Most people would agree that getting through a divorce requires at least one professional: an attorney. In many cases, that is the only professional needed.
But in cases where family finances are complex, or where one spouse has significant anxiety about the financial elements of the case, something more may be needed. Even the most talented and experienced attorney isn’t trained to handle some of the complicated finance and tax elements of certain cases.
Taking a Team Approach to Divorce
In 1993, the Institute for Divorce Financial Analysts began training a new type of professional: the Certified Divorce Financial Analysist™ (CDFA®).[1]
A CDFA® professional is an expert trained in the intersection of money and matrimony. They help clients, and their attorneys understand the short- and long-term financial consequences of any given divorce settlement and untangle difficult to understand financial concepts.
“A CDFA® professional is an expert in the intersection of money and matrimony.”
In this edition of Graceful Exits, I’ll explore how CDFA® Professionals are trained, when they can be useful in a case, and how to decide if you should hire one or not.
Pre-requisites & Training 
To earn the CDFA® designation, a candidate must have three years of professional experience in finance or family law and hold at least a bachelor’s degree.
In addition, a candidate for the CDFA® designation must study divorce-specific content areas like Property and Taxation, Financial Analysis and Planning, and Retirement Plans and Taxation, and then successfully pass a written exam.
Once a professional earns the CDFA® designation, they must complete 30 hours of divorce-related continuing education every two years to maintain their status.
When you hire a CDFA®, you are hiring a degreed, experienced, and highly trained professional bound by a code of ethics.
Why Hire an Expert?
So how does a CDFA® Professional help in a divorce?
Valuation & Division
One key step in any divorce is to list and place a value all the assets a couple owns. If all a couple owns are a few bank accounts, a couple of 401(k)s, and a house, then this task is relatively simple.
But what if there are pension plans, complicated executive compensation schemes, restricted stock, deferred compensation, business interests, annuity contracts, large stock portfolios, or exotic investments?
This seemingly simple task could turn into a frustrating ordeal.
In a case where the family’s finances are complex (or one party is not as familiar with the finances as the other), a CDFA® professional is well-equipped to assist with building a complete inventory of assets and debts, help value assets that are less straightforward,[2] and explain the nature of any assets a client might not understand.
Further, knowing your financial goals and the financial goals of your soon-to-be-ex-spouse, your CDFA® professional can help formulate a thoughtful division of assets that puts you in the best position possible to emerge from your divorce in good financial health, ready to move on.
For example, suppose one spouse earns a high income and the other is just returning to the workforce. In that case, a CDFA® can help work through how to award cash accounts so the lower-earning party has plenty of ready funds without depriving the higher-earning party of enough money to cover an emergency and their outstanding bills.
A CDFA® would also make sure that the lower earner is allocated those assets that are easiest to access so they can use those assets without being subject to unpleasant consequences like unexpected taxes and penalties. And speaking of taxes…
Tax Impacts & Implications
Unfortunately, financial professionals often see their clients dealing with unplanned tax consequences after divorce. 
One classic example is the non-working, slightly younger spouse who receives retirement plan assets and little else. When they try to tap those assets to support themselves, they are confronted with taxes and penalties that can lower the value of the assets awarded.
A CDFA® can help avoid costly errors by educating divorcing clients on the tax consequences of one asset vs. another and advocating if one party finds themselves at a potential disadvantage due to a lack of ready cash.
By considering tax consequences in the context of each party’s goals, it is possible to achieve a better outcome for everyone with just a little thoughtful planning.
Understanding Taxes After Divorce
Projecting Long-Term Outcomes
So far, most of what we’ve discussed is the value of thoughtful analysis to prevent near-term problems. But long-term pitfalls often have the biggest impact and are the hardest to see coming.
It is not uncommon for one party in a divorce to be reluctant to agree to a settlement offer –any settlement offer — because they are unsure of the long-term consequences of accepting. This is where a CDFA® can offer great value.
A competent CDFA® professional will use financial planning software, a few educated assumptions (including how assets will be divided), and their knowledge of client goals to project whether the client can meet their goals with the resources available. 
For example, say that both members of the divorcing couple are in their mid-30s, employed as well-compensated professionals, and will walk away from the marriage with most of their own retirement savings intact.
In this case, no professional planning is needed to determine whether both parties will be OK. There is ample time to save and invest for their future, and both parties will likely agree on a settlement in due time.
Now, change a few elements.
Assume that both spouses are in their mid-50s; one spouse is highly compensated, and the other is less well compensated. Both spouses will walk away with 50% of the estate, but now the lower-earning spouse has a puzzle to solve. Can the lower earner live comfortably over the coming 40 years with their more modest income and the assets awarded?
Do they need to increase their earning potential or make lifestyle changes? How should they use their resources today and in the future?
If there is debt, how should they prioritize paying it off? These questions can only be answered effectively using sophisticated analysis, which is best provided by a professional like a CDFA®.
Do I Need a CDFA®?
This is the million-dollar question, so to speak.
The answer is: maybe.
When you consider whether to hire a CDFA® professional, ask yourself:
- Do I understand the assets and liabilities that my spouse and I own?
- Do I understand the settlement offer that has been made to me?
- Do I understand the tax consequences of owning one asset vs. another?
- Am I confident I’ll emerge from my divorce with assets that will allow me to pursue my financial goals and enjoy good financial health?
If you can’t answer each of these questions with a confident “yes,” it’s time to consider adding a CDFA® professional to your team.
Why Your Attorney Shouldn’t Answer Your Financial Questions
In my practice, I assist with all stages of divorce. It’s never too early or late to seek out an expert like me.
You can find a listing of CDFA® professionals in your area by visiting the Institute for Divorce Financial Analysts website at https://institutedfa.com/find-a-cdfa/.
Ready to see if a CDFA can help you?
Schedule you free one-hour CDFA Consultation
[2] A good CDFA® professional will know which assets he or she is qualified to evaluate, and which may require the input of another expert.
8739856.1