© 2009 Sharon A. LockhartSharon A. Lockhart, CFP® CDFATM CDFP®
Pre-Divorce Financial Planning for Post-Divorce Living
by Sharon A. Lockhart, CFP® CDFATM CDFP®
The key to financial well-being post-divorce is in pre-divorce planning. For many women, especially, the divorce settlement will be the single most important financial decision they make for the rest of their lives. I became a divorce financial analyst in 1997 due to frustration from telling people who sought my financial planning advice after their divorce that I could do little or nothing to help them. All their big issues had already been determined in their settlement, and they had often unwittingly agreed to settlements that seemed fair at the time but failed to look at the long-term effects and left them with too little money.
Career and Home Considerations: Often women defer career opportunities for any number of reasons, including staying home with children while husbands careers continue to advance. Divorce also necessitates a realistic look at the marital residence; even if you can legally remain in it, can you afford to?
Looking Forward: Very few family attorneys have training in financial planning. Nevertheless, divorce involves some very complicated issues like pensions, retirement assets, assets with high versus low tax consequences and the issue of future earning potential. When I create a pre-divorce financial plan, I consider the future 15-30 years from now and where both people may end up. It's an eye-opening exercise.
Prime Indicators for Divorce Planning: Do any of these apply to you? If so, you are even more likely to benefit from using a Certified Divorce Financial Analyst:
The Financial Analyst does not replace your lawyer. Couples still need lawyers to dissolve their marriage contract. Rather than address your legal situation, a divorce financial analyst will assist you with finances.
Top Five Reasons for Using
1) Financial analysis conducted early in the divorce process can save time.
The average length of the U.S. divorce process is one year. In the beginning stages of the process, both parties spend a great deal of time trying to get a clear understanding of the financial aspects and terminology of the separation. A Certified Divorce Financial Analyst (CDFA) can explain all financial aspects of the pending legal documents and help to empower their client to make educated decisions throughout the proceedings.
2) A CDFA can help their client save money during the divorce process.
By using a CDFA, you can have a clearer view of your financial future. Only then can you approach a legal settlement that fully addresses your financial needs and capabilities. A legal settlement that floats back and forth between attorneys, without the client having a clear understanding of all financial ramifications, can be detrimental and time consuming. CDFAs can educate their clients by providing a thorough knowledge and understanding of the often-complicated financial proceedings.
3) A CDFA can help their clients to avoid long-term financial pitfalls related to divorce agreements.
Working with a client and their attorney, a CDFA can forecast the long-term effects of the divorce settlement. This includes detail of all tax liabilities and benefits. Developing a long-term forecast for their financial situation is far better than a short-term snapshot. Financial decisions must be made that not only take care of immediate family needs, but retirement needs as well.
4) CDFAs can assist their clients with developing detailed household budgets to help avoid post-divorce financial struggles.
A CDFA can help clients think through what the divorce will really cost in the long run and develop a realistic monthly budget during the financial analysis process. Expenses such as life insurance, health insurance and cost of living increases must be taken into consideration when agreeing on a final financial settlement.
5) Using a CDFA can reduce the amount of apprehension and misunderstanding about the divorce process.
Misinformation and misconceptions about the divorce process can be detrimental. Many have false expectations that they will be able to secure a divorce settlement allowing them to continue with their accustomed style of living. Financial divorce analysis helps to ensure a good, stable economic future and prevent long-term regret with financial decisions made during the divorce process.
Things to Consider When Doing Divorce Financial Planning
1) Gathering relevant personal information
2) Assessing the current financial situation
3) Considerations for the property settlement
Additional considerations regarding the marital home:
4) Considerations for alimony and child support
5) Retirement planning
6) Tax planning
7) Estate planning
Sharon A. Lockhart, CFP® CDFATM CDFP®, is a registered principal and investment advisor representative with Raymond James Financial Services, member FINRA/SIPC. She founded Divorcec $enseSM in 1997 to provide "pre-divorce financial planning for post-divorce living". Sharon has more than twenty-eight years experience helping individuals through various life stages: first time home buyer, college education, divorce, widowhood and retirement. She specializes in helping individuals accumulate and preserve wealth for retirement.
Information on this website should not be taken as legal advice. Laws change, situations differ, and there may be exceptions to general rules. Except as otherwise may be provided, this website and contents are © 2009 Collaborative Lawyers, Inc. Collaborative Lawyers, Inc., is a state-wide educational and professional development association and business directory of independent Florida licensed attorneys at law and law firms who practice in the areas of collaborative divorce and collaborative family law. It is not a law firm or attorney referral organization.