the assets that you receive as part of the property settlement as an additional source of income. Instead of using these assets to pay for current expenses, they should be maintained for emergencies, retirement, creating new sources of income, and other long-term financial goals.
This does not mean that you should never touch these assets: it’s one thing to use them to pay for tuition to improve your job skills, but quite another to deplete them to purchase a brand-new SUV. Before you dip into these assets, ask yourself whether the expenditure is going to create income for you in the future, or whether it’s a frivolous purchase you’re going to regret when the bill comes due.
Let’s take a look at an example of how failing to create and stick to a realistic budget post-divorce could affect your future.
Consider the cases of Lisa and Teri: two sisters who married men with very different careers. Lisa’s husband became a wealthy stockbroker, while Teri’s husband worked at the local GM plant. Eventually, both couples divorced.
Lisa was awarded five years of alimony at $75,000 per year, half of her husband’s retirement account ($300,000), and the million-dollar family home. Lisa was not used to living on a budget of $150,000 a year, and she wanted to preserve her image as a successful woman. For her, that meant country-club fees, $25,000 a year on clothes, vacations in Palm Springs, lavish parties, summers in Europe, and keeping the family home. Her alimony did not come close to covering her expenses, but she dipped into her retirement account to cover the monthly shortfall. Five years later, she has burned through her retirement savings, her support has ceased, and her only asset is the house that she cannot afford.
Teri, on the other hand, received $20,000 per year in alimony for the same five years plus $35,000 in retirement savings. She went back to school, which enabled her to get a better, full-time job before her support ended. She also put herself on a strict budget – which included $100 a month of “fun money” to spend on eating out, movies, or to save toward a bigger-ticket item such as an entertainment center or a vacation. Five years later, she has grown her retirement savings to $100,000 and is enjoying the same lifestyle as before her divorce.
Lisa ended up with a better divorce settlement than Teri, but Teri is now in a much better position than her sister. Why? Aside from her obvious extravagances, Lisa’s biggest mistakes include the facts that she:
When you are deciding on what assets you and your spouse will take, you should be aware that not all assets are equal. One of you may end up with a huge tax bill when you access the assets: for instance, you could end up paying capital-gain taxes upon the sale of your home or your investment assets. In addition, if you dip into your retirement assets, you may end up paying income tax and a penalty. In the example above, Lisa paid taxes and a 10% penalty in the U.S. every year that she dipped into the retirement account.
Other assets may end up being a money pit. Your primary residence, vacation home, or rental properties could cost you a significant amount of money to maintain. Frequently, the primary benefit of a rental property is not necessarily cash flow, but the tax losses that are generated. If you are in a low tax bracket, then these losses may not benefit you to the extent that another investment would. Your expenses may actually increase. For example, if your spouse used to make all repairs, mow the lawn, etc., but now you have to hire someone to do those things, then your expenses will increase. Would you be better off liquidating these properties and investing the proceeds in something that would increase your cash flow instead of creating a financial drain?
Reducing expenses may mean selling the family home and downsizing to a smaller home. In the example above, did Lisa really need the million-dollar family home? In this case, “keeping up appearances” cost her a comfortable future. If she had sold the house at the time of her divorce, she could have increased her cash flow in two ways: decreased costs, and additional funds to invest. The costs to maintain her home – such as property taxes, utilities, maintenance, and repairs – would have decreased in a well-maintained but more modest property. In addition, since there was no mortgage on her home, she would have been able to buy a smaller home free and clear and still have funds left over to invest and increase her cash flow.
Her choice to keep the house also meant that she was hit with all the capital-gains tax from the time she and her ex-husband bought the house in 1975 to the time she was forced to sell it. The house had appreciated significantly in value over the years, so after paying her tax bill, she was left with a much smaller nest egg than she had expected to help her start over.
You can go broke during property division if you insist on fighting over every last item. During her marriage, Mary purchased a leather desk-accessories set that included a matching leather wastepaper basket. Her husband Larry wanted the wastepaper basket, but she insisted that the set would be incomplete without it, so they ended up fighting over it. After spending in excess of $5,000 in attorney’s fees, Mary ended up with the wastepaper basket. Does this sound too ridiculous to be true? Be warned: this kind of thing happens every day in divorce court. Emotions are running high, and some people will fight “to the death” over truly trivial items. Sometimes, they’re more concerned with making sure their ex-spouse doesn’t get something than with actually getting it themselves.
You have to look at the big picture. Is this item really worth fighting over? Can you purchase a new one for significantly less than you will spend in attorney’s fees? Not only are you wasting money, but you are also increasing the ill-will between you and your soon-to-be ex. If you have children, this can take an emotional toll on them.
Here’s a hard truth for you: no one gets everything they want in a divorce settlement. You will have to give up some possessions you really like – maybe even some heirlooms – so prepare for this by creating a short list of “Must-Haves,” a longer list of “Would-Like-to-Haves,” and a third list of “Don’t-Wants.” Don’t tell your ex you don’t want the items on this third list; instead, “gracefully” offer to trade them for the items you really want. Be prepared to give up some of your “Would-Like-to-Haves” in exchange for more of your “Must-Haves.”
Some assets are easy to forget, such as pensions, stock options from an employer, accrued sick and vacation pay, the cash value of insurance policies, frequent-flyer miles, prepaid dues (such as annual country-club dues and season’s tickets or passes), and timeshare properties and vacation clubs. These should be addressed as part of the property settlement. In many cases, pensions can be worth more than houses, so make sure you have a qualified financial professional value these and other assets before you sign away your rights to them.
It is imperative to protect your credit rating. Here are some tips:
A vindictive or spendthrift ex-spouse can incur debt on your joint accounts and destroy your credit rating during the divorce process. If you’re not able to pay off a joint account in full, ask if you can maintain a balance on it after it’s been closed.
Your credit report will help you discover any outstanding debts that need to be addressed as part of the divorce process. It may be best to pay off joint debts with marital assets, and then each spouse can move forward with a clean slate.
Once your divorce is final, you should use your credit cards sparingly. If you need to establish a credit rating, make sure to pay off all balances on time every month.
If you need to use credit for short-term liquidity, then you may be better off refinancing your home and avoiding maintaining a balance on your credit cards. In the U.S., the benefits of refinancing your home include deductibility of interest and a lower interest rate. You will need to qualify for the mortgage, but spousal and child support are generally included as sources of income to permit a non-working spouse to qualify for a mortgage.
You may have to go back to work to supplement your support payments. If you don’t go back to work now, do you want to wear a fast-food restaurant uniform when you’re in your 60s or 70s? Your property settlement assets should be kept for your retirement – remember Lisa’s example (above) when you’re tempted to dip into your retirement account.
You have to be realistic about any career changes you make. What are your prospects at your current job? If you go back to school, what can you realistically expect to earn? Will your degree improve your earning capacity? Are you taking courses that will help you secure a position in a growth industry that needs qualified workers, or are you just taking a course because it interests you? Does your chosen career or course of study take advantage of your natural strengths, abilities, and interests? Taking courses you hate to secure a job you’ll hate is not a wise use of time or money. Work with a career counselor or personal coach to figure out the pros and cons of staying put or changing direction.
Your lifestyle will change after your divorce. You will have to make some sacrifices. However, if you plan ahead, these sacrifices will pale beside how bright and prosperous your future will be.
Nancy Kurn is the former Director of Educational Services for the Institute for Divorce Financial Analysts™ (IDFA™) – the premier national organization dedicated to the certification, education, and promotion of the use of financial professionals in the divorce arena.
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### Page: https://institutedfa.com/learning-center/basics-divorce/
Title: Basics of Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/basics-divorce/
## Headings Structure:
H1: Basics of Divorce
H1: Ten Questions to Ask Your Divorcing Clients
H1: Top Ten Divorce Terms to Know
H1: Dividing Property During Divorce
H1: Safe Harbor
H1: Protecting Your Credit Score in Divorce
H1: Prenuptial Agreements and Marriage Contracts
H1: Creating a Settlement or Separation Agreement
H1: Negotiating Your Future
H1: Survey: CDFA Professionals Reveal the Leading Causes of Divorce
H1: Top Ten Divorce Tips
H1: Advice from a Judge
H1: Avoiding Common Divorce Pitfalls
H1: Canadian Marriage Contracts
H1: Retroactivity in Same-Sex Divorce: Unanswered Questions
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Ten Questions to Ask Your Divorcing Clients
H1: Top Ten Divorce Terms to Know
H1: Dividing Property During Divorce
H1: Safe Harbor
H1: Protecting Your Credit Score in Divorce
H1: Prenuptial Agreements and Marriage Contracts
H1: Creating a Settlement or Separation Agreement
H1: Negotiating Your Future
H1: Survey: CDFA Professionals Reveal the Leading Causes of Divorce
H1: Top Ten Divorce Tips
H1: Advice from a Judge
H1: Avoiding Common Divorce Pitfalls
H1: Canadian Marriage Contracts
H1: Retroactivity in Same-Sex Divorce: Unanswered Questions
For a financial professional in the divorce niche, the basic information to get from a new client is simple – state of residence, length of marriage, gross salary, and the like. But to truly get to know a client’s situation and needs, it is important to dig a little deeper. Here are ten question...
One of the many things that makes divorce such a complicated and notoriously confusing business is the array of new terms, acronyms, and phrases tossed around throughout the process. Divorce has its own language, and it is important to be able to talk the talk with family lawyers, judges, collaborat...
When thinking about dividing property, draw four columns on a piece of paper; then follow these steps:
Step 1. In the first column, list each property, whether separate or joint. Include everything you own.
Step 2. In the second column, write what each property is worth next to each description....
Here's help navigating the financial dangers of divorce so you will reach safe harbor: a financially sound future.
While you were married, you and your spouse were co-owners of a “business”: your marriage. Like any business owners, you accumulated both assets and liabilities. Maybe you bought a ...
Rachel is the sort of person who plays by the rules. A stay-at-home mother of three, she has always lived within the family budget and paid bills on time. When she and her husband, Jack, split up, she followed her obligations under their divorce decree to the letter. She was therefore shocked to fin...
If you're thinking of taking the plunge a second time, you should consider whether you need the protection of a prenuptial agreement or marriage contract.
A prenuptial agreement is a contract that two parties enter into in contemplation of marriage. It can also be referred to as a “premarital ...
What you need to know before creating a settlement or separation agreement
You’ve sat down with your spouse and hammered out what you think is a pretty great settlement: you get to keep all of the property you really wanted, and your ex gets stuck with all of the debt. But whether or not that agre...
When you’re negotiating your divorce settlement, preparation is the key to success. Are you really ready to negotiate your future?
During the course of your marriage, you accumulated both assets and liabilities. Although there are regional differences when it comes to who gets what, basically...
If you think that incompatibility, infidelity, and money issues can lead a couple straight to divorce, you might just be right.
According to a recent survey of 191 CDFA professionals from across North America, the three leading causes of divorce are "basic incompatibility" (43%), "infidelity" (28...
Certified Divorce Financial Analysts offer these tips to help you sidestep some common divorce-related problems
1. Copy Your Records
Before your divorce, be sure to make copies of all of your financial records. Keep them in a safe place away from your spouse. These records include, but are not l...
A family court judge talks about effective preparation for court – and how to achieve results in court by utilizing all available resources
Back in law school, my trial-practice professor lectured to us to always assume the judge knows nothing about the law of our cases. He advised us to “sp...
Certified Divorce Financial Analysts offer their best tips to help you avoid some of the most common mistakes made by divorcing people.
Understand your financial and emotional limits.
When you understand yourself, you are better equipped to be objective. This saves time, which leads to cost sav...
A marriage contract is an agreement signed before or after a wedding that provides a private and custom-made set of rules for dividing the couple’s property should they separate and divorce or die. In fact, a marriage contract can overlap in many of its functions with a Will. A cohabitation agreem...
When the Supreme Court ruled that same-sex marriages must be recognized in every state, another door opened for LGBT couples – the ability to legally divorce. But one thing not solved by Obergefell v. Hodges was how to treat assets that were held and transactions that occurred before the June 26, ...
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### Page: https://institutedfa.com/learning-center/best-week-roundup-may-20-2016/
Title: In the News
Meta Description: Best of the Week Divorce Roundup
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/best-week-roundup-may-20-2016/
## Headings Structure:
H1: In the News
H1: Best of the Week Roundup: May 20, 2016
H3: 1. How to Prepare for Mediation
H3: 2. Top Ten Questions to Ask Your Divorcing Clients
H3: 3. MediYAYtion: Why Your Upcoming Divorce Mediation is a Good Thing! (And Instructions on How to Rock It!)
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: In the News
H1: Best of the Week Roundup: May 20, 2016
H3: 1. How to Prepare for Mediation
H3: 2. Top Ten Questions to Ask Your Divorcing Clients
H3: 3. MediYAYtion: Why Your Upcoming Divorce Mediation is a Good Thing! (And Instructions on How to Rock It!)
This is our weekly update on divorce news, trends, and articles, where we round up the best pieces of the week.
Mediation is a hot topic this week, with experts explaining all the pros and cons of the mediation process and how to prepare for success. Also, check out our top questions you should be asking your clients. It’s all in this week’s Best of the Week Roundup!
Like Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.” What’s the “homework” necessary to make mediation efficient, productive, and peaceful? Mediator Elizabeth Esrey explains how she approaches each mediation session and instructs clients to prepare.
"The greatest benefit of mediation is the opportunity to have a difficult but direct conversation in a safe place where various opinions are heard and considered."
The key to getting the right information is asking the right questions. Make sure you are getting the full picture of a client’s situation. The best questions not only show you factually where a client is, but also shows the client’s mindset and perspective going into the divorce process.
"Divorce is a confusing, emotional, overwhelming experience, and it is most clients’ first time going through the process. Many clients simply don’t know what to expect and a little Q&A with an expert can go a long way toward making them feel more in control of their divorce."
Family law attorney Christina Pesoli breaks down the many benefits of mediating your divorce. Save money, save time, and work your way to a more peaceful resolution. It’s time to put the ‘yay’ in mediation!
"I think this opposition [to mediation] comes from a fear of the unknown. If clients had a better understanding of what mediation involves, then they wouldn’t be opposed to the idea."
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### Page: https://institutedfa.com/learning-center/canadian-marriage-contracts-1/
Title: Canadian Marriage Contracts
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/canadian-marriage-contracts-1/
## Headings Structure:
H1: Basics of Divorce
H1: Canadian Marriage Contracts
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Canadian Marriage Contracts
A marriage contract is an agreement signed before or after a wedding that provides a private and custom-made set of rules for dividing the couple’s property should they separate and divorce or die. In fact, a marriage contract can overlap in many of its functions with a Will. A cohabitation agreement is essentially the same thing as a marriage contract, but it’s designed for people who intend to live together – or who are already living together – who wish to set out some rules to govern any separation that they may experience. A cohabitation agreement is automatically converted into a binding marriage contract if the couple gets married. Marriage contracts and cohabitation agreements can also establish some rules and regulations for how the couple manage their day-to-day marriage, not just their separation.
In every Canadian province, marriage creates an economic partnership, the fruits of which will be divided between the husband and the wife should they decide to separate and divorce – unless a couple agrees otherwise in a marriage contract. A marriage contract allows couples to opt out of provincial law with respect to property.
A marriage contract, if drafted and signed properly, is legally binding. In order to have a properly drafted and executed agreement, you must follow four simple rules:
Michael G. Cochrane is a Partner at Ricketts, Harris LLP and has practiced law in both the public and the private sectors for 28 years. The author of For Better or For Worse: The Canadian Guide to Marriage Contracts and Cohabitation Agreements (John Wiley & Sons), Mr. Cochrane can be reached at 416-364-6211.
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### Page: https://institutedfa.com/learning-center/creating-settlement-or-separation-agreement/
Title: Creating a Settlement or Separation Agreement
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/creating-settlement-or-separation-agreement/
## Headings Structure:
H1: Basics of Divorce
H1: Creating a Settlement or Separation Agreement
H1: What you need to know before creating a settlement or separation agreement
H3: Financial Assets
H3: Retirement Assets
H3: Employee Benefits
H3: Appreciation Rights, and Restricted Stock
H3: Personal Property
H3: Real Estate
H3: Debts
H3: Closely Held Business
H3: Property Settlement Note
H3: Life Insurance
H3: Other Assets
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Creating a Settlement or Separation Agreement
H1: What you need to know before creating a settlement or separation agreement
H3: Financial Assets
H3: Retirement Assets
H3: Employee Benefits
H3: Appreciation Rights, and Restricted Stock
H3: Personal Property
H3: Real Estate
H3: Debts
H3: Closely Held Business
H3: Property Settlement Note
H3: Life Insurance
H3: Other Assets
You’ve sat down with your spouse and hammered out what you think is a pretty great settlement: you get to keep all of the property you really wanted, and your ex gets stuck with all of the debt. But whether or not that agreement will hold up in court depends on a number of factors, including how it is worded, whether or not there was full financial disclosure by both parties, and possibly whether both parties had independent legal counsel.
That being said, you should make every effort to negotiate your settlement agreement rather than fight over every item in court. Such agreements have several benefits over a judge’s ruling including: they take less time; they reduce the financial and emotional costs; and the parties are more likely to abide by the terms of the agreement.
If you’re able to put aside your emotions and focus on the issues at hand, the chances of negotiating a settlement are extremely high. A courtroom is simply not the right venue to express your feelings of anger or loss, so find a counselor or a support group to help you work through your emotions so you can be as clear-headed and practical as possible during negotiations with your spouse. Some couples will be able to settle all issues; others will be able to settle some issues and have to litigate the rest.
This article will cover property issues only; your settlement agreement will need to thoroughly address spousal or child support as well as custody and visitation issues.
Your settlement agreement should be very comprehensive – particularly with regard to how the property is divided. Once you sign an agreement regarding property division, it cannot be changed unless both of you agree to the changes. It’s up to you to make sure that your lawyer doesn’t leave any assets out of your settlement agreement (unless it’s something that you’re going to litigate in court).
You don’t necessarily have to list every single personal possession in your settlement agreement, but you should list personal items that are important to you. You should also list financial assets, including retirement assets and real estate.
Your agreement should state who gets each asset or how the asset or the proceeds from its sale will be divided. Let’s take a look at the most common categories.
Financial assets include cash, savings accounts, checking accounts, Certificates of Deposit, money-market accounts, stocks, bonds, Real Estate Investment Trusts (REIT), mutual funds, and savings bonds. These assets may be more important to the non-working or lower-income-earning spouse. He or she may need to use these assets to cover some of his or her living expenses.
Remember that not all assets have the same tax consequences. Retirement assets are generally before tax assets. This means that in order to access the money, you have to pay income tax on any distributions you receive. In some cases, you may also have to pay a penalty on the distribution in addition to any income tax that you pay. For example: Mary suggested to Gus, “You keep your retirement assets, valued at $100,000, and I’ll take the money-market account, valued at $100,000.” Gus agreed because it was an equal division of the assets. However, when Gus retires in 2009, he will pay tax on the distributions. So if Gus pays tax at a rate of 25%, then he would end up with only $75,000 versus the $100,000 that Mary received.
In the U.S., there are many different types of retirement assets, including defined benefit plans, defined contribution plans, IRAs, and Roth IRAs. It is important that you determine how defined benefit plans, such as pensions, will be divided between you and your spouse. This is generally spelled out as a percentage of the retirement benefit at the time of the divorce. It is also imperative for the agreement to state if the employee’s spouse will be entitled to survivor’s benefits if the employee dies. It is important to make sure that the non-employee in fact qualifies for survivor benefits; otherwise, he or she may be better off with another asset.
Defined contribution plans include 401(k) plans, profit-sharing plans, simple IRAs, and other types of contributory plans. Generally, these can be divided today, and the non-employee spouse can take the percentage that is awarded and roll it over an IRA or perhaps maintain it as a separate account in the same plan. The agreement should specify the percentage that you and your spouse will receive.
IRAs or Roth IRAs are also easily divisible. Remember that distributions from Roth IRAs will generally not be taxed, while distributions from IRAs will generally be taxed. As a result, $10,000 from a Roth IRA is probably a better asset than $10,000 from an IRA.
In Canada, there are two basic types of pension plans: “Defined Contribution Plans” and “Defined Benefit Plans.” The first type defines who is to make the contributions to fund the plan, how much they are to contribute, and when they are to make the contributions. The second will also specify who is to make what contributions, how much they are to contribute, and when. However, a defined benefit pension plan will also have a formula for determining the amount of annual pension that the member has earned. It is the projection of these future pension payments (which are not at all related to the amount of contributions that have been made) that must be valued.
Depending on the type of plan and which province you live in, a portion of the pension (usually the portion accumulated during your marriage) may be subject to division like any other family asset. If one or both spouses have Registered Retirement Savings Plans (RRSPs), the portion accumulated during marriage will also be subject to division.
Some people will want to divide the pension into two separate pensions: one for each person. This is possible with some pensions but not with others. In any case, it is still important to have the pension valued properly: diving one pension into two is not a way to avoid the cost of a valuation (or to avoid arguing over which value is the right value for the pension).
