I’m a CDFA® (Certified Divorce Financial Analyst®) but I’m also a divorce mediator. That makes my approach to divorce mediation different because I place heavy emphasis on the financial aspects of divorce, preventing financial mistakes and providing financial knowledge. Some of those financial details include separate vs marital property, pensions and other employee benefits, tax implications of divorce, budgeting, insurance needs, and need vs ability to pay spousal and child support.
Not all divorce mediators will deep dive into these issues, and many don’t have the knowledge that a CDFA has. Most mediators are attorneys, and their expertise falls mainly on legal issues as you would expect. That’s why teaming up with a CDFA to help a mediator’s clients avoid financial mistakes is very beneficial. Here are some examples of how a CDFA can help in mediation.
- When there is separate property owned by one or both spouses, such as a 401(k)-plan account owned prior to marriage, it’s important that it be properly divided out from the marital estate. These calculations can be complicated and require an understanding of how gains and losses were attributed to both the separate and marital portion during the marriage. It can add up to many thousands of dollars and often well exceeds the CDFA’s fee.
- An expert’s opinion has tremendous impact on creating movement. There is a gravitational pull towards an expert’s assessment and people in conflict are more likely to concede or compromise when the reason is based on a neutral expert’s opinion. This is especially important when it comes to spousal support. A CDFA can help the couple create thorough budgets and help client’s think about how their expenses will change. For example, do they predict changes in their income (and what increases are reasonable based on past income history) and how will expenses change as their children grow. CDFA can prepare a report projecting net worth up to 20 years in the future which can demonstrate how equitable a settlement proposal will be.
- A CDFA can analyze the present value of a pension and help clients understand the options available to the non-employee spouse under the plan. Pensions are complicated and no two are the same. This is an area that is ripe for liability if mistakes are made.
- A CDFA can calculate the present value of a potential stream of spousal support to help clients decide if they would rather negotiate for a lump sum.
- A CDFA can help clients decide whether they should keep or sell the marital home. Will they be able to refinance, and when? Will they be able to afford the repairs and upgrades every house will eventually need? Do they understand they have the opportunity now to split expenses of sale, something they will lose later? Will there be capital gains when the house is sold?
- In grey divorces, do they understand where they will stand with regard to retirement savings and social security benefits?
- Are assets being valued equally or is taxation being analyzed as part of the division of asset?
These are just a few of the more common financial issues that I will address. Satisfied clients who feel they received great value will provide referrals. A win-win all around.