Aviva Pinto is a CDFA, CDS and Managing Director and Wealth Manager at Wealthspire Advisors.
If you’re heading toward divorce, you probably know that you need an attorney to guide you through the many legal questions. But what about someone to guide you through the financial questions? If you weren’t the one handling the finances in the family, a certified divorce financial analyst (CDFA) can be an addition to your divorce team to help you navigate key questions and ensure an equitable settlement.
What does a CDFA do?
A CDFA is a specialist financial advisor who focuses on helping divorcing individuals create a financial plan. CDFAs will draw on knowledge of divorce and tax law, asset distribution and financial planning to understand the financial implications of the various ways of distributing marital assets in a divorce. They generally work hand in hand with your divorce attorney to pursue the best possible financial settlement in a divorce.
What are the qualifications?
Those taking the CDFA exam are required to have spent a number of years in finance, accounting or law. Since divorce is so emotionally fraught, the most successful CDFAs also have some knowledge of psychology and have a lot of compassion and empathy.
What can a CDFA do for a divorcing client?
A number of issues come up in a divorce that could impact your long-term financial future. A CDFA can help you and your matrimonial attorney evaluate marital support (aka alimony) and child support, determine what is personal property and what are marital assets, determine the current and future values of retirement funds, pension plans, stock options and private company shares, and evaluate the tax ramification of various settlement alternatives. They also take into consideration inflation, as well as your future health care needs, living needs, goals and wishes.
What’s the process of working with a CDFA?
A CDFA can add value in each of the three stages of divorce:
Stage One: One of the parties decides they want a divorce. At this stage, the CDFA will review your assets to understand what is owned jointly (and will be split) and what is owned by one party (such as a trust fund, inherited assets or assets titled in one person’s name only). They will also closely examine investment accounts, savings and checking accounts, real estate, retirement accounts, pension accounts, insurance policies, expected social security, future inheritances, art, jewelry, cars, valuables, as well as your expenses and any debt.
Stage Two: Filing for divorce. Once you have retained a divorce attorney, you’ll need to fill out and file a statement of net worth. At this stage, a CDFA can pull all the information collected above and look at the information filled in by the other partner. They can then help evaluate if there are hidden assets, tax implications, what an equitable settlement would be, what assets are more important to keep or give up, what the post-divorce lifestyle will look like, all based on both parties’ income, assets, liabilities and budget.
Stage Three: Divorce stipulation. In the final stage, the divorce stipulation is signed by the court, officially declaring the marriage to be over and spelling out the details of the settlement—who gets what, including custody of minor children, who pays marital support, who pays child support and the amounts they pay. A CDFA then works with the divorced spouse on a new budget, financial plan and invests the proceeds of the settlement.
One of the most valuable services a CDFA provides is to help create a realistic picture of what life will look like after divorce. Many people going through a divorce do not think about what it means that the resources that had been supporting one household now have to support two. Depending on the income and assets of the divorcing couple, maintaining the same lifestyle post-divorce may not be achievable. In that case, a CDFA can help determine a realistic budget and show the client whether they will have to earn more, go back to work, cut back on expenses or downsize.
Can I afford a CDFA in my divorce?
The divorce process is expensive. Some CDFA’s charge an hourly fee like an attorney. Others have a flat rate charge for their services. Others, like the wealth managers at Wealthspire, that work for a registered investment advisor (RIA) are only paid a percentage of assets under management if you invest with them after your divorce settlement. If you are not the one that handled the finances in a marriage, it is sometimes costlier not to hire a professional to help you. Mistakes in marriage settlements occur far too often if one person has the upper hand because the other is not well versed in the couple’s financial details. A CDFA can help you obtain the fairest division of assets and manage your expectation for what a court will decide if the divorce proceeds to trial.
You can find a CDFA by looking at the CDFA directory or at the National Association of Divorce Professionals website. Make sure you interview a few and find one that suits your temperament and understands what you need.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.