Federal government pensions qualify for division under the Pension Benefits Division Act (PBDA). This Act provides that the member may transfer to a retirement vehicle for the spouse a portion of the value of the pension. This is known as the Maximum Transferable Amount (MTA).
The Canada Pension Plan (CPP) recognizes that married persons, common-law couples, and same-sex partners share in the building of their assets and entitlements, including their CPP credits. When a relationship ends, CPP credits built up by the individuals during the time they lived together can be combined and then divided equally between them by means of “credit splitting”. As a result, the person with fewer credits – that would normally be the lower income earner – receives some credits earned by the other – normally higher income earner – so that they both have the same number of credits accumulated during the marriage or other relationship.
You should be aware that there is more than one way to value a pension; if the amounts are significant, you should consider having an expert valuation done.
In addition to retirement plans, many employers provide other fringe benefits and incentives to their employees. These benefits include year-end bonuses, accrued vacation time, accrued sick time, health insurance, life insurance, disability insurance, expense accounts, stock options, and more unusual benefits such as Phantom Stock, Stock
Some of these benefits may be included in your list of assets; other benefits may be included as income, and some may not be included at all. Determining if a benefit should be treated as a marital asset, income, or nothing at all can be very subjective. Different jurisdictions and judges may view the benefits differently. As a rule of thumb, if the benefit is guaranteed, then it should be included as an asset or as income. A year-end bonus could arguably be an asset, an income item, or nothing at all if it is not guaranteed. For example: Barbara and Jeremy were married for 15 years. Jeremy, the employee-spouse, received a bonus every year. Barbara could certainly make a reasonable argument that it is an asset or income for purposes of calculating child support and alimony. Vested stock options would also be an asset; with the changes in the market, they may not have any value, while unvested stock options, on the other hand, may not be an asset.
List your personal possessions, particularly those that are important to you, and note how they are going to be divided. This would include big-ticket items, such as cars, boats, and motor homes, as well as items such as jewelry, furniture, photos, and personal papers.
Keep the value of these assets in perspective – and recognize when it’s time to give up the fight. We’ve all heard of those cases where parties spend thousands of dollars fighting over an asset that’s worth less than $100.
Each spouse should keep copies of joint tax returns. We recommend that you keep at least the past five years; in addition, you will need records to calculate the cost basis for any assets that you keep.
Real estate includes your marital home and any other homes, vacation properties, timeshares, and rental properties – commercial and residential – as well as any business property. The properties should be listed, and the settlement agreement should address how they are going to be divided.
If the property is going to be sold, the following issues need to be addressed:
Generally, the person who takes the property will be expected to pay the mortgage or debt related to the property. Does this mean that the other spouse has no financial obligation for a joint debt? Absolutely not. Unless the spouse who takes the property refinances the mortgage, both spouses will still be obligated to pay the debt. The divorce decree cannot terminate your financial obligation to your creditor.
After the divorce, Bob would be liable for the car payment and Amy would be liable for the mortgage. If either neglected his or her payments, the other spouse would still be liable. But if Amy and Bob refinance after the divorce, the other spouse will no longer be liable for the debt.
Requiring the other spouse to refinance after the divorce is something that should be put in the settlement agreement. They could, for instance, allow a certain time period to refinance. If they do not refinance or do not qualify to refinance, then the asset could be sold and the loan could be paid off with the proceeds from the sale.
If only one spouse is obligated on the debt during the marriage, then the other spouse cannot be held liable. This occurs most frequently with credit-card debt. However, if it is a joint debt, then just like the mortgage, if one spouse is responsible for paying the joint credit-card debt pursuant to the terms of the settlement agreement, this does not mean that the other spouse is no longer responsible for the debt. Unfortunately, both spouses will remain liable to the creditor. If one spouse refuses to pay, then the other spouse will have to pay off the debt. If you can afford it, paying off credit-card debt with liquid assets is the best way to deal with unsecured debt.
A closely held business can be in the form of a sole proprietorship, corporation, general or limited partnership, or limited liability company. Before one spouse agrees to take a business interest, he or she has to make sure there are no restrictions on owning the interest. There could be legal or contractual restrictions on which spouse could own the business interest.
If the business, for instance, is a professional corporation, as defined by state or provincial law, then one spouse may be legally restricted from maintaining an ownership interest. For instance, if Joe is a physician and Barb is an accountant, in many states or provinces, only Joe could own his medical practice and only Barb could own her accountancy practice. Another restriction may exist if there is a liquor license or taxicab medallion that is only transferable with government approval.
A “buy-sell” agreement is an example of a contractual restriction that may preclude a transfer to a spouse. If the “non-owner” spouse is awarded the business interest in the divorce, then the spouse may be forced to sell the business interest at a substantial discount. For example: Joe owns 25% of a business that has a total value of $100,000; his share is valued at $25,000. If the buy-sell agreement requires Barb to sell her interest at 50% of the value, and if she were awarded the stock in the divorce, she would be required to sell her interest for $12,500.
A property settlement note is generally used to equalize the assets. To equalize the division of assets, Mike should pay Julie an additional $50,000. This can be structured as a note payable to Julie in the amount of $50,000 at an agreed-upon interest rate. If Mike and Julie agree that the note would be payable over five years at a 5% interest rate, then the annual principal and interest payments would be $11,549.
A property settlement note has some significant drawbacks, however, including:
Some life-insurance policies have cash value. This means that the owner could borrow money from the policy or trade the promise to pay a future sum at death for the current cash value, less any costs or charges.
Other policies, such as term insurance, have no cash value. Term insurance may still be valuable, though, particularly if the insured person is now uninsurable.
The settlement agreement should address who will own the existing life insurance policies. Naming an ex-spouse or child as the irrevocable beneficiary of a group plan is minimally effective, since the designation can be changed unilaterally by a plan member when the carrier changes, or indeed at any other time. If the non-insured spouse is supposed to be the beneficiary, then the best way to protect his or her interest is to have the non-insured spouse own the policy. Using the above example, if Mike owns a policy and is the insured, and they agree that Julie should be the beneficiary, then he should transfer ownership of the policy to Julie. She should verify that she is the beneficiary of the policy. They can structure it so that he pays her the premiums as alimony. That way, she can be sure that the payments are made and that she remains the beneficiary. Otherwise, she is at risk if he lets the policy lapse or changes the beneficiary.
Some other assets to address in the settlement agreement include: Frequent Flyer Miles, lottery winnings or other prize winnings, club dues and annual membership fees, inheritance and gifts, and trusts naming one spouse as a current beneficiary.
Keep in mind the assets listed in this article are not by any means exhaustive; you and your spouse may have assets in addition to those listed in this article. They can make a huge difference in your post-divorce life, so take the time to list them carefully and discuss them fully before you settle things, once and for all.
Nancy Kurn is the former Director of Educational Services for the Institute for Divorce Financial Analysts™ (IDFA™) – the premier national organization dedicated to the certification, education, and promotion of the use of financial professionals in the divorce arena.
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### Page: https://institutedfa.com/learning-center/discovering-your-financial-reality/
Title: Discovering Your Financial Reality
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/discovering-your-financial-reality/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Discovering Your Financial Reality
H1: Understanding your financial situation will give you a sense of control over your life – before, during, and after divorce
H3: Assets
H3: Liabilities
H3: Income
H3: Expenses
H3: Example: John and Jane Smith
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Discovering Your Financial Reality
H1: Understanding your financial situation will give you a sense of control over your life – before, during, and after divorce
H3: Assets
H3: Liabilities
H3: Income
H3: Expenses
H3: Example: John and Jane Smith
When contemplating divorce, most people put themselves under undue stress worrying about their financial well-being. Much of that stress is due to the fear of the unknown. So what do you do about it? Before, during, or after a divorce, it is important to keep yourself in reality as to your financial situation. Doing so will give you a sense of control over your life, which will reduce your stress level. Your financial situation can be broken into four different categories: assets, liabilities, income, and expenses. The following are some tips on how to effectively do that.
Assets have a way of disappearing after divorce proceedings start. As soon as divorce becomes a possibility, start by listing what assets you think the two of you own. That list would include:
Once you have your completed list, start collecting statements for every item on it. Investment companies send statements monthly or quarterly, depending on the type of account, the level of trading activity, and the company’s policy. Most employer-sponsored plans send out a year-end statement in the first quarter of the following year. So don’t panic if a statement you’re looking for doesn’t show up at the end of the first month after you start the process. If you have a safety deposit box and you don’t have a list of its contents, visit the bank and make a list. Lastly, make a copy of the last mortgage closing paperwork. In order to qualify for a mortgage, you would have to disclose all of your assets, liabilities, and sources of income and the last five years’ tax returns. Tax returns will show the sources and amount of income, especially if your spouse is self-employed.
Liabilities, unlike assets, have a way of appearing when divorce is pending. Other than listing liabilities, keep track of excessive increases in debt levels. If you see that happening, notify your lawyer immediately. As a general rule, any debt associated with an asset should travel with it. For example, whoever gets the car should get the car loan. If there’s a business involved, always question any debts to relatives, friends, employees, and especially the owner spouse. If you detect such a loan, ask for a signed loan agreement, what the purpose of the loan is, and a payment plan.
The next step is to identify the sources of income. Income includes revenue from full- and part-time employment, investment return, and self-employment income. Add up all the income from different sources to come up with total income.
Your and your spouse’s income level is a factor in calculating child support and plays a role in arguing for alimony. Beware of close-relationship employers. I had a client who didn’t understand why her husband’s income was cut in half after he filed for divorce. After all, he worked for his brother’s construction company.
The next step is to figure out your current budget and your post-divorce budget. Remember that the same amount of income supporting one household will need to support two.
The first step is to gather the necessary documentation that you would need in order to be objective. You should review your check register and credit-card statements. As you list your expenses, make sure you don’t “double dip.” For example, if your cell phone bill is directly charged to your credit card, don’t count your cell phone bill and the credit-card payment. An area that most people miss is cash withdrawals using ATM cards. You should be able to account for where that money was spent. When working on a budget, a good rule of thumb is to both have a number in each category and have a trusted and objective friend criticize your inputs. Start with the pre-divorce scenario using the one-page Expense Worksheet as a guide.
Using two copies of the Worksheet, fill in pre-divorce expenses and post-divorce expenses. Go to the post-divorce chart and carry over each expense with an increase or decrease in its value. For example, an increase would be lawn care, if you would need to hire it out. Food, on the other hand, would decrease.
Now you’re ready for your lawyer. You have a list of your assets, income, and expenses.
Let’s look at an example to see how it all fits in. John and Jane Smith are 40 years old and have two children. They own a home worth $165,000 with net equity of $77,500. Their retirement accounts total $165,500 in value. John earns $90,000 a year and has take-home pay of $68,760 a year. Jane has never worked outside the home and has no job skills, but she hopes to get a job with take-home pay of $8,900 a year.
The following settlement has been suggested. After the divorce, Jane and the children will live in the marital home, which will be deeded to her. She will also receive $44,000 of the retirement money and John $121,500, thus dividing the assets equally. John will pay Jane alimony of $600 per month for five years and child support of $225 per month per child. He will also pay college costs, which start in four years.
John’s expenses include his normal living expenses, child support, alimony, and college costs. Jane’s expenses include support for the children and are reduced when each child leaves home.
This appears to be a reasonably fair settlement. However, an analysis creates the financial future illustrated in Graph #1.
Jane’s assets will be completely depleted within seven years while John’s investments will grow dramatically. The reason is that, soon after the divorce is final, she will need to tap into her assets to make ends meet. She could have anticipated this situation had she done her homework.
To improve Jane’s financial future, the settlement could provide her with increased alimony of $1,500 per month for 10 years. After all, a major consideration for determining alimony or separate maintenance is the need of one spouse and the other’s ability to pay. Both numbers are a result of income minus expenses.
The correct child support, according to the Child Support Guidelines in their state/province, is $1,125 per month for two children for a couple with their income. Jane also could be awarded an additional $24,300 from the retirement plans. She may also need to cut her expenses by 10%. These changes in the original settlement will produce the results illustrated in Graph #2.
John will still have a surplus, which he can add to his investments. If John stays within his budget and invests all of his extra income, his investments have the capacity to grow to $2.5 million by the time he is 60.
This example illustrates the value of preparation as a means of reaching a more financially equitable divorce settlement. If the court’s intent is to treat both parties in a divorce as equitably as possible, it is essential to analyze the marriage as if it were a financial contract, with tangible investment into it by both parties. Without preparation, though, they wouldn’t have been able to argue for more alimony or an uneven split of assets.
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### Page: https://institutedfa.com/learning-center/dividing-property-during-divorce/
Title: Dividing Property During Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/dividing-property-during-divorce/
## Headings Structure:
H1: Basics of Divorce
H1: Dividing Property During Divorce
H3: What Do You List as Property?
H3: Is It Marital or Separate Property?
H3: Who Gets Which Assets?
H3: The Entire Picture
H3: Maintenance/Alimony in Texas
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Dividing Property During Divorce
H3: What Do You List as Property?
H3: Is It Marital or Separate Property?
H3: Who Gets Which Assets?
H4: Retirement Accounts
H4: Non-Retirement Property
H3: The Entire Picture
H3: Maintenance/Alimony in Texas
When thinking about dividing property, draw four columns on a piece of paper; then follow these steps:
Property includes your family home and ranch, rental property, cars, trucks, trailers, livestock, crops, and equipment. It also includes bank accounts, investment accounts (such as mutual funds, stocks, bonds, and annuities), life-insurance cash value, retirement accounts, profit-sharing accounts, and pension plans. You can probably think of more things to add to the list because there is practically no limit to what is considered property.While laws differ among states, property in Texas can be divided into two basic categories: separate and marital (or community) property. Other states, such as New Jersey, are "equitable distribution" states, where settlements are meant to be fair, but not necessarily 50/50.In Texas, separate property includes what each person:
Marital or community property is everything acquired during the marriage regardless of whether one spouse bought it with her salary or placed only one name on the title document. In Texas, the income earned on a separate property account is marital property. However, the increase in value of the separate property account can be separate property. It depends in part on whether or not the other spouse actively worked to increase the value of that property. Other states have the same or similar rules.
Depositing separate property money into a marital-property bank account creates a co-mingled account. Over the years, this can complicate the process of identifying how much is separate versus marital property. Add in a purchase of something like a vacation home with co-mingled funds, and you have an even more complex situation.
This simple question can have very complex answers.
In this example, John and MarySue live in Texas and are getting a divorce. When they married 17 years ago, MarySue had a CD (Certificate of Deposit) of $10,000. While they were married, her CD earned interest of $1,500. The CD balance is now $11,500. Her separate property is $10,000, while the interest of $1,500 earned during the marriage is marital property. If MarySue had moved all of this money to a joint account, she would have made a presumptive gift of the money to the marriage. The amount she co-mingled would have become marital property. If she had spent the money on a family vacation, she would also have made a presumptive gift. In some circumstances, if the separate-property portion has not been spent, it can be traced back to its origins and be treated as separate again.
Let's assume MarySue owned a house when she and John married 17 years ago. During the marriage, she kept the house in her name, not adding John's name to the deed. They made the mortgage payments out of their joint account. The house increased in value partially because of John's talent for home improvement. Now the situation is more complex. MarySue's separate property is at least the value of the house on their wedding date, less the mortgage balance on that date. (Did she get the house appraised at that time? Probably not.) The mortgage payments, in part, increase the equity in the house. Since those payments were made with marital money, that increase in equity is marital property. As in New Jersey, to the extent the house increased in value due to John's efforts, that portion of the value might be considered marital. The amount the house increased in value due to inflation or due to a general rise in real estate values would be considered separate property. John and MarySue end up with a house that is part separate and part marital property. As you can see, finding out what the house is worth can be a challenging task.
Now let's assume that MarySue and John refinanced the house during their marriage. At that time, if both their names went on the new mortgage and the deed to the house, MarySue made a presumptive gift of the house to the marriage. This makes the entire value of the house a marital asset subject to division.
If MarySue's grandmother either gifted or left as inheritance $20,000 to MarySue during the marriage, that amount started out as MarySue's separate property. The same rules apply here as they did to the CD MarySue brought into the marriage.
If MarySue saves $50 a month from her salary and deposits it into a savings account in only her name, the entire account is marital property. She may think of it as "her money," but it is marital because the money she deposited was earned during the marriage.
In most cases, the couple agrees on how to split up the household items. If the items need to be valued, they are done so at garage-sale prices.
The question is not which assets do you want to keep, but rather which assets are best for your long-term financial security. In the end, who gets what will most likely be the result of negotiating between spouses. Knowing what to negotiate for is crucial.
When trying to decide who gets which property, consider the issues related to the property and long-term financial security. To illustrate, we will return to John and MarySue.
Let's assume John has a 401(k) and MarySue has a pension plan through her employer. John has always done the investing for the family. He takes risks and spends hours at the computer checking the stocks and mutual funds. MarySue is more comfortable with a steady income, predictable investment results, and little time monitoring the investments.
MarySue is a teacher and has a pension account with the Teacher Retirement System of Texas (TRS). John has a 401(k) account with his company. His 401(k) account is worth $180,000. Her pension is valued at $60,000. For simplification, both of these retirement accounts are wholly marital property. Theoretically, they could equally share both retirement accounts. But the easier division is to offset. Instead of John getting half of her pension and MarySue getting half of his 401(k), MarySue could have $60,000 of his 401(k) and keep her pension, leaving John with $120,000 in his 401(k). This would give each of them equal amounts of retirement funds. MarySue would be able to keep her steady and predictable pension, and John would be able to creatively invest his remaining share of the 401(k) funds.
The portion of a retirement account that existed before the marriage is not divisible. A complex analysis is used to determine how much of a retirement account is attributable to the marriage and available to be divided in divorce.
John and MarySue have owned a rental home near their children's school for 10 years. There is a mortgage on this house. They also have an investment account with stocks and mutual funds. The estimated value of the house is $100,000. The estimated value of the investment account is $100,000. John has always invested the money, and MarySue is not familiar with the investments. MarySue and John think that if John takes the account and MarySue takes the rental home, they will have an equal split. That is not necessarily true.
MarySue needs to consider the tax basis in the rental property as well as the balance of the mortgage before she can figure out the true financial value of the rental home. Additionally, she should consider the costs and income taxes she would incur when she eventually sells the property. Given all that, she might get only $44,000 out of the property after the income tax considerations and paying off the mortgage.
John also needs to consider the income tax aspects of the investment account. Depending upon the basis of the stocks, and the history of the stock market, there could be capital gains in those stocks that would reduce the net value of the cash he could get from a sale of those stocks to less than $100,000. The net value could be more or less than $44,000.
Both the rental house and the investment account should be carefully analyzed to determine their true worth. Only then can John and MarySue begin to see how to fairly divide these assets.
In real life, couples take all their property into consideration: assets, debts, retirement accounts, etc. The examples in this article show simple comparisons of property. When everything is included, assets are not compared one-on-one, but rather in a mixture.
During divorce negotiations, it's common for spouses to go back and forth about who will get what property. This is in an effort to reach a fair settlement. This is not necessarily an equal split: a settlement can be fair without being equal.
In addition to the long-term financial considerations of a settlement, the couple will think about how a property division will affect their minor children. It may be financially fair to the adults to sell the family home and divide the resulting cash, but it may not be emotionally fair to the children.
In the case of the divorce involving an older homemaker, the property division should include consideration for her decades of life as a homemaker instead of a career woman. Her employment skills at the time of her divorce can easily be substandard. She will most likely be facing a significant reduction in her standard of living. To help her keep an equal and fair economic position, the division of property might need to be unequal.
There are no guarantees in dividing property in divorce. Negotiations go back and forth. This article has barely touched on the issues. Couples need to understand the aspects of their property to determine how a property division will affect their individual long-term financial security. You may wish to seek help from a Certified Divorce Financial Analyst (CDFA). A CDFA is a financial professional who is trained in the specific financial and tax issues of divorce.
For many years, Texas was the only state without post-divorce court-ordered alimony. In 1995, a law was passed partly in an effort to prevent the economically displaced spouse from going on welfare. This law is really more symbolic than practical; it's rare for a Texas divorce settlement to include alimony.
Most other states have more generous alimony laws. For example, in Colorado, alimony/maintenance can be permanent or temporary. It depends on the satisfaction of several criteria, such as ability to pay, reasonable need, length of marriage, etc.
The Texas court is limited to the amount and duration it can require one spouse to pay the other in alimony. Basically, the couple must have been married for 10 years, and the spouse asking to receive alimony must be unable to be self-supporting. The alimony can be no more than $2,500 or 20% of the payor's income, whichever is less. It is generally limited to three years. Of course, couples can negotiate alimony that is greater in amount and longer in duration, but the court-ordered alimony is limited to this. (If the former spouse is physically or mentally disabled, the court can order payments to be indefinite.)
