Most people facing divorce think first and foremost to find a divorce attorney to move them through the process. I encourage couples to also look at hiring a mediator as a first resource. Whichever path is taken there are other professional resources to bring into the mix which may provide further expertise and guidance as you tackle the issues at hand. In this week’s blog we explore the benefits of considering the use of a Certified Divorce Financial Analyst (CDFA) as either a neutral expert retained by both parties, or to provide support to one spouse or the other. I will start by explaining what a CDFA is, some issues that might warrant bringing in a CDFA, and some other considerations when working with a CDFA to assist with your case.
What is a CDFA? A Certified Divorce Financial Analyst (CDFA) is a credentialed professional who helps couples and their attorneys achieve equitable divorce settlements by using their knowledge of tax law, options for asset distribution, and their expertise in short- and long-term financial planning. Most attorneys, and mediators for that matter, have a legal background versus the financial background that CDFA’s have. As attorneys and mediators we certainly learn how to handle the financial issues involved in divorce, but when the financial issues get more complicated it sometimes makes sense to get some guidance and assistance from a professional with a stronger financial background. CDFA’s have this financial background with the added benefit of a focus on the financial issues specifically dealt with in divorce, which is its own specialty. So when might it make sense to bring a CDFA into your case?
Analysis of Complex Financial Issues. When the case has complex financial issues it often makes sense to bring in a financial expert such as a CDFA to review, organize and analyze the financial data involved. There are a number of issues that arise in family law cases that require and benefit from such analysis. One example is stock options and Restricted Stock Units which might be issued during marriage but don’t vest until after separation. A CDFA can get involved to provide an analysis of the community versus separate interest in these options so that as they vest, the interest of each spouse can be divided accordingly. It will often make much more sense to have a financial professional handle these calculations rather than the attorneys or mediator doing so. Some CDFAs will provide insight into business valuations and income available for support input when businesses are involved in the divorce. Rather than paying for a full blown business valuation, couples can agree to have the business financials reviewed and a more informal valuation provided by the CDFA to assist with the issue.
CDFA’s can also offer other support such as input on tax consequences, strategies to maximize tax benefits, support assessments and assistance with accomplishing full disclosure by reviewing and analyzing documentation provided by the couple. The CDFA will put together the data then will defer to the legal professionals to address the legal ramifications and options. In my mediation practice it can be extremely helpful to have a CDFA providing financial analysis and input on the best way to tackle some of these complex financial issues.
Financial Guidance for Disadvantaged Spouse. Another common role for a CDFA is to provide support to a spouse who might be less secure in understanding the finances of the family. Having the less informed spouse work with a CDFA can provide that spouse with comfort in the numbers and can educate them so they are able to actively participate in the process of evenly dividing the property and appropriately setting support. For processes such as mediation to work successfully it is critical that both spouses are educated and comfortable with the numbers. Having the less informed spouse work with a CDFA can be the perfect added resource to allow the process to proceed smoothly.
Acting as Neutral or Supporting One Spouse. When you consider hiring a CDFA you should first consider if you will have them act as a neutral, or if they will be providing guidance and support to just one party. I have seen both uses in my mediation practice. Oftentimes it is nice to be able to have both spouses work with the same CDFA as a neutral. Each of the CDFA’s on my resource list are willing to play either role. When approaching the complex calculation issues mentioned above, it is usually very helpful to have the CDFA act as a neutral so that both spouses can meet with and work with the CDFA to provide the necessary information, and to be able to ask questions to gain complete understanding of the analysis provided. By working with both spouses and for both spouses it serves to create mutual trust in the data and calculations generated by the professional.
When you hire the CDFA to be the educator for the one spouse needing financial assistance, consider hiring them a neutral to work with both spouses in that situation as well. The main work may be with the less informed spouse, but the CDFA’s role would be to work neutrally for both. Doing so often fosters the more financially savvy spouse being more cooperative in providing all the necessary information and documentation to the jointly selected CDFA.
Don’t Overlook this Resource. The key to a healthy divorce is to gather all the information you and your spouse need to make informed decisions. When one or both of you don’t have a clear understanding of the financial picture it can get in the way of sound decision making. If one spouse is unable to understand the full financial picture, or when you have complex financial issues that need to be analyzed, bringing a CDFA aboard may help to provide the added support needed to bring your matter to a well informed and efficient conclusion. Don’t be afraid to reach out to any extra resources you might need to put you at ease as you move through the process.