Do I need a divorce financial advisor?

What a divorce financial advisor does

A divorce financial advisor analyzes the money side of a divorce. The most recognized credential in this field is the Certified Divorce Financial Analyst (CDFA®). The work typically includes:

• Building a marital balance sheet that classifies assets and debts
• Tracing separate property through accounts where it was mixed with marital funds
• Determining income for support, especially for self-employed spouses
• Modeling the after-tax value of settlement proposals
• Projecting how each spouse's finances look years after the divorce

How it differs from your attorney

Your attorney advises you on the law and represents you. A divorce financial advisor does not give legal advice. Instead, they give you and your attorney numbers you can rely on during negotiation, mediation, or trial.

How it differs from a regular financial planner

A financial planner typically focuses on investments and long-term goals. A CDFA® is trained in the issues specific to divorce: property division, support, the tax treatment of transfers between spouses, and dividing retirement plans with a QDRO.

Signs you probably need one

• One spouse owns a business or professional practice
• There is a pension or several retirement accounts
• Either spouse brought significant assets into the marriage or received an inheritance
• Income is irregular, self-employed, or comes partly through a business
• You are weighing keeping the house against keeping retirement assets
• Your spouse managed the finances and you are not sure what exists
• You have received a settlement offer and cannot tell whether it is fair

When you may not need one

If the marriage was short, there are few assets, both spouses have similar incomes, and you agree on how to divide things, the cost of a financial analyst may outweigh the benefit.

Factors that typically matter

• Size and complexity of the marital estate
• Business ownership or self-employment income
• Retirement plans, especially pensions
• Separate property claims
• Whether support is disputed
• Tax differences between assets - two assets with the same balance can have very different after-tax values

Documents commonly reviewed

• Tax returns - typically three years
• Bank, credit card, brokerage, and retirement statements
• Pay stubs, W-2s, and K-1s
• Pension and benefit statements
• Mortgage and loan statements
• Any settlement proposal you have received

Common mistakes and misconceptions

• Assuming an equal split is a fair split - taxes and liquidity change what each asset is worth
• Keeping the house without modeling the cost - it may not be affordable on one income
• Ignoring the tax cost of retirement accounts - pre-tax dollars are worth less than after-tax dollars
• Bringing in an analyst after signing - by then the options are limited
• Expecting a financial advisor to give legal advice

When a professional may be useful

A CDFA® or divorce financial analyst is most useful:

• Before you respond to a settlement offer
• When a business, pension, or complex compensation is involved
• When separate property needs to be traced
• When support depends on income that is hard to measure
• When one spouse needs to understand finances the other spouse managed