Alimony in Texas is considered to be a temporary measure to allow the lesser-earning spouse to get training for a career that will support her. If she has substantial wealth upon divorce, she might not qualify for the alimony. Even if she isn't wealthy, her husband still might not have the income to give her alimony.
Tracy B. Stewart (CPA, PFS, CFP®, CFF, CDFA®) focuses exclusively on divorce financial consulting at Stewart Financial Consulting in College Station, TX. She can be reached at (979) 324-8179 or via email at stewart@texasdivorcecpa.com.
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### Page: https://institutedfa.com/learning-center/entering-divorce-niche-advice-experts/
Title: Working with a CDFA
Meta Description: Entering the Divorce Niche: Advice from the Experts
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/entering-divorce-niche-advice-experts/
## Headings Structure:
H1: Working with a CDFA
H1: Entering the Divorce Niche: Advice from the Experts
H3: Define Your Niche
H3: Address Clients' Fears
H3: Stay in Your Lane
H3: Seek Mediation Training
H3: Pay Attention to Detail; Learn Emotional Intelligence
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Working with a CDFA
H1: Entering the Divorce Niche: Advice from the Experts
H3: Define Your Niche
H3: Address Clients' Fears
H3: Stay in Your Lane
H3: Seek Mediation Training
H3: Pay Attention to Detail; Learn Emotional Intelligence
Divorce is a fast-paced niche in which to set up a business. Newcomers to the profession can often be overwhelmed with all the industry dos and don’ts. We asked seasoned divorce professionals from across the country and Canada what they believe newcomers to the industry should know.
Working in the realm of divorce is a niche in itself but there are no less than 10 niches within the field. Decide if you want to do litigation support, mediation support, collaborative divorce, or maybe it's some aspect of the actual planning process you want to specialize in. If you try to market to everyone, you in essence market to no one. Start your practice by getting really clear about exactly how you want to do this work and then target every message, web page, blog and printed material to that target!
Divorce professionals need to meet clients where their fears are and help them stay calm with planning, truth, rational thinking, clear choices and solid advice. Women, often times, are scared of slipping into poverty even when it is clear that they are actually on solid financial ground. Men are often scared of becoming untethered from their family and community in cases where their wives were in charge of the children and their social lives. Divorce professionals need to be intuitive and address their clients’ fears head on to allow for a settlement which is truly about the financial issues at stake.
Never cross the line. Know what you can and can not comment on!
While a CDFA may never aspire to work as a mediator, attending mediation training to hone your diplomacy skills is essential. Clients going through a divorce are in a “crisis mode” as they enter your office. Learning mediation techniques help the divorce financial professional assist the client in a more comprehensive manner through the divorce process. Family law attorneys will identify this training immediately when working on cases together. The skills taught in mediation are invaluable to the divorce professional.
Prepare yourself for the intellectual and emotional challenge. The divorce analysis requires CFP-level knowledge and exacting organizational skills. You can’t get away with restaurant-napkin recommendations anymore. Your advice may find itself under scrutiny in a court of law. Your clientele will also be in an emotionally sensitive state. The raw emotions involved are sometimes difficult to handle, even for those of us who have handed over death benefit checks. So you must also become proficient in dealing with “high conflict personalities.” Attend an IDFA conference on the topic. In Divorce work, your E.Q. is definitely as important as your I.Q.
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### Page: https://institutedfa.com/learning-center/financial-health-check/
Title: Financial Health Check-up
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/financial-health-check/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Financial Health Check-up
H1: Take this short quiz to find out whether you get a clean bill of financial health – or if you require emergency care
H3: How to Figure Out Your FHQ (Financial Health Quotient)
H3: How Financially Healthy are You?
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Financial Health Check-up
H1: Take this short quiz to find out whether you get a clean bill of financial health – or if you require emergency care
H3: How to Figure Out Your FHQ (Financial Health Quotient)
H3: How Financially Healthy are You?
1) Do you have life insurance?
2) In terms of 401(k)s/IRAs/RRSPs, you:
a) maximize contributions every yearb) make sure you contribute something every yearc) seldom make contributionsd) wonder what are 401(k)s/IRAs/RRSPs?
3) When dealing with credit cards, you:
a) pay off the full balance every month
b) try to pay off the full balance, but at least make the minimum payment
c) suspect I’m in trouble, but can’t live without them
d) don’t have any credit cards
4) Your approach to managing your finances could best be described as:
a) my spouse always handled the money
b) I balance my checkbook and put away a little money every month
c) I have a monthly, yearly, and five-year plan
d) when I have money, I spend it all (and then some)
5) Do you know where your money goes each month?
a) yes – down to the penny
b) yes – give or take $100
c) I think so, but I never seem to have as much as I thought I had
d) it just magically seems to disappear
6) How much of your income do you save and invest for short- and long-term goals?
d) Nothing: I live from paycheck to paycheck
7) Are you saving for your children’s college costs?
a) yes: I’m right on track
b) yes, but it isn’t going to be enough
c) no: they will have to pay their own way
d) I don't have children
8) Do you have an up-to-date inventory of your personal property?
a) yes: down to the last set of drink coasters
b) I know what’s mine, but it isn’t written down anywhere
c) I haven’t gotten around to it yet
d) What do I need that for?
9) Do you have an up-to-date inventory of your marital property?
a) yes: and it has all been valued
b) I know what’s mine, my spouse’s, and what belongs to our family
c) I haven’t gotten around to it yet
d) what is marital property?
10) Are you going to be shopping for a mortgage or home loan after your divorce is finalized?
11) With regard to you tax returns, you:
a) prepare them yourself and file on time every year
b) review them with the person who prepared them
c) trust the tax-preparation professional to get everything rightd) have never filed a return12) If disaster struck (your house was destroyed, your child needed emergency surgery, or you lost your job), would your family be provided for?
a) yes: I have insurance policies to cover all theseb) maybe: I’m not sure what my insurance coversc) I would have to ask family and friends for helpd) no: I don’t like to think about bad things happening to me or my family13) With regard to your marital home, you:
a) know its current value, including how much is still owed on the mortgageb) know its current value, but not how much is still owed on the mortgagec) trust my spouse to give me my fair shared) are determined to keep it no matter what
14) Do you know the location and amounts of all of your investments: including savings, stocks and bonds, real estate, art, jewelry, and collections?
a) yes b) I think so c) I’m not sure: my spouse took care of these sorts of thingsd) I have no idea15) If either you or your spouse own a business, how much do you know about it?
a) everything: I have a current valuation, including debts and assetsb) quite a bit: I meet with the bookkeeper for quarterly updatesc) ery little: my spouse takes care of the businessd) nothing
If you scored low on this quiz, then you must begin managing your cash flow immediately. You also need to set priorities and goals, and start to allocate your resources accordingly. Look at your spending patterns and see if they are in line with your priorities and goals; whenever possible, you should reduce the amount spent on low-priority items to make more funds available for your high-priority goals.
A CDFA can help you analyze the short- and long-term impact of your divorce as well as the pros and cons of different settlement proposals, so ask your CDFA to explain the costs and benefits of a particular proposal before you sign it.
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### Page: https://institutedfa.com/learning-center/financial-issues-divorce/
Title: Financial Issues of Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/financial-issues-divorce/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Avoiding Financial Disaster in Divorce
H1: Discovering Your Financial Reality
H1: Post-Divorce Financial Pitfalls: Named Beneficiaries
H1: Taking Control
H1: Understanding Spousal Support
H1: Retirement Accounts in Divorce: Five Common Questions
H1: Steering Clear of Financial Landmines in Divorce
H1: Making the Case for Spousal Support
H1: Tips: Avoiding Financial Traps
H1: Surviving Financially After Divorce
H1: Financial Health Check-up
H1: Top Ten Financial Errors in Divorce
H1: 529 Plans in Divorce: Worth a Second Look
H1: Tick, Tock: Impact of the New Tax Law on Alimony and Divorce
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Avoiding Financial Disaster in Divorce
H1: Discovering Your Financial Reality
H1: Post-Divorce Financial Pitfalls: Named Beneficiaries
H1: Taking Control
H1: Understanding Spousal Support
H1: Retirement Accounts in Divorce: Five Common Questions
H1: Steering Clear of Financial Landmines in Divorce
H1: Making the Case for Spousal Support
H1: Tips: Avoiding Financial Traps
H1: Surviving Financially After Divorce
H1: Financial Health Check-up
H1: Top Ten Financial Errors in Divorce
H1: 529 Plans in Divorce: Worth a Second Look
H1: Tick, Tock: Impact of the New Tax Law on Alimony and Divorce
Tips to help avoid making disastrous mistakes during divorce
Many couples face financial uncertainty after they divorce. This is often the result of using the same income to pay expenses to operate two households instead of one. For instance, you’re now faced with two mortgage or rent payments...
Understanding your financial situation will give you a sense of control over your life – before, during, and after divorce
When contemplating divorce, most people put themselves under undue stress worrying about their financial well-being. Much of that stress is due to the fear of the unknown....
Without exception, our clients want to move on with their lives as quickly as possible after they complete the financial negotiations of their divorce. Moving on includes taking control of their own finances. There is a long list of things to do in order to take control of post-divorce finances that...
Understanding your income and expenses will help you to gain control of your finances – and life – during divorce
Here’s a question for you: do you have a written, detailed, up-to-date budget detailing all your daily, weekly, monthly, and yearly expenses and income? If you’re like most peopl...
What you need to know right now about spousal support -- in the United States and Canada
In North America, it’s the judge’s place to decide how the marital assets should be divided. By closely examining the assets of each spouse, the judge can determine if spousal support should be paid – ...
Retirement accounts are complicated, especially in divorce. Here are some questions you may run into.
1. Can a retirement account be divided without triggering taxes?
A tax-free division is possible, but each plan or account has different requirements. Before signing any agreement in divorce, consul...
Understanding the financial and tax implications of your options – and avoiding financial landmines – is critical in creating a settlement that will last long-term
When negotiating your financial settlement, you need to know and understand the facts and your options before finalizing your set...
Many states and provinces consider your marital standard of living and your pre-divorce lifestyle as major factors in awarding spousal support. Here’s how to make sure the financial documents you create will work for you and not against you.
You’re in your lawyer’s office. Your head is swir...
Here are some tips to help you avoid some of the common financial pitfalls of divorce.
Negotiate a reasonable settlement. Get some professional advice from a CDFA or CFP® to make sure you’ll be able to live with the financial terms of the settlement – now and into the future.
Don’t live be...
How to prepare yourself to deal with the financial realities of divorce – especially in this tough economy
More often than not, the standard of living of both spouses drops in the first few years after divorce. Why? Because the same cumulative income and pool of assets now has to support two h...
Take this short quiz to find out whether you get a clean bill of financial health – or if you require emergency care
1) Do you have life insurance?
a) yes
b) no
c) don’t know
d) through my spouse
2) In terms of 401(k)s/IRAs/RRSPs, you:
a) maximize contributions every yearb) make sure you contrib...
Certified Divorce Financial Analysts from across the USA share some of the worst financial mistakes they’ve seen in their practices.
1. Terminating Supposal Support when a Child Reaches the Age of Majority
With the assistance of their attorneys, a divorcing couple crafted a Property Settlement A...
When considering the financial aspects of a divorce, every asset is worth a second look. In many cases, the parties have 529 plans for their children’s college education. In most mediated settlements, the parties put the 529 plan in the children’s column and there is little discussion over which...
Getting divorced in 2018 and planning to pay or receive alimony? You may not realize it, but there’s a tax “timer” hanging over your head and the buzzer is set to go off.
Current Law
Based on current tax law, the payer of alimony may deduct the full amount from their taxable income which, i...
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### Page: https://institutedfa.com/learning-center/financial-professionals-whorsquos-who/
Title: Financial Professionals: Who’s Who
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/financial-professionals-whorsquos-who/
## Headings Structure:
H1: Working with a CDFA
H1: Financial Professionals: Who’s Who
H1: What do those letters that follow the names of financial experts mean?
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Working with a CDFA
H1: Financial Professionals: Who’s Who
H1: What do those letters that follow the names of financial experts mean?
During your divorce, you need sound financial advice to ensure the settlement is fair to both parties; afterwards, you’ll probably need help adjusting to your new circumstances and planning for a secure future. Here’s an introduction to some of the financial professionals you may need. CPA/CA/CGA: an accountant can give advice regarding financial statements and is often involved in the planning and preparation of income tax filings. A qualified accountant can make judgments regarding the quality and reliability of a company’s books and records – which can be very helpful in divorce cases involving a family-owned business.
CBV: a Chartered Business Valuator has credentials that include managing business accounts. If you need to know how much a business is worth, call a CBV.
CDFA®: a Certified Divorce Financial Analyst® has specialized education, skills, and experience that enables him or her to analyze both the short- and long-term financial impact of different divorce settlements.
CFE: a Certified Fraud Examiner deals with complex financial situations, looking for hidden cash and financial manipulation. Call a CFE if you suspect your ex of foul financial play.
CFP®: a Certified Financial Planner® can help you improve your overall financial health, and help you budget and plan for future goals. If you’ll be receiving a lump-sum spousal support or equalization payment, a CFP can help you invest it according to your goals.
CVA: a Certified Valuation Analyst can place a value on a business.
EA: an Enrolled Agent has been authorized by the IRS to specialize in tax issues in the USA.
PFS: a Personal Financial Specialist is a designation given out by the American Institute of Certified Public Accountants to those who are already CPAs and who have at least three years of experience in dealing with personal finances. A PFS can help you improve your tax situation – and your financial future.
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### Page: https://institutedfa.com/learning-center/making-case-spousal-support/
Title: Making the Case for Spousal Support
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/making-case-spousal-support/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Making the Case for Spousal Support
H1: Many states and provinces consider your marital standard of living and your pre-divorce lifestyle as major factors in awarding spousal support. Here’s how to make sure the financial documents you create will work for you and not against you.
H3: Choosing the Time Period
H3: Documents You Will Need
H3: Tough and Often Inaccurately Represented Categories
H3: The Bottom Line
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Making the Case for Spousal Support
H1: Many states and provinces consider your marital standard of living and your pre-divorce lifestyle as major factors in awarding spousal support. Here’s how to make sure the financial documents you create will work for you and not against you.
H3: Choosing the Time Period
H3: Documents You Will Need
H3: Tough and Often Inaccurately Represented Categories
H3: The Bottom Line
You’re in your lawyer’s office. Your head is swirling with new jargon, terminology, and concepts. You feel as though you’ve been catapulted into a new country – learning a new language for a trip you didn’t want to take in the first place.
As if that wasn’t bad enough, your lawyer hands you a thick, stapled document and asks you to go home, complete it, and to return it as quickly as possible. This document is a balance sheet, of sorts. You’re asked to list your assets, your liabilities, your valuables – such as jewelry and antiques – and then you’re asked to reconstruct and list all of your expenses – for you and for your children.
Maybe you were in charge of the household finances (which will make this task a little easier), but maybe your spouse took care of the bills during your marriage. Either way, the task seems daunting, time consuming, exasperating, and overwhelming.
Make no mistake about it: this is the single most important document you will file in your divorce. Depending on the state or province you live in, it may be known as a Statement of Net Worth, a Financial Affidavit, a Financial Statement, or a Case Information Statement.
This document should be like the foundation of a house: well designed and solid with structural integrity. Instead, it is often fraught with mistakes and inaccuracies that will harm someone’s credibility as well as opening the door for prolonged negotiations about what that person’s “needs” really are.
So how do you make sure you do this right – especially if you have little or no experience working with this kind of document? How do you make sure it works for you and not against you?
The focus of this article is on a particular section of this document that lists your expenses (or the budget). This is absolutely crucial if you expect to be paying or receiving spousal support, since many states and provinces consider the marital standard of living and your pre-divorce lifestyle as major factors in awarding spousal support.
Sometimes, the last year does not accurately reflect your marital reality. Before or during your separation, you may have spent significantly more – or less – than usual. Maybe you didn’t vacation as you normally did. Maybe you lost a lot of weight due to the stress and had abnormally high clothing expenses for your new size. Maybe you went on a few revenge shopping sprees. Regardless, don’t get caught in what I witness in the courtroom all the time: producing a statement of expenses that can be torn to shreds because the numbers are wrong, can’t be proven, or reflect a time period not typical of the marital standard.
Basically, you’ll need any document that records how and where you spend your money. The more detail and precision in pinpointing and allocating expenses, the stronger your case. Here are a few examples of some of the most important documents:
Credit-card statements
Checking account statements with actual cancelled checks or scanned copies of checks
Explanation of Benefits Statements from your Insurance Company
Copies of Gift Tax ReturnsFrequent Flyer and Membership Rewards Point Balances
This analysis may very well be the most important step you take in asking for and justifying a support request, but it requires analysis that is “bullet-proof.” If you will be the one paying support, an accurate analysis will give you some peace of mind that the support amount is fair – based upon your pre-divorce lifestyle.
Don’t be afraid to call for professional help in creating these documents. A Certified Divorce Financial Analyst® (CDFA®) can help you to reconstruct and prove your marital standard of living – which could make all the difference to the amount of support you’ll be receiving or paying.
Michelle Smith, CDFA® is recognized and respected for her focus on guiding clients through the financial transition of divorce. Based in Manhattan, she is the advisor of choice for many high-profile divorce cases. Her background includes 20 years of experience in financial planning and investments, and 85% of her practice is devoted to divorce-related financial analysis.
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### Page: https://institutedfa.com/learning-center/negotiating-your-future/
Title: Negotiating Your Future
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/negotiating-your-future/
## Headings Structure:
H1: Basics of Divorce
H1: Negotiating Your Future
H1: When you’re negotiating your divorce settlement, preparation is the key to success. Are you really ready to negotiate your future?
H3: Do you know what your marital assets are?
H3: What if there’s a business or professional practice involved?
H3: What about a budget?
H3: What about pensions?
H3: What about personal property?
H3: Are you emotionally attached to your home?
H3: What do you want – and why?
H3: The bottom line
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Negotiating Your Future
H1: When you’re negotiating your divorce settlement, preparation is the key to success. Are you really ready to negotiate your future?
H3: Do you know what your marital assets are?
H3: What if there’s a business or professional practice involved?
H3: What about a budget?
H3: What about pensions?
H3: What about personal property?
H3: Are you emotionally attached to your home?
H3: What do you want – and why?
H3: The bottom line
During the course of your marriage, you accumulated both assets and liabilities. Although there are regional differences when it comes to who gets what, basically, everything purchased, received, or saved during your marriage must be divided when you divorce. So now you’re about to sit down and negotiate a financial settlement with your ex – but are you truly ready to do so?
As with any negotiation, preparation – including a thorough understanding of the situation, as well as assistance from professionals to ensure your interests are being protected – is the key to success. Here are a few questions you need to be able to answer before sitting down to negotiate.
You can’t divide the marital assets fairly if you don’t know what’s there. The discovery process, which can be informal or formal, is important in every divorce. The informal way is to exchange lists of your assets and debts in an affidavit form. This method should only be used if you are sure that you know everything that exists in your estate; if you’re not sure, then a more formal means of discovery should be utilized. One such method is called “interrogatories,” in which each lawyer has their client list, under oath, information about assets, liabilities, and income. This process provides everyone involved with a complete economic picture before starting negotiations. In some cases where more discovery is needed, depositions are taken. Depositions are statements under oath with a court reporter present.
A business or professional practice tends to complicate a divorce. More often than not, the value of the business becomes a focal point of contention. Couples need to seriously consider getting a professional and objective valuation of the business. The costs of a professional valuation are usually steep, but you can’t divide something fairly if you don’t know its true worth.
Then comes the question of what to do with the business. There are a few options, such as:
In a business-owner situation, the business is usually most or all of their net worth, so there aren’t enough other assets to compensate the other spouse. Even if selling the business is an option (it usually isn’t), finding a buyer to pay the right price within an acceptable time frame is practically impossible. Most divorcing couples don’t want to maintain a relationship – not even a business relationship – after the divorce. So what do you do? The only real options are a property settlement note (one spouse buys the other’s share in a series of installment payments at a market-interest rate) or a spousal-support arrangement to compensate for the difference.
It is critical to determine the incomes and expenses of the parties and to try to estimate what the future expenses will be after the divorce is final. If there are children, one spouse will probably pay child support to the other, and in many marriages, one spouse will also pay spousal support (“alimony”). It is important to determine both income levels and future needs before you start negotiations. A Certified Divorce Financial Analyst® (CDFA®) can play a critical role in determining both a budget and cash-flow needs. A CDFA® can also help to plan a course of action for the future by preparing different scenarios utilizing assumptions based upon needs and projections with different income levels.
In many divorces, the most valuable assets are future benefits such as pensions. These must all be determined and considered before starting to think about a settlement. In most cases, the marital portion of these benefits – in other words, the portion of the pension or other deferred benefits that have been acquired during the marriage – are subject to division as part of the divorce settlement. A good lawyer and CDFA® will help you consider these benefits as part of the overall settlement plan, making sure your future needs will be met.
