How to Financially Navigate Your Divorce: An Expert’s Advice on the Steps You Should Take Before, During, & Post-Divorce
No two couples’ financial situations are exactly alike. As a result, figuring out the best way to go about financially uncoupling from a marriage can be quite nuanced.
I discovered from personal experience that when navigating a divorce, aside from any considerations involving children or pets, one of the most difficult aspects of the process is figuring out how to split the myriad debts and assets associated with your marriage. (Think student loans, real estate properties, motor vehicles, investments, retirement accounts, savings, and so forth).
It’s a challenging undertaking even if you’re fortunate enough to be able to work congenially and collaboratively with your soon-to-be-ex…which often isn’t the case for a divorcing couple.
So what can you do to make things easier?
As a Divorce Coach, I would strongly suggest that you work with a Certified Divorce Financial Analyst (“CDFA”) – someone who has been educated in the financial issues associated with divorce.
When I found myself getting divorced, my husband and I had only been married for a couple of years and hadn’t acquired all that much yet in terms of a marital estate to divvy up. So the thought of consulting a financial expert who specialized in divorce scenarios was not on my radar, to say the least. And even if it had been, I wouldn’t have understood the value such an individual could provide me with (or the value and insights they’re able to lend to nearly anyone’s divorce process, for that matter).
However, as I learned more about divorce in the years following my own “untying of the knot” and ultimately came to specialize in helping others get through the process, I quickly discovered how critical this type of resource can be. Not only can a CDFA help you identify and account for debts or assets that you might have otherwise missed and assist you in budgeting for your life ahead post-divorce, but they can also ensure you’re considering the tax implications of the decisions you’re making when it comes to splitting things up.
In other words, if you’re getting divorced, you should probably find a CDFA to work with.
But in case you still aren’t convinced, I decided to interview someone from my network – Amy Adler – who, in addition to being a CDFA, also happens to be a CPA, a Certified Fraud Examiner, and twice-divorced herself – to share some insights on how to go about navigating the divorce process from a financial standpoint.
As a CDFA, what are some of the main benefits you’re able to provide to your clients?
Some of my main offerings include:
preparing the marital estate document (a listing of ALL the assets and debts from the marriage as of the date of divorce) and recommending reasonable options for dividing it,
addressing the tax implications associated with taking possession of and/or cashing in certain assets after divorce,
calculating the current value of retirement assets (e.g., pensions, 401(k), etc.),
planning for life after divorce, and
assisting with some of the legal processes required to obtain the documentation for these issues.
Under what circumstances should someone strongly consider working with a CDFA?
Anyone who is considering or already in the process of getting a divorce who has assets of any kind (real estate, motor vehicles, cash, investments, retirement plans), debts, and/or children for whom child support may be relevant should consult with a CDFA to see if we can help save them money in attorney fees and/or get them the most reasonable settlement possible.
Most people don’t know what they don’t know when it comes to putting together the marital estate, and it’s incredibly valuable to have someone with financial expertise who is objective and unemotional in your corner to make sure all of the assets and debts are well-organized and included in the estate at a reasonable, defensible value.
Whenever I discuss my chosen career path with someone who’s been through a divorce, they frequently say that they wish they’d known me when they were going through the process. The story I commonly hear is that they were so exhausted, stressed, confused, and just plain angry or sad that they gave in and ended up feeling as if they got the raw end of the deal in their divorce settlement.
Although working with a CDFA does add some cost to the divorce on top of your other expenses (such as an attorney, coach, etc.), in the end, choosing to make this investment almost always results in savings that far exceed the upfront cost.
If you are contemplating divorce, what are some initial steps you would recommend taking from a financial standpoint?
If you haven’t yet filed for divorce, proceed with caution. Book a consultation with a CDFA (many offer free consultations), and start taking inventory of the assets and debts you and your spouse own.
