When Assets Get More Complicated
Divorce means you’re dividing your assets 50-50. If yours is an uncontested Divorce, you can negotiate your own property division and keep the court out of it. If that doesn’t work, Guideway helps our clients resolve these matters. Sometimes having a neutral third party helps jumpstart the process. These examples describe property distribution scenarios that are more complex but not uncommon.
- Your spouse has worked at the same company for nearly 20 years and has been contributing to his 401k for those two decades and it’s now worth $600K. After five years of marriage, you’re getting a divorce. But since your spouse contributed to the 401k long before you were married, your portion of that 401k is going to be significantly less than half its value.
- You and your spouse spent a lot of money furnishing the new house that you bought together. The house cost so much that you put all of the new furniture on a credit card. Your outstanding balance is $15K. You and your spouse share the responsibility for paying off this debt. What happens to the furniture? Split it along with the debt—you’re co-owners!
- When you and your spouse started your business together 15 years ago, you borrowed $150K to pay for equipment and other startup costs. Thankfully, the business has been very successful and you paid off your loan a few years ago. Both of you have been involved in the business since the beginning. With the Divorce, you plan to leave the company and will be doing some consulting. You remain, however, a 50% owner of the business. As part of your Divorce proceeding, you will need to have the business appraised, as the business owes you 50% of its value.
What Is a Certified Divorce Financial Analyst and Do I Need One?
A Certified Divorce Financial Analyst (CDFA) is a dedicated specialty whose practitioners specialize in helping divorcing individuals or couples with long-range financial planning.
CDFAs 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 includes financial planning and family law practice. In addition,
CDFAs Are Required to Have Experience in Three or More of These Specialties:
- Tax code
- Investment advisory or management
- Real estate, mortgage, and reverse mortgage lending
- Life and disability insurance
- Financial therapy or coaching
Who needs a CDFA?
A review of these requirements reveals that a CDFA is uniquely qualified to assist divorcing couples, individuals and those who may be contemplating divorce and need to understand the financial implications. For those who are concerned about making decisions that have long-term consequences, a CDFA helps them make equitable financial settlements.
Clearly, not every couple needs someone with this level of financial expertise. But for those couples whose financial landscape is more complex, engaging a CDFA can be an important investment.
It may be a matter of balancing the cost of college for their kids along with a mutually owned business. Or perhaps one spouse owns a vacation home in Paris, or they’re still paying off debt from the 2008 recession’s business downturn that left many families unable to meet their financial obligations.
CDFAs analyze assets with a particular focus on long-range planning
CDFAs look at real property, current and future expenses, retirement and other financial accounts, including life insurance. They’re trained to factor in taxes, the cost of living and inflation.
Those who are struggling with one of the most difficult decisions that divorcing couples face—whether or not to sell the family home—a consultation with a CDFA may be advisable. While there is a lot of emotional attachment to the home where you’ve raised your kids and celebrated holidays, it well might be that a single parent really can’t afford to maintain that home on what will now be a single salary.
It’s important to remember that in a Divorce, the goal is to reach equitable solutions for both spouses. For those divorcing couples where the discussion is getting acrimonious and one spouse or the other is concerned about getting an equitable share of community assets, it may be time to engage a CDFA.