Personal property is important, but don’t spend thousands of dollars fighting over property with more sentimental than real value. Items such as collectables, favorite home furnishings (from chairs to rugs to pots and pans), hobby equipment, and other personal property must not become the focus of your negotiations. A good lawyer and/or financial advisor can help you gain perspective on these items and focus on the big picture when you’re getting ready to negotiate a settlement. Remember that an expensive television or computer has almost no value a few years after you made that big-ticket purchase. The courts don’t look at replacement value but the actual value of the item, which, in the case of used furniture, is often garage-sale prices.
Over the years, we have seen people who were determined to stay in the marital home no matter what. In some cases, that can be a big mistake. First of all, it may be too expensive to maintain. In some situations, it’s better to sell the home and find another one that’s smaller and less expensive to pay for and maintain. As you move ahead and rebuild your life, it may be better to start fresh in another home. Aside from the financial considerations, there may be too many memories attached to the marital home to let you move forward emotionally as long as you’re still living there. There are several ways to handle a marital home:
You must have a game plan when you enter into settlement negotiations. Do you know what you want? Do you know what you need? Are you thinking about all options? Are you being realistic in your demands? It is standard negotiating practice to ask for more than you expect to receive – without going to extremes. Don’t be a doormat, but don’t be excessively greedy, either. Insoluble disagreements arise when divorcing couples are negotiating based on wants rather than needs. So take the time to objectively determine your own needs – and those of your spouse – before starting to negotiate. We have found over the years that if your demands are reasonable and based more on needs than wants, then the chances for a quick, fair settlement are good. There must be give-and-take and wiggle-room in your settlement proposals; your lawyer and financial advisor can help you strategize and come up with different game plans and scenarios as you prepare for this negotiation.
You must be well represented and advised in order to negotiate effectively. This includes knowing the “ingredients” of the marital pie, and also how much of that pie you can realistically expect to keep as you prepare to negotiate your settlement. A team consisting of a lawyer and a CDFA® – and perhaps a therapist if emotional issues are getting in your way – can help understand your needs, your rights, and your true “bottom line” before you sit down to negotiate with your spouse. Divorce is one of the most difficult and stressful experiences you’ll ever have. During this emotional time, it can be hard to think clearly or rationally, so make sure to enlist the help of professionals who can guide you when you’ve lost your way. Remember, if both sides are somewhat unhappy with the outcome, then the negotiations went well.
Henry S. Gornbein is a practicing divorce attorney, a Fellow of the American Academy of Matrimonial Lawyers, and the creator of www.DivorceOnline.com. Fadi Baradihi is the former president and CEO of the Institute for Certified Divorce Financial Analysts.
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### Page: https://institutedfa.com/learning-center/news/
Title: In the News
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/news/
## Headings Structure:
H1: In the News
H1: Best of the Week Roundup: May 20, 2016
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: In the News
H1: Best of the Week Roundup: May 20, 2016
This is our weekly update on divorce news, trends, and articles, where we round up the best pieces of the week.
Mediation is a hot topic this week, with experts explaining all the pros and cons of the mediation process and how to prepare for success. Also, check out our top questions you should be a...
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### Page: https://institutedfa.com/learning-center/prenuptial-agreements-marriage-contracts/
Title: Prenuptial Agreements
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/prenuptial-agreements-marriage-contracts/
## Headings Structure:
H1: Basics of Divorce
H1: Prenuptial Agreements and Marriage Contracts
H1: If you're thinking of taking the plunge a second time, you should consider whether you need the protection of a prenuptial agreement or marriage contract.
H3: Limitations
H3: Benefits
H3: Challenging a Prenuptial Agreement
H3: Additional Issues to Consider
H3: Case Study: Sarah and Brad
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Prenuptial Agreements and Marriage Contracts
H1: If you're thinking of taking the plunge a second time, you should consider whether you need the protection of a prenuptial agreement or marriage contract.
H3: Limitations
H3: Benefits
H3: Challenging a Prenuptial Agreement
H3: Additional Issues to Consider
H3: Case Study: Sarah and Brad
A prenuptial agreement is a contract that two parties enter into in contemplation of marriage. It can also be referred to as a “premarital agreement,” “antenuptial agreement,” or simply a “prenup"; in Canada, it is called a “marriage contract.” (For more information, see "Canadian Marriage Contracts" at the bottom of this page.)
In most states, until the 1980s, prenuptial agreements were deemed against public policy and not valid to the extent they pertained to divorce or separation. They were considered against public policy because it was thought that they encouraged divorce and allowed the husband to thwart his legal obligation to support his wife. Prior to that time, they were valid to the extent that they pertained to the death of one spouse.
A postnuptial agreement (called a "marriage contract" in Canada) is similar to a prenuptial agreement except that it is entered into after the parties have married. In some states, postnuptial agreements are not valid if either spouse is contemplating divorce or separation.
Canadian law also recognizes cohabitation agreements for couples of the same or opposite sex that currently, or intend to, live together.
First, a brief overview of U.S. law. In community-property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), any assets that are acquired during the marriage are marital assets and divided equally between the spouses upon divorce. In equitable-distribution states, any assets acquired during the marriage are divided between the spouses in a fair and equitable manner. In many states, the appreciation in value of a separate asset during the marriage is a marital asset.
Generally, a prenuptial agreement sets forth how the marital assets will be divided in the event of divorce or either spouse’s death. It can also address what assets remain the separate assets of each spouse and what happens to the appreciation in value of the separate assets. For example: Joe has an IRA worth $200,000 at the time he marries Barb. When they divorce, six years later, the IRA is worth $500,000. In some states, $200,000 would be considered Joe’s separate property and $300,000 would be considered a marital asset to be divided between Joe and Barb.
Barb has a home worth $250,000. Joe moves in after they marry, and they use the home as their marital home. When they divorce, the home is worth $400,000. The court is very likely to decide that Barb made a gift to the family, classify Barb’s home as a marital asset, and split the entire asset. If Joe and Barb created a prenuptial agreement, they could have agreed that Joe’s IRA – including any appreciation during the marriage – would have remained his separate property and that Barb’s home – including any appreciation – would have remained her separate property.
Although there are limitations in many areas, prenuptial agreements may also cover issues of spousal and child support. The spouses can agree not to contest any estate-planning documents prepared by the other spouse and to give up certain statutory rights upon the death of one spouse. They can also agree to file joint or individual tax returns during the marriage.
Some couples also cover issues that arise during the marriage, such as their children’s religious upbringing, how household duties will be divided, how finances will be handled, and sometimes even how often the couple will have sex. These provisions are best left out of the agreement, because a judge has no mechanism to enforce them. In addition, you have to be very careful with these provisions, because if they are too unusual, the entire agreement may be deemed invalid by a judge.
In addition to addressing how the assets will be divided, it is also important to decide how debts, particularly those acquired before the marriage, will be divided.
Generally, two parties can agree to anything that does not violate any law or oppose public policy (interest). For example, contractually encouraging someone to divorce would be against public policy and invalidate the agreement. A prenuptial agreement has several limitations; some are unique to prenuptial agreements:
Prenuptial agreements are not just for the wealthy. They are particularly useful in second marriages, where one or both spouses have children from a previous marriage.
Mike and Carol are going to be married. Mike is a widower and has three sons. Carol is a widow with three daughters. Both of them have assets that they are bringing to the marriage, including the death benefits they received upon the death of their first spouses. Mike and Carol are contemplating hiring attorneys to prepare a prenuptial agreement to ensure that the assets they received from their deceased spouses will go to their respective children.
A prenuptial agreement has numerous benefits. Some of these benefits include:
If you’re going to have a prenuptial agreement, you should each hire a lawyer to ensure that it is valid and will hold up in court. Do not try to prepare one yourselves! Steven Spielberg and Amy Irving allegedly drafted their prenuptial agreement on the back of a napkin; the court did not recognize it as a valid contract, and it has been reported that Irving received over $100 million in assets after their four-year marriage ended.
A prenuptial agreement can be successfully challenged in the following ways:
Each spouse should draft their estate plans so that they conform to the terms in the prenuptial agreement. You do not want to force your children and surviving spouse to get involved in litigation involving your estate. The costs could result in everyone getting significantly less.
You may also want to consider using life insurance to replace assets that go to either your children or your spouse. For example: Mike and Carol purchased a new home with the proceeds from the sale of Mike’s previous home. Mike wants Carol to have the home upon his death. He can purchase insurance, naming his sons as beneficiaries, to replace the proceeds from the sale of his previous home.
Prenuptial agreements can be amended or revoked at any time. Some couples add a sunset provision terminating the agreement after a certain period of time, such as ten years.
Sarah has a technology business that she thinks is worth approximately $1,000,000. In 2003, it had gross sales of approximately $750,000 with profits of approximately $300,000 (including Sarah’s compensation). The income has steadily increased at about 20% annually. She is about to marry Brad. This will be the first marriage for both of them, and neither of them have children. Brad’s net worth is approximately $50,000 and his annual income is approximately $40,000 and increases at about 3% per year. Should Sarah have Brad sign a prenuptial agreement to protect her business?
If Sarah wants to protect her business and its future growth, then she should have Brad sign a prenuptial agreement. Otherwise, any future increase in the value of the business during the marriage would likely be split between both parties. Without a prenup in place, if Brad sometimes helped Sarah with the business, then a judge may find that the business is a marital asset and split the business. Sarah must hire an expert to perform a business valuation; better still, she and Brad could jointly decide on the expert that will perform the valuation, or each of them could hire their own expert and then average the two valuations. If this is done, then Brad would have a difficult time challenging the value of the business.
Nancy Kurn is the former Director of Educational Services for the Institute for Divorce Financial Analysts™ (IDFA™) – the premier national organization dedicated to the certification, education, and promotion of the use of financial professionals in the divorce arena.
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### Page: https://institutedfa.com/learning-center/protecting-your-credit-score-divorce/
Title: Protecting Your Credit Score in Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/protecting-your-credit-score-divorce/
## Headings Structure:
H1: Basics of Divorce
H1: Protecting Your Credit Score in Divorce
H3: Take control
H3: Remember, court orders aren't magic
H3: Why credit bureaus will disregard your divorce decree
H3: How to protect your all-important credit score during divorce
H3: If only I'd known….
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Protecting Your Credit Score in Divorce
H3: Take control
H3: Remember, court orders aren't magic
H3: Why credit bureaus will disregard your divorce decree
H3: How to protect your all-important credit score during divorce
H3: If only I'd known….
Rachel is the sort of person who plays by the rules. A stay-at-home mother of three, she has always lived within the family budget and paid bills on time. When she and her husband, Jack, split up, she followed her obligations under their divorce decree to the letter. She was therefore shocked to find out that her mortgage application after divorce had been turned down because her husband had destroyed her credit rating.
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### Page: https://institutedfa.com/learning-center/retirement-accounts-divorce-five-common-questions/
Title: Financial Issues of Divorce
Meta Description: Retirement Accounts in Divorce: Five Common Questions
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/retirement-accounts-divorce-five-common-questions/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Retirement Accounts in Divorce: Five Common Questions
H3: 1. Can a retirement account be divided without triggering taxes?
H3: 2. Is a retirement plan more or less valuable when compared to other assets?
H3: 3. Is a retirement account separate property?
H3: 4. Can you avoid the IRS penalty for early withdrawal in divorce?
H3: 5. Should you “tax affect” retirement accounts when dividing assets in divorce?
H3: Conclusion
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Retirement Accounts in Divorce: Five Common Questions
H3: 1. Can a retirement account be divided without triggering taxes?
H3: 2. Is a retirement plan more or less valuable when compared to other assets?
H3: 3. Is a retirement account separate property?
H3: 4. Can you avoid the IRS penalty for early withdrawal in divorce?
H3: 5. Should you “tax affect” retirement accounts when dividing assets in divorce?
H3: Conclusion
Retirement accounts are complicated, especially in divorce. Here are some questions you may run into.
A tax-free division is possible, but each plan or account has different requirements. Before signing any agreement in divorce, consult with each plan administrator (or account custodian) to properly analyze the process needed for a tax free division. Without the right process, clients may be subject to significant taxes, penalties, and, ultimately, an inequitable division.
While the division of marital property generally is governed by state domestic relations law, any assignments of qualified retirement interests (for example, a 401(k) plan) must also comply with Federal law, namely the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986 (the Code).
A qualified retirement plan will require a Qualified Domestic Relations Order (QDRO or “Quadro”) to divide the investments in the account. If prepared properly, the QDRO outlines every detail of the split so the plan administrator can complete the transaction accurately.
Attorneys might downplay the need for a QDRO specialist because they often use standardized QDROs made available by plan administrators. However, these templates may not include all of the options for division. A QDRO specialist can help assure the QDRO is prepared accurately and money is divided in a timely fashion.
Non-qualified retirement plans, such as many traditional IRAs or Roth IRAs, may not require a QDRO. Many of these plans require a copy of the divorce decree and custodian specific forms to divide the account.
Retirement assets are only one part of a family’s total financial picture. In divorce, unnecessary expenses and taxes can be avoided. Moreover, liquidity is key to starting a financial life over again. CDFA professionals should rate each asset for liquidity and tax consequences to help match the division to the client's financial goals and priorities.
Most retirement plans rank lower than other assets because withdrawals are taxed at the owner’s highest marginal tax rate and incur a 10 percent penalty until age 59.5 (although there are exceptions).
What about the sale of a home? Assuming there is a market for the home, home sale proceeds nearly always rank high on the list of desirable assets. A large share of gain from the sale of a primary residence (after closing costs are paid) is not taxed and, unlike most retirement plans, these proceeds are available to divorcing clients before age 59.5 without penalty.
Cash savings and checking accounts are, obviously, the most liquid. Brokerage and investment accounts rank between home sale proceeds and traditional IRAs because they are available for withdrawal and only investment gains are taxed.
Separate property is a legal concept that varies from state to state, so state law and precedent will guide the financial analysis needed to determine the separate property portion of accounts.
Generally speaking, retirement benefits earned by either spouse during marriage can be divided, even if those benefits have yet to be realized. A CDFA professional can assist attorneys by gathering relevant documents and plan contact information and by being familiar with the coverture fraction. The coverture fraction is used to calculate the community share and is defined as the ratio of the married years of earning the benefit and the employed spouse’s total earning period.
When the receiving spouse is awarded a share of a qualified plan like a 401(k), the share is most often moved to an alternate payee account inside the plan. Under IRS rule 72(t)(2)(C), the alternate payee of a qualified plan can withdraw pursuant to divorce without early withdrawal penalties (10 percent), but ordinary income taxes will still need to be paid. For a spouse with little or no income in the first year of divorce, this can be a source of liquidity to support his or her lifestyle.
The plan administrator will often withhold 20 percent because the alternate payee will be required to pay marginal taxes on any withdrawal. The more the spouse withdraws, the higher taxes owed.
Since every situation is unique, consult a CPA about the intent to use a penalty-free withdrawal before signing a settlement agreement. The alternate payee can often use a two-step withdrawal process to avoid penalties. First, withdraw the cash needed and then either (1) leave the remaining proceeds in the alternate payee account or (2) roll over the account to a new IRA. At the end of the year, the recipient spouse should receive a 1099 from the plan administrator for the withdrawal which indicates the 72(t)(2)(C) exemption.
Many attorneys will “tax affect” retirement plans (discounting the account by the recipient’s highest marginal tax rate). Left unchecked, the spouse receiving more of the retirement accounts may benefit (possibly unfairly) in negotiations from this practice.
In order to properly “tax affect” each plan or account based on economics, the parties would need to know when and how much will be withdrawn, future tax rates for each party, and the rate needed to discount the tax expense back to today’s dollars – even when the recipient is very close to retirement.
By preparing financial projections, a CDFA professional can assess the amount and timing of the recipient’s anticipated withdrawals from retirement accounts. By discounting the future tax expense, the analyst can assess whether and how much to “tax affect” or discount the value of retirement assets. But I must warn you, attorneys who regularly “tax affect” retirement accounts to benefit their client’s position in negotiations may not appreciate this kind of financial analysis.
Valuing and dividing retirement accounts is more complex than most divorcing couples expect. CDFA professionals can provide strategic ideas to help divide these accounts efficiently and avoid unnecessary costs.
Pam Friedman, CFP, CDFA is the Founder of Divorce Planning of Austin and a Partner at Silicon Hills Wealth Management. She is the author of I Now Pronounce You Financially Fit: How to Protect Your Money in Marriage and Divorce, published by River Grove Books and available on Amazon.
Investment advisory services offered through Silicon Hills Wealth Management, LLC, a registered investment advisor. Neither Silicon Hills Wealth Management nor Divorce Planning of Austin do not provide legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.
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### Page: https://institutedfa.com/learning-center/retroactivity-same-sex-divorce-unanswered-questions/
Title: Basics of Divorce
Meta Description: Retroactivity in Same-Sex Divorce: Unanswered Questions
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/retroactivity-same-sex-divorce-unanswered-questions/
## Headings Structure:
H1: Basics of Divorce
H1: Retroactivity in Same-Sex Divorce: Unanswered Questions
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Retroactivity in Same-Sex Divorce: Unanswered Questions
When the Supreme Court ruled that same-sex marriages must be recognized in every state, another door opened for LGBT couples – the ability to legally divorce. But one thing not solved by Obergefell v. Hodges was how to treat assets that were held and transactions that occurred before the June 26, 2015, ruling. This presents a challenge for divorce professionals creating a financial settlement. In splitting up assets, what exactly can be included and when can they be included or excluded?
Hopefully in time the lawmakers will answer this question. Until then, same-sex divorce cases unable to make a determination could experience lengthy debate and litigation before a divorce is final.
Probate Court Judge Randy Rogers in Butler County, Delaware, summed it up well in an interview with the Delaware News-Journal: “The majority of the Supreme Court created a great deal of uncertainty with respect to property and property rights. It will take years, and the judges expect a lot of litigation relative to those things because what had been firmly established in terms of property rights had the rug pulled out from under it the way they made that decision, which is why I believe the dissents were so strong by Chief Justice Roberts and the others. It had a lot more to do than with marriage rights.”
CDFA professionals must monitor changes in their state’s legal rulings and procedures on how and whether retroactive assets and transactions will be considered. Some employers and states are already making their own decisions. For example, employer benefits are being extended retroactively to allow spousal rights for retirement and health benefits. Defined benefit plans are allowing participants to go back and access qualified joint and survivor annuity benefits, and defined contribution plans are accepting QDROs from divorced same-sex couples.
States including Colorado and Kansas have said a union begins once a couple begins cohabitation that passes as common-law marriage. This is likely to translate into assets and transactions at that time to be considered in divorce. However, other states including Louisiana and California say community property starts only at an official marriage, regardless of how long the couple lived together. Montana’s Teacher Retirement System updated its rules to state, “Unless further legal authority requires a different application, TRS will apply the holding in Obergefell prospectively only.” Therefore, it will only consider marriages beyond June 26, 2015. Will that be precedence for retroactivity in Montana?
The Internal Revenue Service clarified in Notice 2014-19 that, effective June 26, 2013, retirement plans must be administered in a manner that reflects the Windsor ruling, which established federal recognition. However, the agency does not require plans to retroactively recognize same-sex spouses prior to that date. Does that mean retirement plan assets before June 26, 2013, are not part of a divorce settlement even if the couple was legally married but lived in a non-recognition state? Additionally, the Social Security Administration is likely to retroactively pay benefits to same-sex spouses, but as of this writing has not released how that will be determined. Normally a federal agency’s decision holds higher precedence than an employer or state ruling when it comes to creating a universal standard.
This hodgepodge of when to consider marital assets and benefits as retroactive is keeping couples, attorneys, courts, and divorce analysts in a state of ambivalence.
In the end, since each state has its own divorce laws, it is likely each state will determine its own state divorce standards to offer guidelines for retroactivity. Perspectives considered could include how long the couple has been married, how much they have contributed to the marriage financially and non-financially, and how property has been separated or comingled. However, this could create its own quandary, as each spouse may not agree on dates and timelines of financial contributions. In addition, it creates a longer discussion in divorce negotiations, which for the couple can lead to a higher cost for divorce.
Another aspect of retroactivity in division of assets is valuation. Some states consider the value of educational degrees, professional licenses, businesses, etc. as marital property. If one spouse of a same-sex couple married in a recognition state but while living in a non-recognition state obtained a degree in 2011, and a divorce occurs in 2016, after Obergefell, can the value of that degree be considered retroactively in a divorce settlement?
For retirement plans, retroactive determination also throws a wrench in calculating the coverture fraction, a formula for determining the percentage an ex-spouse receives from a QDRO. This formula is based on the number of years married while on the job. How would this number be determined retroactively in a previously non-recognition state? Would a couple who married in Vermont in 2009 but living in Virginia be considered married for seven years or one year if divorcing in 2016, since Virginia did not recognize the marriage until after Obergefell in 2015?
This same ambiguity could creep up in negotiations over child and spousal support.
