What is divorce financial planning and how can it help you?
Divorces often seem to be about the past. Who did what to whom? Who did the most work? Who made the most money? Who spent the most money? Who contributed which assets to the marriage?
Divorce financial planning is about the future. A divorce financial analysis looks at the years following the divorce to see how the parties can expect to fare. Will one ex-spouse enjoy a comfortable lifestyle while the other barely scrapes by? A divorce financial planner can help you answer this question: "How can I be sure that I will be financially secure after my divorce?"
Our financial lives are complicated. A divorce financial analysis includes the most important variables that affect your financial security:
inflation
future income
income taxes
pay increases
child support
alimony
mortgages
Social Security
retirement plans
pension plans
investments
IRAs We don’t believe that anyone would knowingly agree to a divorce settlement that leaves him or her in difficult financial circumstances. Yet we have met many divorced people in just that situation. The only sensible conclusion is that those people did not truly understand what they had agreed to. One unfortunate truth of divorce settlements is that, once signed, they are difficult to change. As divorce financial planners, we develop a variety of possible financial settlements in order to help our clients find one that meets their needs.
Why do you need a Certified Divorce Planner if you already have a divorce attorney?
The question answers itself if you reverse it: Why do you need a divorce attorney if you already have a divorce financial planner? Answer: Because financial planners are not expert in the law and lawyers are not expert in financial planning.
We believe that one of our jobs is to provide you and your attorney with the best possible information about your financial needs – now and in the future – so that your attorney can negotiate the best possible settlement for you. If you are unable to reach a settlement amicably, your attorney may want an expert witness to testify in court about financial issues.
Who would benefit from using a Certified Divorce Planner?
Any of these four indicators means you are a prime candidate for divorce financial planning:
- You have been married for 15 or more years.
- One spouse earns 75% or more of the family’s income.
- One or both spouses owns all or part of a business.
- If either party has stock options.
Some people believe that financial planning is only for the wealthy. We have found that middle income households often benefit most from financial planning for the very simple reason that they have less room for error. Charles Dickens, the 19th century English novelist, observed in one of his books that the difference between comfort and misery is often only "half a pound a year." Inflation has changed the amounts and we use dollars instead of pounds, but the principle remains true.
Be sure to look at our discussion of 13 Mistakes Not to Make, to help you recognize some of the pitfalls of a poor divorce settlement, and to teach you what to look out for in your divorce financial planning.
are certification marks owned by the
Certified Financial Planning Board of Standards, Inc. These marks are awarded to
individuals who successfully complete the CFP Board's initial and ongoing certification
requirements.