Divorce impacts nearly every area of life, and one of the most impacted is finances. If you have assets of any sizeable amount and are going through a divorce, a divorce financial advisor can provide sage financial advice for both now and your post-divorce future.
What is a Divorce Financial Advisor?
A divorce financial advisor is a specialized financial professional who helps individuals understand and manage the financial implications of divorce. Most don’t work exclusively with divorcees, but they have extensive experience helping clients going through separation and divorce.
The primary certification for a divorce financial advisor is the Certified Divorce Financial Analyst (CDFA) certification. Many have other financial certifications as well, but the CDFA is the one that shows a professional is knowledgeable and experienced in divorce finances.
Divorce Financial Advisors vs. Regular Financial Advisors
What makes someone a well-qualified divorce financial advisor is their specific knowledge of divorce situations. They’re familiar with asset distribution between spouses, tax regulations pertaining to divorces, and what’s typically accepted by mediators and judges.
This specialized knowledge is in addition to the financial planning, retirement planning, estate planning, and other areas that financial advisors often assist with.
The Role of a Divorce Financial Advisor
A divorce financial advisor may be hired solely to represent you, or to help both you and your (ex)spouse.
Financial Clarity During Emotional Times
Divorce is often a messy and highly emotional process, which can cloud judgment when making financial decisions. A divorce financial advisor acts as an objective third party, providing clarity and support during this challenging time.
You can expect them to help you understand the financial realities of your situation, identify potential pitfalls, and make informed choices based on your individual circumstances and goals. They’ll also try to warn you before making emotionally charged financial mistakes.
Expertise on Divorce-Specific Financial Issues
Their expertise in divorce-specific financial matters can save everyone a lot of time, headaches, and arguing (although there probably will be some disagreements). Specifically, a divorce financial advisor can assist with:
- Asset Division: They can work to determine fair market value of assets, and develop equitable divisions based on the agreement of your divorce. Splitting a stock portfolio is fairly straightforward, but assessing the value of properties, vehicles, businesses and many other assets isn’t so clear.
- Retirement Accounts: Tax-advantaged retirement accounts (i.e. IRA, 401(k), 403(b), etc.) come with strict tax regulations. A divorce financial advisor will be familiar with the distribution requirements, penalties and allowances. They’ll be able to determine how tas these accounts might be distributed, in order to keep tax liabilities as low as possible.
- Property Division: Property transfers and sales can also have major tax implications, especially if there’s a second property, inherited property, or family property involved. A divorce financial advisor will be able to recommend how any real property might be distributed, to keep tax liabilities minimal.
- Alimony and Child Support: A divorce financial advisor won’t make the final determination on what alimony and child support should be paid, although they might be consulted on the matter. More importantly, they can help you determine how any paid or received ongoing support might affect your financial situation going forward.
- Financial Planning: A divorce financial advisor can provide both short- and long-term financial planning. They can help you make projections and investment decisions. They also can assist with strategizing which assets would be most useful to you.
Any of these services that are provided would be done in collaboration with your attorney, and possibly a mediator (if one is used).
The divorce process is largely focused on finances from day one. Bringing on a financial advisor early during your divorce (or even slightly before) can let you get informed advice from the start. To find a divorce financial advisor, you can complete our financial advisor matching tool now. The process of getting paired requires just a few minutes to answer the questions.
When Do You Need a Financial Advisor for a Divorce?
A divorce financial advisor may be helpful in almost any divorce where there are substantial assets being divided. They can be especially helpful in a few particular situations, though:
- High-Net-Worth Divorces: Couples with high net worths should consult a financial advisor who can determine fair market values of non-securities assets, provide tax guidance when splitting up assets, and make recommendations as to how wealth might best be preserved.
- Complex Asset Situations: When there’s a business or multiple properties involved, evaluating and distributing assets becomes more challenging. A divorce financial advisor can work to determine asset values, and then help couples decide how to best distribute assets that can’t be individually divided (e.g. a small business or vacation home).
- Long-Term Marriages: Finances tend to become more mixed the longer a couple is married. It’s much more difficult to determine each spouse’s share when a couple has been married for decades, as opposed to when they’ve been married for just a year or two.
- Uncertain Future: Sometimes a divorce financial advisor might be consulted not so much for the divorce itself, but for how assets should be handled post-divorce. It’s particularly prudent to consult an advisor if it’s unclear how current assets would cover major future expenses, such as college or retirement.