While it may be too late for those legally married before 2015 but not recognized, a solution to these discrepancies for new marriages could be the pre- or post-nuptial agreement. By writing in dates, financial and non-financial contributions and asset ownership, if divorce arises later the debate would be limited and the divorce quicker. Also creating less contention is retitling property as separate to avoid being considered marital, especially in a community property state. If this is done after marriage, such as with a post-nuptial agreement, gift tax would be avoided because of the tax exclusion of property transfers between spouses. Agreements are not just for the wealthy!
Divorce professionals have plenty of landmines to watch for surrounding retroactivity. It is the intent of this article to call attention to this potential roadblock in a same-sex divorce and maintain awareness. Obergefell paved the way for same-sex marital rights, but left a pothole in divorce proceedings.
Dan Serra is a CDFA and CFP in Bethesda, MD. As an Accredited Domestic Partnership Advisor (ADPA), he specializes in guiding LGBT families with their finances. He also is qualified as a financial mediator and neutral in the collaborative divorce process.
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### Page: https://institutedfa.com/learning-center/safe-harbor/
Title: Safe Harbor
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/safe-harbor/
## Headings Structure:
H1: Basics of Divorce
H1: Safe Harbor
H1: Here's help navigating the financial dangers of divorce so you will reach safe harbor: a financially sound future.
H3: Marital vs. Separate Property
H3: The Marital Home
H3: Hopelessly Devoted
H3: Create a Budget
H3: What about my stuff?
H3: What do you want – and why?
H3: The bottom line
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Safe Harbor
H1: Here's help navigating the financial dangers of divorce so you will reach safe harbor: a financially sound future.
H3: Marital vs. Separate Property
H3: The Marital Home
H3: Hopelessly Devoted
H3: Create a Budget
H3: What about my stuff?
H3: What do you want – and why?
H3: The bottom line
While you were married, you and your spouse were co-owners of a “business”: your marriage. Like any business owners, you accumulated both assets and liabilities. Maybe you bought a house, a car, a cottage, some furniture. One or both of you earned income, maybe put some money aside for retirement. In addition to mortgage and car loans, you might also have accumulated some credit-card debt. Maybe one or both of you had a bad year – you got sick, or your spouse was laid off – and your financial troubles were the final straw in an already troubled relationship.
Whatever your own reasons were for ending your marriage, money is going to play a big part in your divorce process. Since property division on divorce is a state or provincial matter, there are regional differences when it comes to dividing the marital pie. You’ll need to ask your lawyer about the rules governing property division in your area, but here are some general rules to get you started.
The first thing to know is that there are two kinds of property: Marital and Separate. Anything that is marital will go into the marital pie that’s going to be divided; anything that’s separate property will not. The distinction between the two is a gray area and should be discussed with your lawyer, but here’s how most courts typically define separate property.
Separate property is anything that was gifted during the marriage, inherited during the marriage, or brought into the marriage and kept in either spouse’s separate name. Let’s take a look at some examples. Karen got married 10 years ago. She was in love, so she told her husband Frank: “What’s mine is yours and what’s yours is mine.” So she changed the title on her cottage from her name alone to both of their names. Even if her husband never contributed a dime to the upkeep or maintenance of the cottage, in most areas, the cottage will likely be part the marital pie and up for division now that they’re getting divorced.
How about the inheritance that Karen received five years ago from her Aunt Millie? She left it in a bank account in her separate name, which means that the money she inherited is her separate property and not up for division. But what if Karen had taken her $15,000 inheritance and used it to renovate the kitchen in the marital home? She could ask her lawyer to try to subtract $15,000 from the marital portion, but the courts are likely to rule that the inheritance became marital property when she invested it in the home. As a general rule, you can convert separate property into marital property by commingling it (e.g., if Karen had put the inheritance into a joint account with Frank rather than one in her name only), or by making a “presumptive gift to the marriage” (e.g., using the inheritance money to renovate the kitchen, or to take the family on a ski trip to Switzerland, or to buy a motor-boat that the family all enjoyed at the cottage).
Here’s another tricky part: any increase in value on the inheritance (or any other separate property) is considered marital in most areas. Aunt Millie left Karen $15,000, which grew to $20,000 at the time of her divorce. The $5,000 in growth could be considered marital, depending on state or provincial law.
Let’s look at one more example. Let’s say Karen was the saver in the family, and during her marriage, she automatically deducted $100 from each paycheck and placed it in a high-interest account in her separate name. Do you think the money in that account is marital or separate property? It’s marital property, because everything Karen earned during her marriage is marital property regardless of whose name is on the account. The general rule is that everything that either of you earned, purchased, received, or saved during your marriage is marital property, which must be divided with your spouse when you divorce.
In many divorces, the biggest question is who gets the marital home. Should the wife get it, should the husband, or should they sell it and split the proceeds? What if the house is “underwater” – meaning that the householders owe more on their mortgages than their houses are worth? The answer is not always easy or clear.
In a normal economy, couples typically build equity in their homes; if they decide to divorce, they would usually divide the equity they had built by selling the house or by one partner buying out the other’s share. But after the recent boom-and-bust cycle, many couples own houses that neither spouse can afford to maintain on his/her own, and that they cannot sell for what they owe.
So with the housing market still struggling in may areas, one of a couple's biggest assets can be a liability if they're breaking up. Some divorcing couples are being forced to ask themselves a new question: “Should we stay together for the sake of the house?”
Before the recession, there were generally two main options for the home:
Now, let’s look at today’s reality.
In a recent survey of Certified Divorce Financial Analyst® (CDFA®) professionals across the US and Canada, 67% of respondents stated that the current housing market has forced them to come up with creative solutions to property-division problems when the matrimonial home fails to sell – or would sell for less than what clients still owe on the mortgage. The most common solution is for ex-spouses to retain joint ownership and continue to live in the house (often, he moves into the basement and she lives upstairs) until the market improves, agreeing to postpone final division of assets until after the house is sold. Other common solutions include:
If you and your spouse have agreed to continue to own the house together for a period of time post-divorce – for instance, until your children reach a certain age, or until the market recovers and they can at least break-even on the sale of your home – but only one of you is going to continue to live in the home, then you’ll have to negotiate who pays for what until the house is sold. In many cases, the person who remains in the home pays the mortgage and taxes and may get some credit for any reduction in principal on the mortgage from the date of the divorce until the date that the home is sold. If the mortgage payment is similar to what the other person has to pay in rent, then they might agree that the person who stays in the home gets no credit for reducing the principal since he/she is enjoying the benefits of living in the home. Major repairs are usually divided between the parties – either at the time of the repair, or by reimbursing the person who has paid for the repair over time or when the house is sold.
Sometimes, people (mostly women) are determined to stay in the marital home no matter what. It’s the place where their children were born; they decorated it with loving care over the years; it represents security and familiarity in the rapidly-shifting landscape of divorce. In some cases, keeping the home can be a big mistake – and sometimes, this mistake can lead to financial ruin. We’ve seen people willing to give up their share in their spouse’s pension, joint investments, or savings accounts in order to keep the house. But if you can’t afford to cover the mortgage, taxes, repairs, and maintenance on your own – without dipping into your savings or retirement accounts – then keeping the home may be a decision you’ll come to regret. Talk to your CDFA® professional about what your financial future will look like if you keep or if you sell the home before making your final decision.
It is absolutely crucial to develop a realistic post-divorce budget so you’ll know what you need – and whether the property division and spousal or child support payments (if any) will cover these needs. To do this, you’ll need to determine the incomes and expenses of both you and your spouse and also try to estimate what both of your expenses will be after the divorce is final. This is a difficult task for many people – especially if you were not the spouse who handled the family finances while you were married. A CDFA professional can help you to develop a budget and figure out your cash-flow needs – and also let you know if you’re steering towards financial security or disaster. Working with a CDFA allows you to see both the short-term and long-term financial effects of accepting “Settlement A” vs. “Settlement B”, which will help you to make better decisions at a difficult time.
We appreciate that you may be attached to certain possessions, but please don’t spend thousands of dollars fighting over “stuff” that has more sentimental than real value! People often overestimate the value of appliances, furniture, and other household items. You should take a look at classified ads on websites such as Craigslist.com or Kijiji.com, or in your local newspaper to get an idea of the dollar-value attached to certain items. In most instances, the family treasures are simply used goods, and they will command little more than garage-sale prices. You can choose to have potentially more valuable items – such as a Chippendale desk or a Tiffany lamp – professionally appraised. Be aware, however, that even a professional appraisal is unlikely to produce numbers that approach replacement values for insurance purposes. Items such as collectables, favorite home furnishings (from chairs to rugs to pots and pans), hobby equipment, and other personal property should not become the focus of your negotiations. A good lawyer and/or financial advisor can help you gain perspective on these items and focus on the big picture when you’re getting ready to negotiate a settlement. Remember that an expensive television or computer has almost no value a few years after you made that big-ticket purchase. The courts don’t look at replacement value but the actual value of the item, which, in the case of used furniture, is often garage-sale prices.
You must have a game plan when you enter into settlement negotiations. Do you know what you want? Do you know what you need? Are you thinking about all options? Are you being realistic in your demands? It is standard negotiating practice to ask for more than you expect to receive – without going to extremes. Don’t be a doormat, but don’t be excessively greedy, either. Insoluble disagreements arise when divorcing couples are negotiating based on wants rather than needs. So take the time to objectively determine your own needs – and those of your spouse – before starting to negotiate. We have found over the years that if your demands are reasonable and based more on needs than wants, then the chances for a quick, fair settlement are good. There must be give-and-take and wiggle-room in your settlement proposals; your lawyer and financial advisor can help you strategize and come up with different game plans and scenarios as you prepare for this negotiation.
You must be well represented and advised in order to negotiate effectively. This includes knowing the “ingredients” of the marital pie, and also how much of that pie you can realistically expect to keep as you prepare to negotiate your settlement.
A team consisting of a lawyer and a CDFA® – and perhaps a therapist if emotional issues are getting in your way – can help understand your needs, your rights, and your true “bottom line” before you sit down to negotiate with your spouse.
Divorce is one of the most difficult and stressful experiences you’ll ever have. During this emotional time, it can be hard to think clearly or rationally, so make sure to enlist the help of professionals who can guide you when you’ve lost your way.
Remember, if both sides are somewhat unhappy with the outcome, then the negotiations went well.
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### Page: https://institutedfa.com/learning-center/steering-clear-financial-landmines-divorce/
Title: Steering Clear of Financial Landmines
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/steering-clear-financial-landmines-divorce/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Steering Clear of Financial Landmines in Divorce
H1: Understanding the financial and tax implications of your options – and avoiding financial landmines – is critical in creating a settlement that will last long-term
H3: Take Taxes into Account
H3: Review Tax Returns
H3: Understand Retirement Plans
H3: Short-Sales May Result in Taxable Income
H3: Structure Spousal Support Carefully
H3: Check your Health Coverage
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Steering Clear of Financial Landmines in Divorce
H1: Understanding the financial and tax implications of your options – and avoiding financial landmines – is critical in creating a settlement that will last long-term
H3: Take Taxes into Account
H3: Review Tax Returns
H3: Understand Retirement Plans
H3: Short-Sales May Result in Taxable Income
H3: Structure Spousal Support Carefully
H3: Check your Health Coverage
When negotiating your financial settlement, you need to know and understand the facts and your options before finalizing your settlement. In my divorce practice, I have found some crucial items are often overlooked; this article outlines some of those items for your consideration. Make sure to work with your lawyer and a divorce financial professional to cover the bases.
Failing to understand the tax basis of property can generate unexpected taxes for the spouse receiving property, which reduces the value of the settlement. Carefully reviewing the tax basis of all property, and planning whether to keep or sell the property post-divorce, can avoid the problem of unanticipated taxes on unrealized gains.
Dividing marital property into tax assets of similar tax basis, and then dividing these classes equitably, helps to avoid the complexities or omission of offsetting assets with different basis.
Personal tax returns are a financial road map to the finances of the family and vital to arriving at a financial settlement. With the current downturn in the economy, loss carryforwards are appearing on more tax returns. Carryforwards have a value as a potential tax benefit; some can be deducted from future income, and others affect the basis of the transferred property.
Be sure to negotiate how unused capital losses, net operating losses, passive activity losses, charitable contribution carryforwards, and unused investment interest expenses will be divided in your settlement.
Not all retirement plans are the same. It’s crucial to find out what options are available to you, and to make sure your divorce agreement only includes payments that your – or your spouse’s – plan allows. Here are three points to consider:
In depressed housing markets, where many homes are worth less than the mortgage balance, some homeowners are negotiating with their banks to make a short-sale. Understanding whether a short-sale could result in a taxable gain and whether any taxes would be payable on the sale is another important minefield that has to be navigated.
Spousal support can be used to shift income from the spouse in a higher tax bracket to the spouse in a lower tax bracket (it reduces income to the payor and increases income to the recipient).
Be sure to structure your spousal support properly so you don’t trigger unanticipated taxes. Avoid:
A mistake in either of these areas may cause the payor spouse to lose all or a part of the spousal support deducted on his or her tax return and be charged not only unexpected taxes but also penalties and interest. This is an extremely complicated area; ask your divorce financial professional to explain it to you to avoid an expensive surprise from the taxman down the road.
In the USA, the Consolidated Omnibus Budget Reconciliation Act (COBRA) contains provisions giving certain former spouses the right to temporary continuation of health coverage at 102% of the actual employer’s premium. In order to be eligible for continued coverage, you must inform the ex-spouse’s employer of the divorce within 60 days of the divorce. Trying to cover an ex-spouse by not informing the employer of the divorce can result in health coverage being denied or a fraud lawsuit by an insurance company attempting to collect medical benefits paid.
[Ed. In Canada, extended health-care plans will not cover an ex-spouse post-divorce; once divorced, a spouse no longer qualifies as a dependent. If you’re the non-member spouse, and if you have documented medical issues, you need to investigate plans that allow for pre-existing conditions ASAP; most plans of this type need to be placed within 30 days of the divorce, so time is of the essence here.]
With offices in Arizona and Louisiana, Andrew K. Hoffman has practiced as a CDFA® since 1999. He is chairman of the Institute for Divorce Financial Analysts’ (IDFA) Editorial Committee and a member of the IDFA Advisory Steering Committee. His firm’s website is lacdfa.com.
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### Page: https://institutedfa.com/learning-center/survey-separated-people-now-contacting-cdfa-professionals-lawyers-1/
Title: Survey: Separated People now Contacting CDFA Professionals Before Lawyers
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/survey-separated-people-now-contacting-cdfa-professionals-lawyers-1/
## Headings Structure:
H1: Working with a CDFA
H1: Survey: Separated People now Contacting CDFA Professionals Before Lawyers
H1: People at the beginning of the divorce process now recognize that the financial issues they’re facing are as important as the legal ones – and many of them are now seeking financial advice about their situation before they enter a lawyer’s office
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Working with a CDFA
H1: Survey: Separated People now Contacting CDFA Professionals Before Lawyers
H1: People at the beginning of the divorce process now recognize that the financial issues they’re facing are as important as the legal ones – and many of them are now seeking financial advice about their situation before they enter a lawyer’s office
When clients ask whether they really need to hire a lawyer as well as a CDFA pro, Shapiro explains the different – but complementary – roles played by each professional. “I tell them that as important as the financial settlement is, it is really only one piece of the puzzle,” she says. “The attorney’s job is to look at the entire situation and advocate for and explain to the client their respective rights and obligations.”
A CDFA professional is someone who comes from a financial planning, accounting, or legal background and goes through an intensive training program to become skilled in analyzing and providing expertise related to the financial issues of divorce.
“It is definitely advantageous to hire a CDFA first,” asserts Seth Kaplan, an experienced CDFA professional practicing in the Sacramento, CA area. “We can educate the client on various financial considerations, provide an overview regarding their options for getting divorced (i.e., litigation , mediation, collaborative), and help them organize their required financial materials and documents, which will help contain the cost of the process.” Before he makes referrals to local attorneys, Kaplan talks to clients to gain an understanding of their primary issues and details about their financial situation. “For instance, I need to know whether they own a business, whether there are minor children, what their primary objectives are, whether they have preferences regarding having a male or female attorney, and/or other preferences they may have – such as personality types.”
Shapiro takes a similar approach with her clients, learning what’s important to them and telling them about their options for resolving their issues. “After they decide which model suits their needs and preferences best, I refer them to at least three attorneys who practice in that model – and who understand the value a CDFA professional brings to the process. I tell my clients it’s like picking a doctor: they’re all well-qualified, but some you’re comfortable with, and some you aren’t.” She adds that if a client has chosen an attorney she doesn’t know, she offers to speak with them to create a productive working relationship – and to reassure them that she isn’t going to tread on their turf. “I stress that the attorney is the captain of the ship in terms of legal strategy. I’m here to support them and the client with key financial data – not to dictate how the case should proceed,” she adds.
Money is a huge source of uncertainty and fear-based arguments in many divorces; a CDFA pro can allay some of the fears by helping clients avoid financial pitfalls, watching out for tax issues, and letting clients know what their financial future will look like if they accept “Settlement A” or “Settlement B”. When clients feel more secure, they’re able to make better choices about their futures.
If marriage is all about love, then divorce is all about money. “And when people are going through a divorce, they must keep their focus on the money,” says Jeffrey A. Landers, a CDFA professional based in New York, NY. The author of Divorce: Think Financially, Not Emotionally (Sourced Media Books, 2012), Landers adds that divorces are now much more financially complicated than they were just ten or 15 years ago. “Today, it’s not unusual for marital assets to include residential and commercial real estate, sophisticated financial investments, complex employee compensation packages, and closely-held businesses or professional practices,” he says. “Finances, financial projections and analyses aren’t taught in law school – and good divorce attorneys understand they don’t have the expertise and/or the time to handle the financial complexities of their clients’ cases.” This means that more and more divorce attorneys are now encouraging their clients to hire a skilled CDFA professional to assist in their case.
“If a divorcing person hopes to lock in a secure financial future for themselves and their children, then it is vitally important to have a divorce financial advisor on their team,” asserts Landers. “And not just any financial advisor: they need one with the training and experience to handle their specific set of circumstances.”
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### Page: https://institutedfa.com/learning-center/surviving-financially-after-divorce/
Title: Surviving Financially After Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/surviving-financially-after-divorce/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Surviving Financially After Divorce
H1: How to prepare yourself to deal with the financial realities of divorce – especially in this tough economy
H3: 1. Expect your income to drop after the divorce is final.
H3: 2. Consider whether you can afford to keep the house.
H3: 3. Know what you have.
H3: 4. Consider the after-tax values of your assets.
H3: 5. Understand your financial needs.
H3: 6. Don’t overlook the value of a future pension.
H3: 7. Hire a good team.
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Surviving Financially After Divorce
H1: How to prepare yourself to deal with the financial realities of divorce – especially in this tough economy
H3: 1. Expect your income to drop after the divorce is final.
H3: 2. Consider whether you can afford to keep the house.
H3: 3. Know what you have.
H3: 4. Consider the after-tax values of your assets.
H3: 5. Understand your financial needs.
H3: 6. Don’t overlook the value of a future pension.
H3: 7. Hire a good team.
More often than not, the standard of living of both spouses drops in the first few years after divorce. Why? Because the same cumulative income and pool of assets now has to support two households instead of one. Unfortunately, most people don’t prepare themselves financially or emotionally for that consequence. So what can you do to better prepare yourself for this inevitability? The answer is simple, but it’s not easy to put into practice.
Divorce is an inherently stressful process. To alleviate some of the stress, it’s important to be proactive and in control. Here are the “Lucky Seven” things you can do to help prepare yourself for your post-divorce financial future.
You should expect your income to drop after the divorce is final. Develop a budget based on needs– not wants – and keep in mind that your expenses need to stay within your post-divorce income. Consider all sources of income – including spousal and child support, keeping in mind that they won’t last forever – as well as investment income. To develop a budget, use a detailed worksheet so you don’t overlook any expenses. The best source for the expense information is your check register, if that’s how you pay your bills. Remember that not all your expenses are paid monthly; some insurance premiums or tax bills might be payable quarterly or annually, so make sure to account for those as well. (To help get you started, fill out the “Monthly/Annual Expenses” worksheet, which is available online at www.institutedfa.com.)The last step in preparing a budget is to ask a reasonable and critical friend or family member to review your budget and challenge the expenses that seem unreasonable. You have to agree to keep an open mind and not to get mad if he/she challenges one of your items; remember that this person is trying to help you.
Here are the traditional options for the matrimonial home:
In many cases, one spouse – usually the wife – wants to keep the house. Though this might be emotionally satisfying, it usually makes little or no financial sense. The equity in the house is illiquid, meaning it won’t pay the bills.