By making a list of all of your accounts and assets (everything you can think of, including Venmo account balances and airline miles) before filing for divorce, you may be able to mitigate the risk of your spouse hiding assets from you once you’ve alerted him or her to the impending divorce.
What are some actions you would recommend taking if you’re in the midst of a divorce?
Particularly if you live in a community property state, be sure to take the time to gather statements that show the values of assets and debts as of the date of your marriage in addition to the most current information. Include any appraisals for property, mortgage and bank statements, pay stubs, debt agreements, etc. CDFAs can use this detail to prepare and value the marital estate and recommend options for division. Plus, these documents will be necessary if the case goes to trial.
What are some common mistakes that you see people make?
It’s easy to make mistakes in this process since it tends to be so emotionally charged. I made plenty of them myself when I was going through my own divorces. But here are some of the most common mistakes I see:
Not considering the cost of selling the marital home in its valuation (i.e., subtracting the costs to sell it, such as realtor fees and other closing costs, out from its valuation);
If one spouse is self-employed, neglecting to place a value on their business/company;
Not providing documentation to prove what portion of assets (e.g., retirement plans, etc.) are separate vs. community property; and
Failing to include the current value of expected future funds to be received from investment assets, such as pensions and rental properties.
What are some things to look out for (red flags)?
Hidden or undisclosed assets are the most common concerns I see. It’s important to be transparent in this process, but oftentimes one spouse attempts to conceal assets in the hope of avoiding sharing in the property division. Although it’s not guaranteed that hidden assets can be found, there are steps that can be taken to ensure as much as possible is located and included in the overall division.
Sometimes one spouse will use children or other threats as a weapon to intimidate the other spouse and force them to back away from the financial negotiations. It’s important to reach out for support from professionals in the industry such as coaches and therapists if this occurs.
Do you have any suggested follow-up actions from a financial standpoint?
Don’t wait to take care of the changes that need to be made after the decree is executed! It may seem like there’s an unending list of to-dos after your divorce is finalized (which isn’t much fun after all of the time and energy that went into getting to the finish line in the first place), but putting off some of the post-divorce tasks can cause issues down the line, so just get them out of the way quickly.
A few of the tasks that may need to be done include:
Updating your will to get your ex-spouse removed from it
Completing the transfer of assets awarded to each side
Taking your ex-spouse off of bank and other asset or debt accounts where possible
Updating your name and address on all forms of identification and accounts if you’ve moved to a new home and/or changed your name
In summary, there are many financial considerations for you to make when it comes to getting divorced, and it’s very easy to make mistakes – even if you’re financially savvy. So if you find yourself on the road to divorce, I’d highly recommend seeking out guidance from a CDFA such as Amy.
If you have any questions, please feel free to comment on this post or reach out to Amy directly (her bio and contact information can be found below).
Amy Adler is a CPA, Certified Fraud Examiner, Certified Divorce Financial Analyst, and a divorced mom of two teenagers. She began her career in the Big 4 public accounting realm, spent several years in general accounting and internal audit at companies such as Whole Foods and the Texas Health and Human Services Commission, and has been at DK Partners (a full service CPA firm) for the past five years managing the divorce consulting and fraud investigation services as well as managing in the audit department. After her second divorce a few years ago, she realized that she could put her personal experience and financial and investigation expertise to good use and became passionate about helping others receive a fair settlement while minimizing the stress and emotional charge involved in the divorce process.
Firm Website: http://www.dktxcpa.com
Kim West is the Founder and CEO of When It’s Knot Forever, a company she built to assist and empower those approaching, going through, or coming out of the divorce process. Kim (JD, MBA) is a Divorce Coach who offers her coaching services nationwide. To learn more, follow her on Facebook or Instagram.
To schedule a free consultation call with Kim, sign up here: https://calendly.com/whenitsknotforever/freeconsultation
Check out her online mini-course on “How to Get Divorced”: https://courses.whenitsknotforever.com/p/how-to-get-divorced