Traditionally, once a decision is made to initiate divorce proceedings, the professional of choice to consult with is a family law attorney. As divorce is a legal process, this certainly makes sense. But should the lawyer be the only professional involved?
In cases involving highly complex tax and financial issues, potential fraud or the need to value a business, it is common for attorneys to call on a financial professional (typically a CPA) to assist with the case. However, in the majority of cases that would qualify as “average”, is there a need for a financial planner?
To answer that question, you need to ask yourself a simple question: “Am I confident with my financial future post-divorce?” If yes, you probably don’t need to consult with a planner. But if you are uncertain about how a potential divorce settlement will impact your future, it’s a good idea to get some advice.
So how can a financial planner help? First of all, you should be talking to an individual that specializes in divorce issues. A Certified Financial Planner is not trained specifically in divorce-related tax and financial issues unless he or she obtains additional education in that area. One of the better programs is the Certified Divorce Financial Analyst designation. A professional trained in this area can assist you by providing you information that will allow you to make the best decisions for your future. Some of the areas he or she can help you with are the following:
- Income tax implications with alimony and child support
- Cash flow analysis of various post-divorce scenarios
- Analysis of property settlement options to ensure against tax surprises
- Income tax estimates to properly measure net income after support is paid or received
- Assistance with preparing a realistic post-divorce budget to verify the affordability of proposed support scenarios
- Helping you to determine liquidity needs prior to a property settlement so you don’t end up with the wrong type of assets (i.e. real estate as opposed to retirement funds)
These are just a few examples of how a divorce financial planner can help you make the best decisions before you sign off on an agreement. Regardless of the complexity or net worth of your case, getting answers to these questions will help you avoid potential financial problems down the road.