A Qualified Domestic Relations Orders or QDRO allows retirement accounts to be divided without taxes and penalties in the case of a divorce. Most people going through a divorce know this. What they don’t know, however, is that a QDRO can be drafted in one of two ways. It can be a “separate interest QDRO” […]
Divorce is not something many people anticipate happening. In fact, there’s almost nothing as disruptive as a divorce when it comes to your vision for your life. With so many factors, from concerns over family dynamics to dealing with who is going to live where, it’s easy to get overwhelmed. This is especially true when it comes to money.
Though it’s certainly not the case in all marriages, most marriages are financial as well as romantic relationships. Resources are shared, career decisions are made with another person in mind, paychecks are pooled together to make large purchases. As long as it takes to truly separate yourself from your spouse emotionally, it can take even longer to separate from them financially.
That said, making a clean break from your spouse is not only possible but often one of the more satisfying aspects of a divorce.
Do I really need help or should I do this alone?
The bad news is that splitting assets after a divorce is rarely simple. You’ll need to take a look at every single one of your joint assets and figure out how to divide them according to your settlement. If there are retirement accounts in the mix this can be complicated by withdrawal restrictions and other rules.
The good news is that you are not the first person to have embarked on this endeavor. There are millions of people who have been through this exact process. This means that there is a substantial amount of information out there to help you. There are entire websites and books devoted solely to this topic. However, unless you love pouring over statements and spreadsheets and don’t mind constantly calling the person you are in the process of divorcing, you are probably going to need some professional help with the financial aspect of your divorce.
A divorce attorney and Certified Divorce Financial Analyst® are your best bets when it comes to doing this correctly and nearly everyone going through more than the most rudimentary divorce works with one or both of these types of people. If you find ones who are trustworthy and efficient you’ll learn that they’re usually worth their weight in gold.
When the idea of separating from your spouse financially becomes too much, try to keep in mind that you really don’t have to do this alone. In fact, most people don’t.
Are you feeling pressured to agree to something that just doesn’t seem fair?
There are a lot of preconceived notions out there about how best to go about a divorce. For example, many people think that mediation is always the best way to go because it’s cheaper and more amicable. Unfortunately this isn’t always the case. Often Mediation becomes a long, drawn-out process in which you are spouses are forced to endure hours of fraught negotiation.
Many people regret choosing mediation and would rather have paid more, gotten a better settlement, and not have the stress of dealing of dealing with their spouse.
It is often a good idea to meet with a Certified Divorce Financial Analyst® before you meet with the divorce attorneys. They can help you decide whether mediate is your best bet. They can also help you cut down on excessive fees. Let’s face it, divorce attorneys are not cheap. A CDFA® can help you get prepared for the attorney meetings so that you can make them as efficient as possible and cut down on those hourly fees.
If you’ve already met with attorneys and feel that what you’ve been asked to agree to just isn’t fair when it comes to financial matters, a CDFA® can help you lay out your case and organize your thinking so that when you go into the next meeting you are ready.
What is a Certified Divorce Financial Analyst®?
A Certified Divorce Financial Analyst or CDFA® is a financial professional who has the required experience and test results needed to be considered fit by the Institute of Divorce Financial Analysts to advise clients on the financial issues that come up in divorce. Usually CDFA®s are also Certified Financial Planners or financial advisors. Unlike other CFPs and financial advisors, however, they are specifically trained to guide you through the financial intricacies of divorce.
How can a Certified Divorce Financial Analyst help with my divorce?
1. A CDFA® can help you make a detailed list of your assets:
The first step to the financial side of a divorce is to create a comprehensive list of the assets you and your spouse possess. Though this step seems simple, it causes problems for a lot of people. A good CDFA® will help you make sure you haven’t left anything off your list.
2. A CDFA® can help you make a realistic post-divorce budget:
One of the most important things to figure out in a divorce is how much money you will need to live on after the split. Many people make the mistake of assuming they will be able to live on much less money when they are on their own. Unfortunately, this is not always true. A CDFA® can help you make an accurate monthly budget for your life after the divorce. In doing this they will take into account things that you might overlook like cost of living increases, changing health insurance expenses, and tax implications.
3. A CDFA® can help you understand how much the divorce will cost:
One of the biggest questions people have when going through a divorce is how much the whole thing is going to cost. Good CDFA®s who are experienced in helping clients through divorce can help you get a clear picture of the different expenses you will incur through the process and when you can expect to pay them.
4. A CDFA® will help you with the logistics of splitting accounts:
Once an agreement has been reached about how assets will be split, you will need to start the process of actually doing this. Some assets, like checking and savings accounts, are relatively easy to split. Others, like 401ks and IRAs, can be more difficult. A CDFA® can help you through splitting the trickier of these assets in a way that avoids complications and unnecessary fees.
5. A CDFA® can help you save money in the divorce process:
At first this might seem counter-intuitive. After all, if you hire a certified CDFA® that’s one more person who you will have to pay in addition to all the lawyers and other professionals who are already on the case. The truth, however, is that a good CDFA® really can save you money when it comes to your divorce.
People who don’t hire a CDFA® often spend a lot more time in the beginning of the process trying to understand the basics of the situation. This means more time talking to attorneys which costs more than anyone likes to think about. People who don’t have a financial advisor also often have trouble finalizing their settlement because they are constantly revising how much money they should ask for. A financial advisor can help you know exactly how much money you will need and avoid the huge lawyer fees you’ll incur if your settlement is constantly being revised by your attorneys over many months.
Lastly, a CDFA® can help you save money in your divorce by helping you avoid common expensive pitfalls. For example, some people don’t understand that withdrawing money from retirement accounts in order to settle a divorce can trigger costly early withdrawal fees. A CDFA® who knows the specifics of these accounts will help you understand your options and may have some ideas for handling the situation in a less costly way.
6. A CDFA® can help you understand how your divorce will affect your retirement:
While it is definitely good to understand how your divorce will affect your situation in the immediate future, it’s important to know how it will affect you in the long-term as well. Most importantly, you need to have a clear picture of how this divorce will affect your retirement plans. Quite a bit can change in this area due to a divorce. A CDFA® can walk you through any adjustments you may need to make.
Want to know what we can do for you?
Divorce is hard. There’s really no way around that. Often it’s so disruptive that trying to think about money on top of everything else seems almost impossible.
Many people find, however, that the faster they can get the financial piece of their divorce puzzle into place the faster they can come to terms with the whole experience.
It might be time to try something new.
If you’re feeling stuck or confused about the financial aspect of your divorce, it might be time to try something new. Why not schedule a phone call with our Certified Divorce Financial Analyst? We won’t charge you anything and we don’t require a further commitment from you. We’ll simply ask you some basic questions and help you see the big picture when it comes to your divorce finances. If you want to continue on with us after that and let us help you throughout your divorce process, fantastic! If not, we’re happy to have helped you in even a small way on the path to your new life.
Ready to Book a Call?
David Wilson, writer at Financial Truths, is also a financial advisor and Certified CDFA® ® at Vector Financial Solutions, Inc. Vector Financial Solutions is located at 139 E. 3rd Ave., Escondido, CA 92025 and by phone at 760-741-3159. He serves clients throughout the U.S. as well as those in Escondido, San Marcos, Rancho Bernardo, Poway, 4s Ranch, Rancho and Santa Fe, California.
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