One factor that doesn’t really impact whether a divorce financial advisor should be consulted is any prenuptial agreement. If there is a prenup, a financial advisor can check whether assets are being valued fairly and divided according to the agreement. If there’s no prenup, an advisor can assist in determining who should receive what.
If you’re going through a divorce and any of these apply to your situation, strongly consider finding a divorce financial advisor. There are many in the Invested Better network.
Navigating the Divorce Process with a Financial Advisor
A financial advisor can provide assistance at every stage of the divorce process. Here’s how they might assist throughout the process:
- Pre-Divorce Financial Planning: Begin gathering and organizing all relevant financial documents. Assess your current financial situation, both as a couple and for you individually.
- During Divorce: Assist with settlement negotiations, helping value assets and analyze the finances of settlement proposals. Work out the tax implications of different settlement proposals, and make recommendations when appropriate.
- Post-Divorce: Develop a new budget and longer-term personal financial plan. Adjust investment strategies and portfolio allocations, plan for long-term financial goals, and forecast how changes in income (e.g. alimony ending) might impact future finances.
Key Services Provided by Divorce Financial Advisors
Divorce financial advisors have knowledge in most financial matters that arise during divorces. They are, therefore, able to offer a range of services:
- Asset Valuation and Division: Estimate the asset values when the value isn’t immediately clear, and suggest ways of equitably dividing assets.
- Tax Optimization: Calculate each person’s tax liabilities for different asset division proposals, and recommend ways to minimize taxes owed.
- Alimony and Child Support: Calculate the alimony and child support that might be owed, and look at how such payments would affect a budget.
- Retirement Accounts: Recommend ways of distributing retirement accounts, based on their value, other assets’ values, and tax implications.
- Budgeting: Develop a realistic budget for post-divorce life, and navigate immediate cash flow challenges during the divorce.
- Investment Planning: Create a personalized investment strategy that aligns with your risk tolerance and financial goals.
- Asset Management: Allocate assets according to your personalized investment plan, and monitor and manage them on an ongoing basis.
How to Choose the Right Divorce Financial Advisor
There are many good divorce financial advisors, including many in the Invested Better network. You’ll want to consider the following factors when deciding whether to hire someone:
- CDFA Certification: The Certified Divorce Financial Analyst certification is the main certification for divorce financial advisors.
- Experience: They should have at least a few years of experience, and that experience should include working with many clients going through divorce.
- Client Profile: Look for someone who works with clients who have net worths similar to yours. Ask about experience handling small businesses during divorce if you run a business.
- Compatibility: Divorce is a difficult time for everyone involved. Make sure you’re comfortable talking to them, and that they communicate in a way you appreciate.
- Services: Most divorce financial advisors can provide the services you need, but it’s good to confirm that someone offers all of the financial services you’re looking for.
Find a Divorce Financial Advisor
At Invested Better, we’ve connected with financial advisors who have varied expertise — including many that specialize in divorce finances.
Through a brief online form that has targeted questions, we can match you with a financial advisor who’s well-suited for your situation. We’ll consider your situation, net worth, needs, and other factors to find someone who’ll likely be a good match. Getting started takes just a couple of minutes.
The Long-Term Benefits of Working with a Divorce Financial Advisor
Even if you use a divorce financial advisor just while you’re going through divorce, hiring one can bring long-term benefits.
They’ll help you avoid common financial mistakes that some people make during divorces. Deciding which assets to negotiate for can have long-term benefits if those assets increase in value. Minimizing taxes keeps more funds in your accounts, giving you more to invest and potentially grow.
Developing a new personal financial plan will serve as a financial path into the future. You’ll know what your current financial situation is, and you’ll understand how you can proceed toward where you financially want to be in the future.
You’ll also have to stress less about financial decisions during and immediately after the divorce. Although you still ultimately make the decision, a financial advisor can guide you through the thought process. Having a knowledgeable professional takes a lot of stress out of financial decisions.
Consult a Divorce Financial Advisor
If you’re going through a divorce, not consulting a divorce financial advisor could prove to be a costly financial mistake. There are few other times in life when you’re making such significant decisions about virtually all of the assets you have.
To find a qualified divorce financial advisor, use our financial advisor matching tool. Answer some questions, and our algorithm will find a financial advisor who’s able to assist with divorces. We’ll make sure you get connected with an experienced advisor, so this is at least one less thing you need to stress about.
General Disclaimer: The information provided on this site is for informational purposes only and should not be construed as financial advice. Invested Better does not guarantee the accuracy or completeness of the information provided. Please consult with a licensed financial advisor before making any financial decisions.
Investment Risk Disclaimer: Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
