Need a road map to getting your finances in order? Our experts Ani Mason and Alyssa Rower discuss what you need to know as you head into divorce.
Budgeting
- Typical questions that may arise in a divorce process include:
- What did I spend during my marriage?
- What will my post-divorce spending look like?
- Which financial professional can best help with these questions?
- A “Certified Divorce Financial Analyst” (“CDFA”) or a Private Wealth Manager can help you answer budgeting questions.
- Note that Private Wealth Managers can have a variety of professional trainings, but they are most often Certified Financial Planners (“CFP”). You may also see credentials like “Certified Financial Analyst” (“CFA”), or they may have an MBA.
- A “Certified Divorce Financial Analyst” (“CDFA”) or a Private Wealth Manager can help you answer budgeting questions.
- What can I expect to pay for this service?
- A CDFA often charges an hourly rate, and their involvement is typically limited to the divorce process. They may charge an upfront retainer, but there is no expectation, where you’re paying hourly, to invest your money with them going forward.
- A Private Wealth Manager may offer these services to you for free. If you already have a relationship with a Private Wealth Manager, that person is likely to help you with this process as part of your ongoing relationship. However, where you don’t have a pre-existing relationship, there is generally an expectation that you have (or will have, after the divorce) an appropriate amount of assets that you will invest with them going forward.
Analyzing Cash flow
- Typical questions that may arise in a divorce process include:
- What were my different sources of income during the marriage?
- What will my different sources of income be after the divorce?
- How much will I have, after taxes, to pay my living expenses post-divorce?
- Which financial professional can best help with these questions?
- Similar to budgeting, both a CDFA and a Private Wealth Manager can help you answer these questions re cash flow. Given that budgeting and cash flow are necessarily interrelated, it can be beneficial to have the same person assessing both income and expenses.
- Where tricky tax questions are involved (e.g., how much can I expect in after-tax spousal maintenance and investment income), you may benefit from working with someone who is also a Certified Public Account (“CPA”). A CPA will be able to assist you in understanding how taxes impact your settlement, and they can help you optimize those tax consequences to create more income (and assets) all-around.
- What can I expect to pay for this service?
- See Question 1 above for CDFAs and Private Wealth Managers.
- CPAs typically charge at an hourly rate, and they may take a retainer upfront.
Valuing Assets
- Typical questions that may arise in a divorce process include:
- What is my apartment worth?
- What is my spouse’s hedge fund worth?
- What is my business worth?
- What is our art collection worth?
- Which financial professional can best help with these questions?
- There is a specific financial professional who is qualified to value any particular asset you have, whether it’s an extensive wine collection, an interest in a law firm or something else altogether. Each different type of asset requires a different valuation process. Your attorney or mediator can help identify the right valuation professional to assist with your particular asset picture.
- What can I expect to pay for this service?
- Some valuation professionals will charge a flat rate (e.g., a real estate appraiser), where the valuation process is predictable and relatively straight-forward. Other valuation professionals will take an upfront retainer and charge by the hour (e.g., a more complex business interest), where the time required to properly appraise the asset’s value can vary significantly from case to case.
Tracing Assets
- Typical questions that may arise in a divorce process include:
- What happened to our income and assets during the marriage?
- Is my spouse disclosing everything and being transparent?
- Which financial professional can best help with these questions?
- Where you have a concern that your spouse is not being transparent around finances, a forensic accountant may help you in understanding your financial picture. Forensic accountants can put together a report for you that traces what happened to assets during the marriage. They can also flag where your accumulation of assets or debts does not correspond to your level of income and spending during the marriage.
- What can I expect to pay for this service?
- Forensic accountants charge by the hour and will take a substantial upfront retainer. Before you engage a forensic accountant, you want to consider whether you may spend more money tracing assets and income than your potential share of those assets is worth.
Post-Divorce Financial Planning/Wealth Management
- Typical questions that may arise in a divorce process include:
- Which assets should I keep in the divorce?
- How much do I need to be saving to have enough for my retirement?
- Which financial professional can best help with these questions?
- A Private Wealth Manager, or a CDFA with a financial planning specialization, can help you answer these questions and think strategically about your long-term financial planning, both as it relates to your divorce settlement and in general.
- What can I expect to pay for this service?
- See Question 1 above.