Q: Who do CDFAs™ help?
A: CDFA professional's help clients determine the short-term and long-term financial impact of any proposed divorce settlement. They also provide valuable information on financial issues that are related to the divorce, such as tax consequences, dividing pension plans, continued health care coverage, stock option elections and much more. CDFA professional’s also help attorneys by helping the client make financial sense of proposals. CDFA professional's give lawyers the tools they need to help prove their case.
Q: Who should utilize a CDFA?
A: Theoretically, all individuals going through the divorce process could benefit from financial counseling and advice. However, if the situation is very simple – an uncontested divorce, no children or assets – it may not warrant the level of analysis that a CDFA™ can provide.
Most CDFA™ clients come from a marriage where their joint income is $100,000 or greater and their total assets exceed $100,000. Some of these couples have no debt while others have substantial debt.
CDFAs™ work with clients from a variety of financial backgrounds, including: one primary wage earner; dual income families; retired couples; first or second marriages; children, no children, children and step-children; no assets or significant assets; significant inheritance or potential inheritance.
A CDFA™ is required to look at both sides of the picture and provide a recommendation that is fair and equitable to both parties. Our primary obligation is to our clients and to support their lawyers in obtaining a fair and equitable settlement, but a lawyer is most effective if he/she can show the whole picture, not just one side.
Q: How do CDFAs™ help divorcing individuals?
A: A CDFA’s role is to assist the client and his/her lawyer to understand how the financial decisions he/she makes today will impact the client’s financial future. We help our clients understand:
The difference between personal and marital property
How property is valued and divided
Retirement and pensions
Spousal and child support
Whether you can afford to keep the house
Tax problems and solutions
Which settlement to choose
A CDFA™ offers confidence that your settlement is financially feasible, an objective viewpoint in an emotional situation, and expert advice about your special financial needs. Your marriage may be over, but the rest of your life is still ahead. Working with a CDFA™ can increase your chances of reaching a settlement that fully addresses your long-term financial needs, securing your financial future.
Q: Should a divorcing person hire a CDFA™ instead of a lawyer?
A: Definitely not! The IDFA™ highly recommends that any person getting a divorce seek legal counsel. The CDFA professional's role is to assist the lawyer – not to replace the lawyer.
Q: Do CDFAs™ help only men or only women?
A: CDFAs™ are trained to advocate for men and women. The CDFA™ simply interprets the numbers and helps the lawyer build a strong case that’s in the client’s best interest.
Q: Am I going to receive spousal support?
A: The tests for spousal support (also called "alimony" or "maintenance") include some of the following; however, keep in mind that no two cases are the same. You need to seek individual advice in order to determine how the specifics of your case may impact your ability to receive spousal support:
Need. Can you support yourself with earned income plus investment income?
Ability to pay. Does the payer of alimony have sufficient funds to pay?
Length of marriage. A long-term marriage (ten years or more) is typically a stronger case for the lower-earning spouse.
Health of both parties.
Q: Will I lose some or all of my pension as a result of divorce?
A: Pensions and retirement plans are marital assets; generally speaking, the portion you earned during your marriage will be subject to division. Depending on the state or province you live in, the portion that was earned before your marriage could also be considered a marital asset. However, it may be possible to keep your pension intact and have it offset with other assets.
Q: I'm the custodial parent. Should I keep the house?
A: This is a great question. The answer is sometimes yes, sometimes no. It's important to pinpoint exactly what it will cost to maintain the home, factoring in taxes and inflation. The next step is to analyze if there is enough money coming in to stay comfortable in the home (in other words, pay the bills each month and keep the house in good repair). Once that has been determined, the advisability of retaining the home must be compared to the advisability of giving up other assets (such as liquid accounts, retirement plans, etc.). Finally, all decisions need to be weighed against current economic and stock market conditions. Certified Divorce Financial Analysts® are trained to help people answer this question before they commit to a settlement that cannot be changed.
Q: How do we figure how much child support should be paid?
A: In the USA, every state has Child Support Guidelines that are mandated by the state. However, the Guidelines get tricky when one (or both) spouses is an independent business owner who can control their wages. In this situation, it typically helps to bring in a financial or tax expert who can help determine the true potential income of the partie(s).
Child support in Canada is determined by guidelines that are mandated by the Federal court. Generally speaking, it is based on these factors:
Ages of minor children (under 18)
Number of minor children
Income of the parents
These factors are plugged into a formula, which then supplies a recommendation for the Court.
The Guidelines may not cover the children's actual costs – for instance, extraordinary medical expenses, private school tuition, or extracurricular activities are generally not covered. Speak to your lawyer about the possibility of increasing the Guideline amounts to cover reasonable expenses.
Q: Do we have to go to court to get divorced?
A: Only if you can't reach an agreement. Then, a court date is set and a judge hears the case. Less than 2% of all divorce cases go to trial in the United States.
Q: What is a QDRO and why do I need one?
A: A QDRO (or Qualified Domestic Relations Order) is the legal document that divides up a qualified pension or retirement account (including 401k's) pursuant to a divorce. The Judgment of Divorce is not sufficient to divide up qualified plans, a QDRO is needed. There are many nuances that go into QDRO's and make it an advocating (versus neutral) document. In order to protect your assets, be sure to obtain qualified advice in this area from a specialist.
To find additional resources, visit www.institutedfa.com.
To learn more about how I can help you evaluate your financial settlement options and make informed choices for your future, request a free Discovery Meeting Consultation.