In today’s housing market, sometimes the matrimonial home can’t be sold in a reasonable amount of time – or for a reasonable amount of money. Today, many couples own houses that neither spouse can afford to maintain on his/her own, and that they cannot sell for what they owe on their mortgage. If the house can only be sold at a loss, divorcing couples have a few options, such as:
If your house is “underwater” – meaning that you owe more on their mortgage than your house is worth – here are a few questions your should ask yourselves before putting the house up for sale:
If one spouse wants – and can afford – to keep the house, that spouse should pre-qualify for a mortgage before the divorce is final. Sometimes, a divorcing couple will decide that one spouse is going to keep the house. They take the other spouse’s name off the deed – and then the spouse who wants to keep the house gets turned down for a mortgage because he/she doesn’t make enough money to qualify to refinance in his/her name alone. The spouse who is leaving the marital home ends up being on the hook for the debt, has no reciprocal asset, and can’t qualify for his/her own mortgage because he/she doesn’t make enough to support both mortgages.
To qualify for a mortgage, most conventional lenders use credit and debt to income ratios. Many use a credit score system to qualify applicants; a credit score is based on payment history, amount of credit owing, length of time credit established, number of recently opened credit accounts, and types of credit established. Lenders generally use two different ratios to analyze credit worthiness. Generally speaking, here’s how they work (check with your local lender – their guidelines may differ):
In order to qualify for a conventional mortgage, an applicant must have an acceptable credit score and debt-to-income ratios.
Account statements have a way of disappearing when divorce proceedings start. When contemplating divorce, start by collecting statements for all your financial holdings and put together a list of your assets. When negotiating your divorce settlement, this step will prove helpful as a starting point. Here’s an example of items you’ll need to list on an Asset Worksheet. Remember to note the value of each asset, and who owns what portion of it:
As you work your way through the asset split negotiations, each asset can be moved to its appropriate column: “Husband” or “Wife”. To figure out the percentage split, divide the total for each spouse by the grand total.
Accounts with pre-tax contributions and tax deferred growth come with a tax liability. Know what the after-tax equivalent value is before agreeing to take an asset. Having $100,000 in an IRA or RRSP is not the same as having a $100,000 in a checking account. The spouse with the retirement savings plan will end up with the account value minus the tax liability, and the other spouse will have the whole amount to spend.
You need to make sure that the liquidity of the assets you’re getting matches up to your needs. Let’s suppose you want to keep the marital house – which is worth $300,000 or 50% of the marital estate – as your share of the settlement. Until you take a close look at your long-term financial forecast, you won’t know whether you can afford to keep it. Suppose, for example, you’ve factored child-support payments into your income; after the payments end, how are you going to pay the mortgage? If you have to put the house up for sale in a few years, you may be solely responsible for paying all the real-estate costs and capital-gains taxes from the time you and your spouse acquired the property until you sold it – which could be bad news indeed.
Any portion of a pension that was earned during the marriage should be included in the marital pool of assets. Pensions can be handled in three different ways:
Your particular situation should determine which option makes the most sense for you. For example, a 32-year-old wife with two young children and limited resources will have different needs than a 55-year-old wife with a career and her own pension. Make sure you’re not the divorcee who has a great pension that will pay in 15 years and have no money to pay the bills today.
Personal recommendations from a trusted friend or business associate are a great source for professionals. However, you need to do your homework before hiring anyone. Your team should consist of a divorce lawyer and a Certified Divorce Financial Analyst® (CDFA®) at a minimum. If needed, other members or the team could include a mediator, an accountant, a business or pension valuator, or perhaps a child or individual therapist. Although you may think that the more professionals you hire the more costly your divorce will be, this is not necessarily true. In the long run, having the appropriate help will cut down on litigation costs, and it may save you from making costly blunders regarding your settlement.
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### Page: https://institutedfa.com/learning-center/taking-control/
Title: Taking Control in Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/taking-control/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Taking Control
H1: Understanding your income and expenses will help you to gain control of your finances – and life – during divorce
H3: Child Support
H3: Spousal Support
H3: Property
H3: Separate Property
H3: Marital Property
H3: The Last Word
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Taking Control
H1: Understanding your income and expenses will help you to gain control of your finances – and life – during divorce
H3: Child Support
H3: Spousal Support
H3: Property
H3: Separate Property
H3: Marital Property
H3: The Last Word
Here’s a question for you: do you have a written, detailed, up-to-date budget detailing all your daily, weekly, monthly, and yearly expenses and income? If you’re like most people, your answer to this question will be “no.” The lack of a budget may have caused financial problems during your marriage, but it could be ruinous post-divorce. If you don’t know what your expenses are, how will you know how much you’ll need to maintain your current lifestyle – for yourself and your children? Or worse: you may already be living so far above your current income that you’ve taken the first steps down the road to bankruptcy without even being aware of it.
So the first step to gaining control of your finances – and life – during divorce is to prepare an accurate current budget and a post-divorce budget. You will need to gather documentation to ensure that your budget is objective and not the product of guess-work.
First, you need to identify your sources of income, which includes revenue from full- and part-time employment, investment return, and self-employment income. Add up all the income from different sources to come up with total income. If you’re clueless about what your spouse earns, obtain or make copies of his/her tax returns for the last three to five years. Also, watch the mail for statements from banks or brokerage houses; if you have never opened any of these during your marriage, and you have good reason not to let your spouse know of your sudden interest in the family’s finances, you can start by making a note of how many of these arrive in an ordinary month as well as the names and addresses on each envelope.
After you have an accurate picture of what’s coming in, you need to create an equally accurate picture of what’s going out. You should review your check register and credit-card statements – or your online banking records if that’s how you usually pay your bills. Remember that not all your expenses are paid monthly; some insurance premiums or tax bills might be payable quarterly or annually, so make sure to account for those as well.
Don’t forget about cash withdrawals using ATM cards; you’ll be surprised how quickly taking $50 here and $100 there can put you in the red if these withdrawals are not included in your budget. Also, you need to be able to account for where/how you spent the cash: was it taking taxis to work, going out to restaurants, on a new outfit, or paying the babysitter?
After you’ve completed a “first draft” of your budget, ask a reasonable and financially-savvy friend or family member to review it and question the expenses that seem unreasonable. (You may think a $500 shirt and weekly spa appointments are both reasonable and necessary, but someone who sees you living beyond your means may not agree!) If you’re going to ask for help with your budget, you’ll have to agree to keep an open mind and not to become angry or defensive if he/she questions one of your items. This person is trying to help you, and he/she will probably be a lot easier on you that a judge would be!
Start with the pre-divorce scenario using the budget table on page XX as a guide. Make two copies of the chart, replacing or deleting items to suit your needs, then fill in pre-divorce expenses on one and post-divorce expenses on the other. After you’ve created your pre-divorce budget, go to the post-divorce page and carry over each expense with an increase or decrease in its value based on your new circumstances. For example, an increase might be lawn care or snow removal if your ex used to handle that. Food expenses, on the other hand, should decrease now that you have one less mouth to feed.
If you’re like most people, your number-one financial concern during divorce is maintaining positive cash flow – in other words, being able to pay the bills on a monthly basis – not only on the day after divorce, but five, ten, 15 years into the future. In order to meet cash-flow needs, there are three sources of money that may be available to you as a result of your divorce: child support, spousal support, and marital property. Let’s take a quick look at all three.
In the US and Canada, a parent is obligated to support his or her children, regardless of the parent’s marital status. All states and provinces have child support guidelines; you should review the guidelines in your area to get a rough idea of what you might be entitled to receive or have to pay. Generally speaking, child support is based on factors such as the ages of and number of minor children, the amount of time they will reside with each parent, and the income of each parent. These factors are plugged into a formula, which then supplies a recommendation for the Court. In a divorce situation, the non-custodial parent is usually ordered to pay child support to the custodial parent, from which the custodial parent pays the child’s expenses.
However, the child support formula does not take into consideration your child’s actual expenses. For example, extra-curricular activities, private school tuition, and college funding are not factored into the formula. These are considered “extraordinary expenses,” and they are often an area of great discussion and/or argument. It may be unrealistic to keep your child in Rep Hockey, horseback riding, and Kumon math; you and your soon-to-be-ex spouse will now have to start making decisions based on what is financially feasible.
Here’s an example. My neighbor Cathy, who is in the process of getting a divorce right now, has an 11-year-old daughter who is a promising figure skater. Brittney’s skating expenses are $500 per month in training, competition fees, and costumes. Cathy tells me that the costs will increase as her daughter gets older. Unfortunately, these expenses will not be taken into consideration when the court calculates child support for her, and Cathy cannot afford to cover them on her current salary.
One of the ways in which a Certified Divorce Financial Analyst® (CDFA®) can help their clients is to determine which costs may not be addressed by the guidelines and then to help them find alternative solutions to cover these expenses.
Since child support is such a complex area of the law – and because it can be a very contentious issue between divorcing parents – you should ask your lawyer for guidance regarding the child support amount.
Another source of income (or an expense) for many divorced people will be spousal support. Spousal support is based on different factors, and it’s a very gray and subjective area. However, the two most heavily weighted factors are need and ability to pay; the length of the marriage is another factor that is considered when awarding spousal support.
Unless you have prepared an accurate budget, you will not know how much spousal support you need – or, if you’re on the other end of the equation, how much you can afford to pay.
Aside from determining need and ability to pay, you need to understand some other important issues with regard to spousal support. With respect to the amount and duration, this can either be a negotiated amount between spouses or it can be court ordered. (In the US, spousal support can be set up as modifiable or non-modifiable; if it’s non-modifiable, this means that neither party can ask for it to be changed for any reason at any time in the future.) In most cases, each party may revisit the amount and duration each year after filing a tax return. As well, there may be the ability to revisit the amount of support if there is a substantial change in circumstances for one or both of the parties. Here’s an example: John is paying Mary, who currently has a minimum-wage job, $20,000 per year in modifiable spousal support. In the second year after the divorce, Mary finds a job that pays $55,000 per year. Due to this change in circumstances, John may be able to have the spousal support reduced.
No two divorcing couples have identical circumstances. The standard is to give support to the spouse who needs it in order to keep the family on a equal setting – however, there is an underlying duty for each spouse to work towards being independent of each other.
The third potential source of money in a divorce is property. Many states and provinces call for an equitable division of property. “Equitable” does not always mean “equal” – it is, however, supposed to mean “fair.” If the spouses can’t agree, the judge is the final arbiter of what constitutes fair. Although most divorces settle 50/50, it can make a huge difference which 50% you get; in other words, all assets are not created equal.
The first thing to know is that there are two kinds of property: Marital and Separate. Anything that is marital will go into the marital pie that’s going to be equitably divided; anything that’s separate property will not. The distinction between the two is a gray area and should be discussed with your lawyer, but here’s a short explanation of how the courts typically define property.
Separate property is anything that was gifted during the marriage, inherited during the marriage, or brought into the marriage and kept in either spouse’s separate name. Let’s take a look at some examples. My friend Karen got married 10 years ago. She was in love, so she told her husband, “What’s mine is yours and what’s yours is mine”. So she changed the title on her cottage from her name alone to both of their names. This is called making a presumptive gift to the marriage and now the cottage will likely be part the marital pie and up for division now that she’s getting divorced.
How about the inheritance that Karen received five years ago from her Aunt Millie? She left it in a trust account in her name, which means that it’s her separate property. What if Karen had taken her $15,000 inheritance and used it to renovate the kitchen in the marital home? She could ask her lawyer to try to subtract $15,000 from the marital portion, but the courts are likely to rule that the inheritance became marital property when she invested it in the home.
Here’s another tricky part: any increase in value on the inheritance (or any other separate property) is considered marital, so if that $15,000 grew to $20,000 at the time of Karen’s divorce, the $5,000 in growth could be considered marital property.
Everything that’s not considered separate property is considered marital. As long as it accumulated during the marriage, it’s going into the pie to be divided – no matter whose name it’s in. So, starting at your date of marriage, the contribution to your retirement plan that comes out of your paycheck and goes directly into the XYZ fund account in your name is marital property; ditto for your spouse’s pension.
In many divorces, the biggest question is who gets the marital home. Should the wife get it, should the husband, or should they sell it and split the proceeds? What if the house is “underwater” – meaning that the householders owe more on their mortgages than their houses are worth? The answer is not always easy or clear. In a normal economy, couples typically build equity in their homes; if they decide to divorce, they would usually divide the equity they had built by selling the house or by one partner buying out the other’s share. But after the recent boom-and-bust cycle, many couples own houses that neither spouse can afford to maintain on his/her own, and that they cannot sell for what they owe.
According to a recent survey of CDFAs in the US and Canada, 73% of respondents stated that the current housing market has forced them to come up with creative solutions to property-division problems when the matrimonial home fails to sell – or would sell for less than what clients still owe on the mortgage. The most common solution is for ex-spouses to retain joint ownership and continue to live in the house (often, he moves into the basement and she lives upstairs) until the market improves, agreeing to postpone final division of assets until after the house is sold.
You need to create an accurate budget today, and you need to understand how child support, spousal support, and property division will impact your ability to cover your cash-flow needs. This is where a CDFA® comes in: we analyze and illustrate the short- and long-term implications of different settlement proposals by factoring in expenses, investment earnings, taxes, and inflation. Our clients are then able to make educated decisions about their financial futures. Remember, you only get one chance to negotiate your property settlement. Can you really afford to make a mistake?
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### Page: https://institutedfa.com/learning-center/tax-issues-divorce/
Title: Tax Issues of Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/tax-issues-divorce/
## Headings Structure:
H1: Tax Issues of Divorce
H1: Tax Tips and Traps
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Tax Issues of Divorce
H1: Tax Tips and Traps
Here are two topics you’d probably rather not think about: divorce and taxes. If you’re separated or newly divorced, however, it could be worth your while to get some good financial advice about both.
Spousal Support
Also known in some areas as “alimony” or “maintenance”, spousal support...
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### Page: https://institutedfa.com/learning-center/tax-tips-traps/
Title: Tax Tips and Traps
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/tax-tips-traps/
## Headings Structure:
H1: Tax Issues of Divorce
H1: Tax Tips and Traps
H1: Here are two topics you’d probably rather not think about: divorce and taxes. If you’re separated or newly divorced, however, it could be worth your while to get some good financial advice about both.
H3: Spousal Support
H3: Child Support
H3: Third-Party Payments
H3: Divorce-Related Fees
H3: Filing Status
H3: Joint Tax Returns
H3: Tax Credits and Benefits
H3: The Fiscal Cliff
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Tax Issues of Divorce
H1: Tax Tips and Traps
H1: Here are two topics you’d probably rather not think about: divorce and taxes. If you’re separated or newly divorced, however, it could be worth your while to get some good financial advice about both.
H3: Spousal Support
H3: Child Support
H3: Third-Party Payments
H3: Divorce-Related Fees
H3: Filing Status
H3: Joint Tax Returns
H3: Tax Credits and Benefits
H3: The Fiscal Cliff
Also known in some areas as “alimony” or “maintenance”, spousal support is typically treated as taxable income to the person receiving it and tax-deductible for the person paying it. Before deciding whether a specific amount is going to work, you need to know what the actual out-of-pocket cost is if you’re the payor or the net amount that you’ll receive if you’re the payee. For example, if paying $30,000 in spousal support annually, how much is that $30,000 going to cost you after factoring in the tax deduction? And, if you’re receiving the $30,000, how much of that will you have to pay in taxes? For payments to qualify as spousal support, they must meet a number of requirements; talk to your lawyer or Certified Divorce Financial Analyst® (CDFA®) professional to make sure you’ve met them all.
Generally speaking, child support is non-taxable income to the person receiving it and it is not tax-deductible by the person paying it. If you’re going to be paying both spousal and child support, you may be tempted to lump both payments together and call them “spousal support” so you can claim a bigger tax deduction. Sorry to burst your bubble, but the IRS and CRA are wise to this “strategy”, which could land you in serious hot water! You can also end up owing back taxes, penalties, and interest if your support payments are not structured correctly in your divorce agreement. In the US, if spousal support is reduced or terminated because of a contingency related to a child (such as a child attaining a specific age or income level, dying, marrying, leaving school, or gaining employment), it can be reclassified as child support. There are many other ways the IRS could reclassify some or all of the deductible spousal support you have paid as non-deductible child support; ask your CDFA professional to make sure your agreement doesn’t contain one of these hidden traps before you sign it.
Usually, payments must be made directly to the recipient to be classified as support. But what if you’re going to be paying child or spousal support to an ex who has a genuine problem with money – a gambling addiction, for instance? “Third-party or specific-purpose payments can be considered support payments [under certain circumstances],” says Mary Krauel (CPA, CA, MBA, CDFA), who practices in Mississauga and London, Ontario. “Specific-purpose payments may include rent, property taxes, insurance premiums, and educational or medical expenses for the benefit of the recipient.” This is helpful in settlements where there is concern the support payments will be used by the recipient for necessary expenses while at the same time preserving the deductibility for the payor, she adds. “To guarantee deductibility – clearly state it in the agreement.”
In the US, you can deduct the portion of fees paid to to divorce-industry professionals (e.g., lawyers, actuaries, accountants, or appraisers) for tax advice or for help in getting spousal support. In Canada, you can deduct legal fees paid to establish, increase, or collect support payments; however, only the recipient of support may claim these deductions – not the payor. Ask your CDFA professional or accountant whether you can deduct any of the divorce-related professional fees before you file your taxes.
“Filing status is often more important than dependency exemptions: someone filing as a Head of Household (HOH) can claim a higher standard deduction and lower tax rates than a single filer,” says Heather Smith Linton (CPA, CFP, CVA, CDFA), who practices in Durham, North Carolina. “This can often translate into more of a tax savings than a dependency deduction. A couple needs to have at least two children to make this strategy work,” she continues. “The general rule for filing as HOH is that an unmarried taxpayer would have to maintain a household that is the principal place of abode for over half the year for a qualifying child.” According to Justin Reckers (CFP, CDFA), who practices in San Diego, California, the HOH filing status strategy is a simple and elegant way to reduce overall tax bills and even has some other benefits. “HOH filing status comes with tax brackets identical to those available to the Married Filing Jointly scenario, but also allows for each party to the divorce to file separate tax returns,” he says. Talk to your CDFA professional or accountant about the requirements for claiming HOH to see if this strategy can work for you.
If you are still filing joint returns with your spouse, make sure to review your tax return before signing on the dotted line. “Remember – you will be held liable for what is being reported, whether your spouse or a professional accountant prepared the form,” warns Carlton R. Marcyan (JD, MBA, CPA, CFP, CDFA), a partner at Schiller DuCanto & Fleck in Chicago, Illinois. “In my nearly 25 years of practicing law, I would estimate that two out of three spouses do not look at their tax returns before signing and are not aware of what they are consenting to.”
Make sure you’re taking advantage of all possible tax credits and benefits during and after divorce; if your agreement isn’t structured correctly, you may be unable to claim tax relief. Karen Hallson-Kundel (CGA, CBV, CDFA), who practices in Winnipeg, Manitoba, points out that the separation agreement must specifically identify the parent who will claim the child in order to preserve the Eligible Dependant tax credit, for instance. “Families with two children can structure the separation agreement to indicate that each parent claims one child, effectively doubling the tax benefit,” she says. “Carefully planning this aspect of a separation agreement can save your family between $4,052 and $6,702 (depending on your province) for the 2012 tax year.” In the year of separation, get your CDFA or accountant to crunch the numbers to see whether you should be claiming the spousal support or any allowable tax credits. “If you pay support and you are were separated for only part of the year, you may claim either the deductible support paid that year or allowable refundable tax credits – whichever yields the larger benefit,” says Karen Archibald. “For example, Sally and Joe separated on September 1, and Joe pays Sally $300 each month in deductible support. Joe would be far better off claiming the spousal credit of $10,527 versus the support of $1,200.” Of course, there are different tax credits and benefits in the USA and Canada, so ask your CDFA professional about what is available in your area and for your situation.
In the USA, the new tax laws will have a large impact on upper income earners and their divorce. The new laws bring back the phase-outs for Personal Exemptions and Itemized Deductions; The phase-outs begin at $250,000 for unmarried taxpayers. “For the past several years, the rule of thumb was to have the higher-earning spouse take the Personal Exemption for the children, since it was worth more to him/her,” says Jeff Kostis (CFP, CDFA, CPA/PFS), who has offices in Vernon Hills and Chicago, Illinois. However, the return to the phase-out changes this. “Now, if the higher-earning spouse takes the exemption for the children, the tax benefit may be lost if he/she earns more than $250,000 per year.” Similarly, many divorce decrees require the higher-earning spouse to pay the mortgage and real-estate taxes on the jointly-owned house used by their former spouse and children. “The payor spouse deducted part of the mortgage payment as alimony, part as an itemized deduction,” says Kostis. “In total, 100% of the payment was tax deductible. With the return of the Itemized Deduction phase-outs, the payor spouse may not get the full tax benefit from the itemized deductions. In these cases, the couple may be better off to increase the amount of alimony – which is fully tax deductible – and have no requirement as to the payment on the mortgage and real estate taxes.”
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### Page: https://institutedfa.com/learning-center/ten-questions-ask-your-divorcing-clients/
Title: Basics of Divorce
Meta Description: Top Ten Questions to Ask Divorcing Clients
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/ten-questions-ask-your-divorcing-clients/
## Headings Structure:
H1: Basics of Divorce
H1: Ten Questions to Ask Your Divorcing Clients
H3: 1. What assets do you own?
