Many people work with a financial advisor for advice about saving for retirement or managing investments, but if you’re in the process of getting divorced, it may make sense to meet with one to discuss you and your family’s financial security both during the divorce process and after.
One of the primary reasons for consulting a financial planner is that they can help you, and your spouse, make financial decisions that are the best for your family’s future. Often, when getting divorced, both individuals can make emotional decisions about money, property, or assets that are not in their long-term best interest. For example, one spouse may insist on keeping the family house as part of a divorce settlement. However, that decision may not be financially sound if the individual cannot afford to maintain the property or must sacrifice savings or retirement funds to do so.
Not all divorces involve shared property, assets, and money, but if yours does, it’s wise to involve the services of a financial advisor as early in the process as possible. Many couples who lived comfortably when married often have financial struggles once they are divorced, and some of that can be attributed to poor financial decisions made during the divorce negotiation process. In order to avoid this situation, look for a financial planner who is also a Certified Divorce Financial Analyst (CDFA). Along with your divorce attorney, a financial planner who is also a CDFA can help couples and individuals to understand their marital estate and their budgets as a married couple versus two single individuals. A CDFA can also help brainstorm solutions to divide property, and can advise on the restrictions on retirement assets and pensions.
Ways that Divorce Financial Planning Can Help Both You and Your Family
Divorce Financial Planning advises both clients and divorce attorneys on the financial aspects of divorce and at different stages of divorce. Contracting with a certified financial planner in the early stages of your divorce can help you avoid making several of the most common (and costly) mistakes.
Here are some mistakes that a divorce financial planner can help you avoid:
Poor Record Keeping.
If you’re seeking a divorce, you need to know what assets you have and the debts you owe. If one spouse is primarily responsible for finances, the other spouse may not have a full understanding of what they have. Having the details about life insurance policies, social security benefits, health insurance policies, college or school tuition obligations, etc. is critical as all of these need to be addressed as part of the divorce process. Working with a financial planner can help you pull all of that information together so you can make informed decisions throughout your divorce settlement negotiations.
What to do with the house?
Much like a bank account, a house is generally a marital asset that is a part of the divorce settlement process. Very often, the parent who will have primary custody of any minor children will want to keep them in the family home. However, maintaining a house on a single income may pose a financial hardship for the parent and children in the long-term. Working with a divorce financial planner can help everyone in determining a plan for the family home that will ensure financial stability and security.
Dividing up other assets.
In some divorce settlements, one spouse will receive a portion of the other’s retirement accounts or other savings or brokerage accounts. While receiving this cash payout may seem ideal on the surface, it’s important to remember the tax implications. If you liquidate assets to provide funds for living expenses, you may incur a hefty tax bill due to financial gains. When negotiating about how to divide other assets, the input from a divorce financial advisor can help you understand which assets may have “strings attached” and how to avoid them.
Fighting over the money.
The divorce process can sometimes be emotionally contentious, with each side bickering back and forth over every small detail. Working with a financial planner at this time can help you to see the “big picture” of long-term financial stability and understand that continuously fighting over small details is costing both of you money in the present.
Resources for Financial Advisors in Northern Colorado
If you or your spouse will be filing for divorce or legal separation in the Northern Colorado or Fort Collins area, there are a number of local resources that may help you to better understand the divorce process and assist you in locating the best financial advisor for your case. The following websites may be helpful:
The Institute for Divorce Financial Analysts (IDFA™) has certified more than 5,000 professionals in the US and Canada as Certified Divorce Financial Analyst® (CDFA®) professionals.
The Better Business Bureau (BBB) is an effective tool consumers can use to determine whether a particular financial advisor will be the right fit for their needs.
The National Association of Personal Financial Advisors (NAPFA) is a professional organization for financial advisors and serves as a good resource for finding a reputable financial advisor near you.
Contact a Financial Advisor During the Divorce Process
When you take the time to learn about the financial implications of your divorce settlement and the ways to goes about planning for your family’s financial well-being, you’ll be one step closer to determining the best path for finalizing your divorce or legal separation.
Laura Monty Law is a Fort Collins divorce attorney also specializing in unbundled legal services, mediation, and collaborative law in Northern Colorado. Do not hesitate to contact Laura Monty and schedule an initial consultation.