H3: 2. What do you owe?
H3: 3. Could your spouse be hiding assets?
H3: 4. What is most important to you?
H3: 5. What are you willing to give up?
H3: 6. How do you expect your custody arrangement to be structured?
H3: 7. How would you describe your financial situation?
H3: 8. Do you expect to pay or receive alimony?
H3: 9. Where are you in the divorce process?
H3: 10. What questions can I answer for you?
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Ten Questions to Ask Your Divorcing Clients
H3: 1. What assets do you own?
H3: 2. What do you owe?
H3: 3. Could your spouse be hiding assets?
H3: 4. What is most important to you?
H3: 5. What are you willing to give up?
H3: 6. How do you expect your custody arrangement to be structured?
H3: 7. How would you describe your financial situation?
H3: 8. Do you expect to pay or receive alimony?
H3: 9. Where are you in the divorce process?
H3: 10. What questions can I answer for you?
For a financial professional in the divorce niche, the basic information to get from a new client is simple – state of residence, length of marriage, gross salary, and the like. But to truly get to know a client’s situation and needs, it is important to dig a little deeper. Here are ten questions to ask new divorce clients.
This is a basic question that should be top of mind for a financial professional. Clients can easily come up with a list of bank accounts and real estate, but be sure to press them further. What retirement assets do they own? Stock options? Art, jewelry, or antique collections? A thorough inventory of marital assets goes far beyond liquid cash, so make sure clients understand the breadth of what you are looking for.
Along with knowing what a client has, it is important to know what a client doesn’t have. This includes all credit card debt and outstanding loans. Be sure to get specific details on any mortgages. Knowing that a house is “underwater,” for example, can greatly change the financial outlook of the client.
It may sound unlikely, but assets have a way of disappearing after divorce proceedings begin. For example, a spouse may transfer assets to a third party or create false debt in order to skew their financial picture and, therefore, avoid paying a large settlement or alimony. If your client suspects that their spouse is hiding something, start by checking the couple’s tax returns for the past five years to find any elusive assets.
While neutral financial professionals should never tell a client what they should negotiate for in a divorce, it is important to understand what a client finds most important. For example, do they wish to remain in the marital home? Knowing that will help you structure different settlements and future predictions.
Like #4, be sure not to steer a client in any particular direction. However, this question can be useful to get the client thinking about sacrifice. Divorce settlements rarely work out with everyone completely happy, so it is good to prepare a client for this harsh reality. After all, it is often far more expensive to continue fighting your ex over a particular asset than it is to just let it go.
Assuming the couple has children, it is important to know who the children will be spending the most time with. Factoring in child support payments can affect the way a financial picture comes together. Be sure to check your state’s child support guidelines so you can take realistic numbers into account.
More important than the specific content of the client’s answer is the general feel of their description. Are they naively assuming that their lifestyle will continue unchanged? Do they assume (perhaps incorrectly) that they will receive spousal support? This question gives great insight into how the client is thinking and feeling and how they will react to different proposed settlements.
Though fewer and fewer divorce settlements include alimony, many people still assume that it will be part of their own settlement. Gauging a client’s expectation around spousal support – whether they expect to pay or receive it – can be useful in creating your own models of their financial future.
For better or worse, most people will seek out a family lawyer first in their divorce process. They may not think to bring in a financial professional until further into the process. When you are called off the bench, take a moment to understand how far the client has gotten. Have they gathered and catalogued information for their financial affidavit? Or do they not even know what a financial affidavit is? Taking time to understand this enables you to tailor your communication, advice, and instructions to the individual you are serving.
This might be the most important question you can ask a new client. Divorce is a confusing, emotional, overwhelming experience, and it is most clients’ first time going through the process. Many clients simply don’t know what to expect and a little Q&A with an expert can go a long way toward making them feel more in control of their divorce. Have some patience and compassion for your clients and try to answer their questions as thoroughly as possible…without giving legal advice. The extra support will be invaluable to your professional relationship.
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### Page: https://institutedfa.com/learning-center/tips-avoiding-financial-traps/
Title: Tips: Avoiding Financial Traps
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/tips-avoiding-financial-traps/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Tips: Avoiding Financial Traps
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Tips: Avoiding Financial Traps
Here are some tips to help you avoid some of the common financial pitfalls of divorce.
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### Page: https://institutedfa.com/learning-center/top-ten-divorce-terms-know/
Title: Top Ten Divorce Terms to Know
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/top-ten-divorce-terms-know/
## Headings Structure:
H1: Basics of Divorce
H1: Top Ten Divorce Terms to Know
H3: 1. QDRO
H3: 2. Financial Affidavit
H3: 3. COBRA
H3: 4. Community Property State
H3: 5. Equitable Distribution State
H3: 6. Legal Separation
H3: 7. Recapture Rule
H3: 8. Rehabilitative Maintenance
H3: 9. Property Settlement Note
H3: 10. IRC Section 72
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Top Ten Divorce Terms to Know
H3: 1. QDRO
H3: 2. Financial Affidavit
H3: 3. COBRA
H3: 4. Community Property State
H3: 5. Equitable Distribution State
H3: 6. Legal Separation
H3: 7. Recapture Rule
H3: 8. Rehabilitative Maintenance
H3: 9. Property Settlement Note
H3: 10. IRC Section 72
One of the many things that makes divorce such a complicated and notoriously confusing business is the array of new terms, acronyms, and phrases tossed around throughout the process. Divorce has its own language, and it is important to be able to talk the talk with family lawyers, judges, collaborative divorce professionals, and clients. Here are ten divorce terms to jumpstart your journey to divorce literacy.
A court ruling earmarking a portion of a person’s retirement or pension fund payments to be paid to his or her ex-spouse as part of a division of marital assets.
A Qualified Domestic Relations Order (QDRO) is an order from the court that says how an employee’s retirement plan should be divided up between the employee and his or her ex-spouse. The QDRO should include how much to allocate to each spouse, when the non-employee spouse can start receiving benefits, and what happens when either party dies. The details of retirement plans can be incredibly tricky, so it’s important to have an attorney or experienced professional draft the QDRO.
Key document used to collect financial data, including all income, expenses, assets, and liabilities.
The financial affidavit is the backbone of any divorce settlement. Full disclosure and accuracy are imperative, but it is also important to note that the affidavit changes frequently as new information comes to light. This document may sound straightforward, but it can be surprising how many people are not involved in family finances and are ill-prepared to compile the necessary information.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) law passed in 1986. It allows an ex-spouse to continue to receive health insurance coverage from his or her former spouse’s employer for up to three years after the divorce.
This federal law is a nice safety net for divorcing individuals who are on their ex-spouse’s insurance plan. However, premiums for COBRA coverage are often higher than when they were covered under the employer’s plan. Particularly with subsidies available under the Affordable Care Act, you should be sure to shop around to make sure you’re getting the best option.
A state in which any property not deemed “separate” (i.e., owned before marriage or obtained by gift or inheritance) is “community” property and will likely be subject to a 50/50 division.
The way that assets are divided in divorce depends on the property division statutes of the state. There are currently eight states that have community property statutes: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington.
A state where settlements divide property based on a number of considerations to achieve an equitable and fair distribution – not necessarily an equal one.
The remaining 42 states (those that are not community property states) have equitable distribution statutes. In these states, property is divided based on many factors, including the length of the marriage and differences in age, wealth, earning potential, and health of the partners involved. This forgoes the idea that settlements should always be 50/50 and attempts to create a fair post-divorce situation.
Court ruling on division of property, spousal support, and responsibility to children when a couple wishes to separate but not divorce.
Couples may want pursue a legal separation rather than a divorce for several reasons, including religious principals, medical or insurance issues, or simply not wishing to be divorced. The state of Texas is the only state not to recognize legal separations.
A rule that comes into effect if spousal support payments decrease more than $15,000 during the first three post-divorce years. If an individual paying spousal support is found to be in violation of recapture rules, the “excess spousal support” must be included in the payor’s taxable income in the third post-divorce year.
One of the more confusing and easy-to-forget rules related to divorce, recapture can be a huge tax problem for individuals paying spousal support. The Tax Reform Act of 1984 created this rule to prevent a property settlement payment (which is fully taxable for the payor) from being disguised as spousal support (which is tax-deductible for the payor).
Temporary financial support given to an ex-spouse until they are able to earn sufficient income to support themselves.
Rehabilitative maintenance became popular as a way to give ex-spouses a transition period. It is unrealistic to expect a lower wage-earning or stay-at-home spouse to immediately be able to earn enough income to support an entire household. Rehabilitative maintenance gives these individuals a chance to return to school or the workforce and transition into breadwinner status.
A note from the payor to the payee for an agreed-upon length of time with a reasonable interest rate.
These notes are a tool in dividing property between spouses. If one spouse wishes to keep an asset that tips the scales in his or her favor (such as the marital home), a property settlement note can be drawn up to achieve an equitable settlement.
The section of the IRS code that allows an alternate payee to receive a one-time distribution from a retirement plan without having to pay a 10% tax penalty.
This little-known piece of the tax code can provide a great source of relief for individuals who received some part of their ex-spouse’s retirement plan in the divorce settlement. This one-time, penalty-free early distribution can help in establishing a post-divorce life, whether that’s buying a new car, renting a new apartment, or paying to go back to school. It should be noted that ordinary income tax does apply to this distribution.
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### Page: https://institutedfa.com/learning-center/top-ten-divorce-tips/
Title: Top Ten Divorce Tips
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/top-ten-divorce-tips/
## Headings Structure:
H1: Basics of Divorce
H1: Top Ten Divorce Tips
H1: Certified Divorce Financial Analysts offer these tips to help you sidestep some common divorce-related problems
H3: 1. Copy Your Records
H3: 2. Obtain Copies of Credit Applications
H3: 3. Identity Check
H3: 4. Marital Debt
H3: 5. Cancel "Joint" Lines of Credit
H3: 6. Understand Your Social Security Benefits (U.S. Rule)
H3: 7. Follow the 5 Ds for Alimony Deductibility (U.S. Rule)
H3: 8. Ensure Your Income Will Continue
H3: 9. Dividing the Marital "Stuff"
H3: 10. Review Beneficiary Information
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Basics of Divorce
H1: Top Ten Divorce Tips
H1: Certified Divorce Financial Analysts offer these tips to help you sidestep some common divorce-related problems
H3: 1. Copy Your Records
H3: 2. Obtain Copies of Credit Applications
H3: 3. Identity Check
H3: 4. Marital Debt
H3: 5. Cancel "Joint" Lines of Credit
H3: 6. Understand Your Social Security Benefits (U.S. Rule)
H3: 7. Follow the 5 Ds for Alimony Deductibility (U.S. Rule)
H3: 8. Ensure Your Income Will Continue
H3: 9. Dividing the Marital "Stuff"
H3: 10. Review Beneficiary Information
Before your divorce, be sure to make copies of all of your financial records. Keep them in a safe place away from your spouse. These records include, but are not limited to, personal and business income tax returns (last three years), business records, account statements from investment firms, banks, and pension offices, pay stubs, life insurance information, annuities, credit card statements, stock certificates, and receipts for purchase of larger items. Copy anything to which you might need to refer. Obtaining copies of records via the discovery process while in the midst of a divorce is much more difficult and can be expensive.
Wendy W. Spencer is a CFP®, and CDFA® in the Denver, CO area. She can be reached at ( 303) 235-2789 or via e-mail at spencer-capital@mywdo.com.
Obtain copies of any credit or mortgage applications from your bank or creditors, particularly those that have been completed 12 months prior to your separation. If the application was joint, then it will list assets, liabilities, and income for both spouses. Those applying for loans or credit tend to list all possible assets and income in order to qualify for the credit. As a result, this may be a very good source of asset discovery when one spouse believes that the other is withholding information on marital property.
Karen Odom is a CPA, CDFA in High Point, NC. She can be reached at (336) 889-3422 or via e-mail at kodom@odomcpas.com.
Verifying accurate personal, financial, and business information is critical to maintaining your identity. It's important to check data reporting services, such as credit agencies, as well as banks and investment/insurance companies, to ensure that your name, address, and other personal information are correct. Google yourself! Find out what information, if any, about you is on the Web. You can contact the Webmaster for sites where you find inaccurate information. Contact your local post office and utilities as soon as you or your (ex) spouse plan to move to provide a forwarding address and to ensure that you continue to receive your mail.
Maureen D. Hale is a CDFA based in Chicago, IL. She can be reached at (312) 458-0611 or via e-mail at mdhale@ameritech.net.
Debts that were obtained in the name of both spouses before a divorce (meaning both husband and wife signed a document or application saying that they were responsible for the debt) remain the obligations of both parties after a divorce, no matter what a divorce decree says. Creditors are not party to your separation or property settlement agreement. Therefore, if your ex-spouse does not pay a debt that he or she was responsible for according to your divorce decree, then YOU are responsible for the debt.
Todd Curry is a CDFA(tm) in Charlotte, NC. He can be reached at (704) 987-8786 or via e-mail at tcurry@divorcefinancialadvisors.com. Visit his website at www.DivorceFinancialAdvisors.com.
If your divorce settlement makes your ex-spouse responsible for the payment of a debt that was jointly incurred, continue to monitor the account to ensure that payments are made in a timely manner. If your ex-spouse is late or defaults on a payment, it can adversely affect your credit.
Victoria Roberts is a CDFA based in Sarasota, FL. She can be reached at (941) 429-3055 or via e-mail at vlrobts@earthlink.net.
If you have been married 10 years or more, you will be entitled to half of your spouse’s benefit or 100% of your accrued benefit, whichever is greater. This does not impact your spouse’s benefit in any way, so it is not a negotiation point in a divorce.
Stephanie Maloney is a CDFA® and CFP® based in Los Angeles. Visit her website at: www.financialsolutionsfordivorce.com She can be reached at (310) 301-7239 or via e-mail at smaloney@fs4divorce.com.
If you want a deduction for the alimony you pay (it will be taxed to your ex), it must be paid in dollars, under a decree or written agreement, and cease on your ex's death. After the divorce you must maintain your distance (you can't live with your ex), and the payments can't be designated as non-taxable or child support.
Ginita Wall is a CPA and CDFA in San Diego. She can be reached at (858) 792-0524 or via e-mail at gwall@planforwealth.com.
If you are receiving child or spousal support, be sure there is disability insurance and you own a life insurance policy on your soon-to-be-ex spouse. These policies would ensure that the income you need continues if your ex is disabled or dies. You should own the life insurance and pay the premiums. You may be able to negotiate an increase in support to cover the premiums. Don’t rely on your ex or their employer to protect your interests. Be sure your ex applies for and is issued coverage before the divorce is final.
Rebecca Pace is a CPA/PFS, CFP® practitioner, and CDFA®. She operates Pace Advisors, LLC in Cincinnati, OH, and can be reached at (513) 233-9900 or via her website, www.PaceAdvisorsLLC.com.
Judges frown upon taking their time to hear disputes over something as ridiculous as the distribution of “pots and pans.” Simply stated, most judges “do not do pots and pans.” Generally, judges expect divorcing couples to figure out the division of marital possessions on their own. Be as specific as possible in the Marital Settlement Agreement regarding who gets what. Attach a list clearly identifying the item and the recipient in order to avoid confusion later. Going back to court to argue and amend any part of the divorce decree is an ordeal and is definitely costly.
Gloria J. Patterson is a CDFA® and CFP® ™ based in Clearwater, FL. She can be reached at (727) 450-0678 or via e-mail at Gloria@DivorceAdvisorsInc.com.
After your divorce, remember to review the beneficiary information on your company 401(k) plan, individual retirement plans, annuities, life insurance policies and individual designated beneficiary accounts. Often we re-title assets but forget about changing beneficiary information on accounts that are not directly impacted by the divorce. If you are naming minor children as beneficiaries, assign a custodian of your choice – remember, minors are not legally allowed to own securities.
Carol Khouri is a CDFA® and CFP® in Lexington MA; she can be reached at (781) 862-7100 or by e-mail at carolk@wingatelex.com.
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### Page: https://institutedfa.com/learning-center/top-ten-financial-errors-divorce/
Title: Top Ten Financial Errors in Divorce
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/top-ten-financial-errors-divorce/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Top Ten Financial Errors in Divorce
H1: Certified Divorce Financial Analysts from across the USA share some of the worst financial mistakes they’ve seen in their practices.
H3: 1. Terminating Supposal Support when a Child Reaches the Age of Majority
H3: 2. Using Inaccurate, Misleading, or Incomplete Financial Information
H3: 3. Forgetting about the Spousal Survival Benefit
H3: 4. Failing to Follow Up
H3: 5. Ignoring Tax Status During Property Division
H3: 6. Overlooking Pension Plan Assets
H3: 7. Assigning Dependency Exemptions Without Considering Tax Implications
H3: 8. Failing to Advise Clients to Refinance the Mortgage Before the Divorce is Final
H3: 9. The Perils of Jointly-Owned Business
H3: 10. Failing to Get the Insurance Before Signing the Settlement
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Top Ten Financial Errors in Divorce
H1: Certified Divorce Financial Analysts from across the USA share some of the worst financial mistakes they’ve seen in their practices.
H3: 1. Terminating Supposal Support when a Child Reaches the Age of Majority
H3: 2. Using Inaccurate, Misleading, or Incomplete Financial Information
H3: 3. Forgetting about the Spousal Survival Benefit
H3: 4. Failing to Follow Up
H3: 5. Ignoring Tax Status During Property Division
H3: 6. Overlooking Pension Plan Assets
H3: 7. Assigning Dependency Exemptions Without Considering Tax Implications
H3: 8. Failing to Advise Clients to Refinance the Mortgage Before the Divorce is Final
H3: 9. The Perils of Jointly-Owned Business
H3: 10. Failing to Get the Insurance Before Signing the Settlement
With the assistance of their attorneys, a divorcing couple crafted a Property Settlement Agreement that included both an agreed-upon division of property and a ten-year, defined-duration spousal support award for the wife. According to the agreement, spousal support was set to terminate in the same month the couple’s youngest child graduated from high school and turned 18, the local age of majority. IRC section 71 (C) (2) sets forth two child-related contingency situations in which spousal support will be re-characterized as child support:
In this case, had support payments ceased as scheduled, the payments would have been presumed to be associated with a child-related contingency and the IRS could have re-characterized spousal support payments as child support for the entire ten-year period. It would have cost the husband approximately $1,000,000 in additional taxes and very likely resulted in a malpractice suit for the attorney.
– Gigi Robson CPA, CDFA® practices in Richmond, VA.
For the preliminary hearings, many state courts appoint special masters to set the groundwork for the eventual settlement. If they’re using inaccurate, misleading, or incomplete information derived from hastily prepared financial affidavits, they will most likely set a base line for settlement that will need to be substantially changed later. It is more difficult to completely restructure the settlement after their findings than to work within the scope of their plan. Although the financial affidavits will likely undergo several permutations, it is best to deal with the more obvious inaccuracies sooner rather than later. Such inaccuracies can include expenses that both parties claim or that may be exaggerated, income not reported, or deductions taken that should not be allowed. Time spent early in the process will usually mean great time-savings later on.
– Alan Abrahamson, MBA, CFDA™ practices in CT, MA, NY, RI.
I have seen cases where both husband and wife were retired and receiving pensions pre-divorce and wanted to keep it that way post-divorce. No big deal, right? No QDROs needed. That might be true, but did anyone think about the spousal survivor benefit? Can the election be undone? Certainly the husband and wife may want to stop paying the premium on that election. And if either took a joint and survivor option at in retirement, can they now “pop-up” to a single life annuity option post-divorce? Both attorneys and clients sometimes overlook these considerations. – Donna Smalldon, MBA, CFP®, CDFA®, Mediator practices in OR, WA, and CA.
Typically, when a family law attorney receives a stamped Judgment of Dissolution, their job is done. Clients also think they’re done – but there are many issues that could be avoided down the road if lawyers followed-up with clients to ensure they complete certain tasks to adequately wrap up their divorce. As a family law attorney, here are some of the most common issues I’ve seen:
– Puja A. Sachdev, Esq., MSBA, CDFA™ practices family law in San Diego, CA.
Most lawyers ignore the tax status of an account when working toward an equitable division of property. Many think only about getting the columns to add up for the husband and wife: they don’t go a step further to determine how those assets will be affected by taxes if the spouse needs to sell the assets to survive. You need to understand the client’s future cash needs and determine which assets are best for him or her before finalizing property division.
– Sam L. Thornal, CFP®, CDFA®, ChFC® , CRPC® practices in Addison, TX.
I had a client whose husband had always handled the couple’s finances. I asked her to send me everything she could find regarding their assets; buried deep in the 80 faxed pages was her husband’s pension statement. His pension had two parts: a monthly income stream and a supplemental benefit that had a present value of $30,000. The $30,000 was included in the husband’s disclosure document, but he made no mention of the monthly pension income. I valued that income at around $390,000 and included it in the asset division report to my client and her attorney. However, when I reviewed the settlement agreement her attorney had drafted, the pension was omitted – a $390,000 mistake.
– Irene Smith CFP®, CPA, CDFA® practices in Woodland Hills, CA.
I have seen the dependency exemption for the children assigned to a wage earner whose AGI is so high that they cannot use the Child Tax Credit, American Opportunity Credit, the Adjustment for Student Loan Interest, or even the $3,700 deduction amount due to AMT considerations. Meanwhile, the other spouse could have taken advantage of the deductions/credits – and even could have gotten some of the refundable parts without a tax liability. At $80,000 AGI for singles and heads of households the American Opportunity Tax Credit begins to diminish and at $90,000 it goes away completely. If an individual is consistently in AMT territory the dependency exemption does not help them – these are disallowed under the AMTI calculation. The Child Tax Credit reduces at $70,000 and is completely gone at $95,000 for single and head of household. Therefore, lawyers should be aware of the tax implications when devising optimal divorce agreements. The dependency exemption for the children should not be assigned to an ex-spouse who cannot benefit from it.
– Beth Pickenpaugh, CFP®, ASA, CDFA®, MS practices in Columbus, OH.
Let’s say that John and Jane have agreed that John will keep the family home post-divorce, giving Jane other assets to make up for her share of the current equity. You can do quitclaims to change the titling of the home, but unless John refinances the original joint mortgage, Jane is still financially responsible for the mortgage. If John stops making mortgage payments, it will affect Jane’s credit report as though she had missed the payments herself. The only way to ensure this doesn’t happen is for John to refinance that mortgage before the divorce is final.
– Nancy Hetrick, AWMA®, CDFA® practices in Phoenix, AZ.
I had a case in which a married couple, with no succession plan and no buy-sell agreement, jointly owned a business. Post-divorce, they agreed to continue to co-own the business. Unfortunately, after the divorce, the wife died and the husband became owner of everything. With the value of the business well in excess of $30 million, estate taxes were triggered with no way to pay them. With an accurate value on the business, it might have been possible to find a buyer before a triggering event occurred, or to have set up insurance to fund a buy-sell agreement.
– Michael Kothakota, AFC, CDFA® practices in Apex, NC.
The insured should go through the underwriting process prior to signing the settlement agreement. If coverage will not be available due to health issues, or if the premiums are prohibitively expensive, other provisions should be included in the settlement to protect against pre-mature death, such as the creation of trusts or other estate-planning tools.
– Noah B. Rosenfarb, CPA/ABV/PFS, CDFA® practices in Short Hills, NJ.
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### Page: https://institutedfa.com/learning-center/understanding-spousal-support/
Title: Understanding Spousal Support
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/understanding-spousal-support/
## Headings Structure:
H1: Financial Issues of Divorce
H1: Understanding Spousal Support
H1: What you need to know right now about spousal support -- in the United States and Canada
H3: What factors does the judge consider?
H3: Need
H3: Ability to pay
H3: Length of marriage
H3: Standard of living
H3: Age and health of both spouses
H3: Duration of spousal support
H3: What is “no-fault divorce?” Can it affect spousal support?
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Financial Issues of Divorce
H1: Understanding Spousal Support
H1: What you need to know right now about spousal support -- in the United States and Canada
H3: What factors does the judge consider?
H3: Need
H3: Ability to pay
H3: Length of marriage
H3: Standard of living
H3: Age and health of both spouses
H3: Duration of spousal support
H3: What is “no-fault divorce?” Can it affect spousal support?
In North America, it’s the judge’s place to decide how the marital assets should be divided. By closely examining the assets of each spouse, the judge can determine if spousal support should be paid – and by whom. In some cases, the assets may generate sufficient income that either no spousal support is necessary or it can be reduced.
Each state has guidelines to calculate spousal support. However, they are generally just that – guidelines. Whether or not spousal support should be awarded is up to the discretion of the judge. The judge can also decide the amount of spousal support and the period of time that it should be paid. In Canada, there are no such guidelines: a judge decides whether or not spousal support should be paid, as well as the amount and duration.
An important point to note about judgments and settlement agreements: unless they specifically state that the spousal support is non-modifiable, they can be modified due to material changes in either spouse’s circumstances. In Canada, the exception is that a separation agreement may be non-modifiable in spite of a material change in circumstances depending on the negotiations and what led up to the agreement – particularly if there’s a waiver of spousal support in the agreement.
Judges consider many different aspects to determine first whether spousal support should be awarded, and if so, the amount of support and how long it should be paid. They may look at the amount calculated under the state’s guidelines. They will also look at need, ability to pay, length of marriage, standard of living, ages and health of both parties, number of minor children, educational level, and child support.
Let’s take a look at some of these factors.
The first question the judge will consider is, “Does the recipient have enough money to live on?” In both countries, the spouse who asks for support is required to seek economic self-sufficiency. The judge will look at the individual’s ability to earn income and the marital and separate assets of the spouse seeking support to determine if he or she can use these assets as a source of support.
For example: Bob earns $200,000 per year. His wife Mary agreed not to work after college to stay at home and take care of their family. Mary has inherited $2 million from her parents. It is unlikely that she will be awarded spousal support, because she has $2 million and her share of the marital assets to use for her support.
In Canada, a lump sum can be awarded to compensate the spouse that sacrificed his or her career for the benefit of the family. Often, this lump sum will depend on the length of the marriage and other circumstances. “Courts tend to award periodic support over lump sums,” says Toronto-based family lawyer Judith Holzman. “The rule of thumb tends to be that there will not be a lump sum award in a longer marriage unless it would prove difficult to collect the support or for other special circumstances.”
The best approach to prove need is to prepare a detailed budget to establish the amount needed for spousal support.
The judge will decide how much the payor can afford to pay and still have enough to live in his or her accustomed standard of living. To determine one spouse’s ability to pay, the judge will add back discretionary savings (such as contributions to retirement plans and automatic withholding to savings accounts, bonds, and employer stock purchase programs).
For example: Bob earns $200,000 and invests $50,400 in discretionary savings. He invests $16,000 in his retirement plan, $20,000 in his employer’s stock purchase program, $2,400 in bonds, and $12,000 in a money-market account. When the judge calculates Bob’s ability to pay spousal support, he/she will include the $50,400, which Bob has withheld from his paycheck for discretionary savings, as income available to pay spousal support.
The payor spouse must act in good faith. If Bob were to quit his job, for example, so he would not have to pay spousal support, then the judge would generally consider the payor’s income-producing capacity. There is a Colorado case on record where the husband had a very high income and quit his job to grow mushrooms. The judge ruled that he could grow mushrooms, but that he would have to figure out a way to pay the spousal support that was awarded to his ex-wife.
“In Canada, if someone has a high-paying job,” says Holzman, “the court will consider ability to earn and order spousal support based on the high-paying job, unless the person could show that he had to quit his job for health or other good reasons.” In this case, the court would disregard any discretionary savings, RRSP contributions, employer’s stock purchase program, bonds, or money market account.
The length of the marriage is also a consideration when the judge awards spousal support. If the marriage only lasted for two years, it is unlikely that the judge would award permanent spousal support to one spouse. The judge may not award spousal support at all, unless there are children or there is some other circumstance that would prevent the recipient from working. A judge considers all of the facts and circumstances.
For example: If a couple is married for 20 years, and the wife was 18 when they married and is now 38, then the judge will probably not award permanent spousal support. However, if the wife was 40 when they married and she is now 60, the judge may award permanent spousal support.
The judge will also consider the couple’s standard of living during the marriage.
For example: If a couple is married for 25 years, and the husband earns an annual salary of $600,000, it would be unreasonable for him to argue that his wife could live on $40,000. However, if he earns $50,000, it would be unreasonable for his wife to argue that she should get $40,000 to cover her expenses.
Another consideration is the age and health of both spouses. Is either disabled or retired? If so, are they receiving a permanent income stream? If one spouse is 50 or older, and has never worked, he or she will have a difficult time finding employment. Spousal support will have to be awarded.
Spousal support may be awarded for a specified time period, or it may continue until it is modified or terminated. Some judges have a rule of thumb that they will award spousal support for half the number of years of the marriage.
Spousal support generally ends upon the death of either spouse, or upon the remarriage of the recipient. Spousal support will continue until it is modified, unless the decree states that it is non-modifiable.
During the separation period, any payments to the other spouse are generally not considered spousal-support. However, if a temporary order was issued for spousal support, and the order does not state that payments will not be taxed as spousal support, then the spousal support payments are deductible by the payor and included in the income of the recipient. In Canada, temporary support is deductible by the payor and included in the recipient’s income only if it’s part of a court order or if a temporary agreement is in place.
“There is no rule of thumb in Canada that the award of spousal support is for only half the number of years of marriage,” explains Holzman. “While spousal support will end upon the death of either spouse if the surviving spouse was dependent on the other on the date of death, the survivor can claim dependency in Ontario and therefore claim against the estate as a dependent of the deceased, for whom the deceased ought to have made a provision in the will.”
In addition, Holzman says, “Spousal support does not end on marriage or cohabitation in Canada, but it is one circumstance that would be looked at on any application to vary support as a possible material change in circumstances. For instance, the obligation of a spouse after a 20-year marriage is very different from a new cohabitee who will not owe an obligation of support until the parties have lived together for three years or have had a child. Even a remarriage does not necessarily overset the obligation of support from the first spouse. All the circumstances of earning abilities of the new spouse, and the situation of the spouse being supported, will be taken into consideration.”
“No-fault divorce” means that either party can file for divorce without the other spouse’s consent – and without establishing that the other spouse was at fault. Canada, as well as every state in the U.S., recognizes no-fault divorces. There are, however, some differences regarding the treatment of spousal support. In Canada, neither party can be denied spousal support because of his or her conduct. In the U.S., the conduct of either spouse can be considered when spousal support is awarded.
However, keep in mind that judges have a lot of discretion in awarding spousal support. They may or may not consider the fault or conduct of one spouse when they decide if spousal support should be awarded.
Nancy Kurn is the former Director of Educational Services for the Institute for Divorce Financial Analysts (IDFA) – the premier national organization dedicated to the certification, education, and promotion of the use of financial professionals in the divorce arena.
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### Page: https://institutedfa.com/learning-center/what-cdfa-professional/
Title: What is a CDFA professional?
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/what-cdfa-professional/
## Headings Structure:
H1: Working with a CDFA
H1: What is a CDFA professional?
H1: The role of the CDFA is to assist the client and his/her lawyer to understand how the financial decisions he/she makes today will impact the client’s financial future
H3: What Is The CDFA’s Role?
H3: Financial Planners Help Clients Achieve Goals
H3: Accountants Examine Details for Present Day
H3: CDFA’s Responsibilities and the Team Approach
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Working with a CDFA
H1: What is a CDFA professional?
H1: The role of the CDFA is to assist the client and his/her lawyer to understand how the financial decisions he/she makes today will impact the client’s financial future
H3: What Is The CDFA’s Role?
H3: Financial Planners Help Clients Achieve Goals
H3: Accountants Examine Details for Present Day
H3: CDFA’s Responsibilities and the Team Approach
After his divorce, David went to a financial advisor to determine how to best position his assets. Together, David and his planner decided to do a total financial plan for him. During the planning session, it became apparent that during his marriage his wife had done all of the investing. She chose all the investments, made all the decisions, and invested all the money.
At the time of their divorce she said, “Let’s just split everything 50/50. You take this half of the assets and I will take that half. Is that OK?” David answered, “Well, I guess that sounds pretty fair. That’s OK with me.”
Unfortunately, there was something he neither knew nor understood; neither did his lawyer, and neither did the judge. They didn’t realize that David would have to pay taxes on his half of the assets when he tried to access them. His ex-wife, on the other hand, could access her half of the assets tax-free. His 50/50 split cost him an additional $18,000 in taxes. Had David met with a CDFA® before the divorce was finalized, he would have been in a better position to ask for a more equitable settlement.
This parable has an unfortunate ending, but pre-divorce financial counseling can help people going through a divorce arrive at a settlement that is fully understood by all involved.
Who do people turn to for such assistance? When people think about getting a divorce, the first professional that comes to mind is an attorney. Typically a financial advisor – whether it is a CPA, CFP®, or a CDFA – is not considered until later in the divorce process – or even until after the divorce is final.
Financial problems can tear a marriage apart, and are often the primary factor that leads to divorce. Once a decision to separate or divorce has been reached, all sorts of questions bubble to the surface. These questions are often clouded by wounded emotions and accompanied by mutual accusations, which comes as no surprise. If a couple cannot solve their financial difficulties while the marriage was underway, it is unlikely that they will be able to agree on pressing financial issues when it has fallen apart.
Many divorcing couples have questions such as:
These are the questions that divorce lawyers face with each divorce case. Many lawyers struggle with the intricate financial details that concern tax issues, CRA rulings, capital gains, dividing pensions, and so on. Lawyers attend law school to become experts in the law, not to become financial experts. Additionally, even if lawyers happen to have accumulated a degree of financial expertise, they are not allowed to testify on behalf of their clients in court. This is why more and more lawyers have seen the virtue of bringing a financial expert into the divorce process at the very start. Solid information and expert analysis are important resources in their search for the best possible resolutions for their clients.
Fortunately, with the advent of Certified Divorce Financial Analysts, help is on the way.
To understand this role, we first have to distinguish between a CDFA and other financial experts, who go by various titles, such as: Chartered Accountant (CA), Certified General Accountant (CGA), Certified Financial Planner® (CFP®), and Chartered Financial Consultant (ChFC®).
The role of the financial planner, CFP® or ChFC® is to help people achieve their financial goals regardless of whether they are divorcing or happily married. After identifying those goals, the next step is to take an inventory of the clients’ current assets and liabilities, then examine what must be done to achieve those goals. Some goals might be reached within a year; others could be realized 50 years down the line. To look that far into the future, certain assumptions must be made. These include income, expenses, inflation rates, interest rates and rates of return on investments. After these assumptions are settled on and adjusted for changes, the scenario must be reviewed on a regular basis. If during the review process the planner determines that the client is not on track, he or she will recommend a number of necessary or advisable fine-tunings. In other words, the financial planner looks at financial results in the future based on certain assumptions made today, and keeps the client moving toward stated objectives.
Conversely, accountants typically confine themselves to examining the details of a present-day scenario. If called upon to participate in a divorce proceeding, they might calculate the taxes on dividing property combined with the effect of child support and spousal support over a very short period of time. They typically do not project further into the future. They also may be retained to perform an audit of account activity or to perform forensic accounting functions to help uncover “hidden assets".
To best meet the needs of a divorcing client a blend of these two ideologies is needed. To meet this need a new professional designation was created – the Certified Divorce Financial Analyst®. The role of the CDFA® is to help both client and lawyer understand how the financial decisions made today will impact the client’s financial future, based on certain assumptions.
A CDFA is someone who comes from a financial planning, accounting or legal background and goes through an intensive training program to become skilled in analyzing and providing expertise related to the financial issues of divorce. The CDFA:
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### Page: https://institutedfa.com/learning-center/working-cdfa/
Title: Working with a CDFA
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/working-cdfa/
## Headings Structure:
H1: Working with a CDFA
H1: Entering the Divorce Niche: Advice from the Experts
H1: Your Financial Professional
H1: Financial Professionals: Who’s Who
H1: Survey: Separated People now Contacting CDFA Professionals Before Lawyers
H1: What is a CDFA professional?
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Working with a CDFA
H1: Entering the Divorce Niche: Advice from the Experts
H1: Your Financial Professional
H1: Financial Professionals: Who’s Who
H1: Survey: Separated People now Contacting CDFA Professionals Before Lawyers
H1: What is a CDFA professional?
Divorce is a fast-paced niche in which to set up a business. Newcomers to the profession can often be overwhelmed with all the industry dos and don’ts. We asked seasoned divorce professionals from across the country and Canada what they believe newcomers to the industry should know.
Define Your ...
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### Page: https://institutedfa.com/learning-center/your-financial-professional/
Title: Your Financial Professional
Language: en-US
Canonical URL: https://institutedfa.com/learning-center/your-financial-professional/
## Headings Structure:
H1: Working with a CDFA
H1: Your Financial Professional
H1: How to choose and work with a financial professional to achieve the best possible outcome to your divorce
H3: Accountant (CPA, CA, CGA)
H3: Certified Financial Planner® (CFP®)
H3: Certified Divorce Financial Analyst® (CDFA®)
H3: Questions to Ask a Prospective Financial Professional
H3: Working With Your Financial Professional
H3: Resources
H3: Newsletter
H3: Contact Info
## Main Content:
H1: Working with a CDFA
H1: Your Financial Professional
H1: How to choose and work with a financial professional to achieve the best possible outcome to your divorce
H3: Accountant (CPA, CA, CGA)
H3: Certified Financial Planner® (CFP®)
H3: Certified Divorce Financial Analyst® (CDFA®)
H3: Questions to Ask a Prospective Financial Professional
H3: Working With Your Financial Professional
During and after divorce, many people report that their standard of living decreases – sometimes significantly. Unless you change your occupation for one with a higher paycheck, you’ll have the same amount of income but more and higher expenses: where there once was one, there are probably now two homes, two cars, two sets of furniture, two sets of children’s clothes and toys, etc. During your divorce, you need sound financial advice to ensure the settlement is fair to both parties; afterwards, you’ll probably need help adjusting to your new circumstances and planning for a secure future. Here’s an introduction to some of the financial professionals you may need – along with some suggestions of how to find and work with them.
An accountant – a Certified Public Accountant (CPA) in the USA and a Chartered Accountant (CA) or Certified General Accountant (CGA) in Canada – can handle many of the financial aspects of your divorce. His or her responsibility is to calculate your net worth and your spouse’s net worth, and to produce figures that are agreeable to both you and the courts. There are a number of accreditations given to accountants, and you’ll find these designations after their name. Wading through the differences between someone who is a Certified Fraud Examiner (CFE), or a Board Certified Forensic Examiner (BCFE), or a member of the American Society of Appraisers (ASA), or who has a National Association of Certified Valuation Accreditation (NACVA), may seem a daunting task.
In most cases, you’ll be looking for an accountant with practical experience in divorce matters. Look for someone with good analytical skills and some background in forensic accounting so they will be able to ferret out the details behind what’s on the face of the statement.
Ask your lawyer, CDFA®, or personal accountant to recommend an accountant who has experience with matrimonial law. “Trust your instincts at all times when deciding ... whether to use Accountant ‘A’ or Accountant ‘B’," says Esther M. Berger, a Certified Financial Planner® and the author of MoneySmart Divorce (Simon & Schuster). Look for someone honest and forthright, and who offers reasonable economic terms.
A CFP’s job is to give you an understanding of your financial needs. Divorce inevitably creates changes in your financial situation, and you may need some help in adjusting to your new lifestyle. A CFP can help you with budgeting and investing, and some can also assist with tax, estate, or retirement planning. He or she will help you organize your financial future by proposing a personalized plan with a time horizon, and a solid investment strategy to help you towards financial stability for tomorrow. Ask professionals for referrals, or ask your friends who have similar financial situations to recommend a CFP.
A CDFA is a financial professional – often also a financial planner or an accountant – who has specialized skills and experience that enables him or her to analyze the long-term financial impact of divorce. Financial professionals who have met specific education and experience requirements have been designated CDFAs by the Institute for Divorce Financial Analysts™ (IDFA™).
CDFAs receive special training in divorce-related financial issues such as tax and property division. After completing the IDFA training and passing the exams, CDFAs also receive a free trial to special software enabling them to produce charts and graphs that will show a client the results of choosing one scenario over another. A CDFA can take the offer on the table and project out 5, 10, 20 years to show you what you’ll have to live on if you sign the agreement. If the projections show that you’re going to run out of money after 18 months, you’ll need to renegotiate your agreement. That’s why it’s so important to meet with a CDFA before you sign your agreement. If this advice comes too late for you, meeting with a CDFA could still be worthwhile: he or she can look at your financial situation and show you how to improve it by making some spending/saving changes.
Once you’ve set up an initial interview, there are a number of questions you should ask to make certain you’re dealing with a competent professional – and someone who’s right for you.
When you sit down at the initial interview, you may choose not to bring any important paperwork with you. It’s important to establish a good rapport. It’s a meeting of personalities, and you’re looking for respect, understanding, and an ability to talk freely.
However, once you start into the financial legalities of the case, there are several important documents your CDFA professional or accountant will need to see:
You’ll also need valuations or other paperwork detailing property you and your spouse own together or separately – from the contents of a safety deposit box to the car to your home. Although you’ll be dealing mainly with "big ticket items" here, if something is very important to you, make sure it’s on your list. If a business is involved, brokerage statements or corporate minute books will also be required. Basically, your accountant or planner needs to see any major paperwork that involves the transaction of money – for both you and your spouse.
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Title: Institute for Divorce Financial Analysts Legal Warning/Disclaimer
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