All About Certified Divorce Financial Analysts (CDFA)

Let’s start with some good news. It is not as bad as you’ve heard. The divorce rate is high, but it still requires a lot of variables for a couple to actually get divorced. Still, “probably won’t happen” doesn’t guarantee your marriage lasts. If your marriage does end badly, chances are you’ll need help. That’s where a Certified Divorce Financial Analyst comes in.

A financial advisor can help you plan for divorce and what comes next.

Divorce in the U.S.

It’s true that the divorce rate in America is somewhere around 40%. While that’s not great, accurate statistics can both inform and mislead. Yes, nearly half of all marriages end in divorce. But that doesn’t mean half of all people get divorced. In fact, new couples today have closer to a 25% rate of actual divorce. ¹

Several factors make a couple more or less likely to separate over time. The most important is how often the participants have been married before. The more often you get married, the more likely it is that each new marriage will end in divorce.

While the stats are rough, first marriages generally have a divorce rate of 20% to 30%. Second marriages end about 60% of the time. People with three or more marriages divorce their partners 75% of the time. People burning through multiple marriages drives a higher divorce rate as they grow more likely to divorce their next partner with each one. ²

But multiple marriages aren’t the only factor. Couples who marry earlier divorce each other far more often than those who wait. Couples with one or more college degree divorce less often than those without. Baby Boomers divorce more often than subsequent generations. ³

Big picture? The best way to avoid divorce may be to slow down a little bit, start becoming the adult you want to be, then try not to fret about a divorce rate far less scary than it appears.

What Is A Certified Divorce Financial Analyst (CDFA)?

The CDFA is a credential for financial professionals who help people to plan their divorces. While divorce involves many different areas of life planning, one of the most significant issues that couples navigate is how to split their assets. A certified divorce financial analyst helps with that. Some common issues that a CDFA will help with include:

• Mediating a fair division of assets.
• Tax structuring and management.
• Liquidating illiquid assets.
• Dividing illiquid assets without liquidation.
• Separating marital from pre-marital assets.
• Alimony payments and structuring.
• Child support documentation.
• Dividing retirement funds.
• Dividing investments both liquid and illiquid.

The CDFA certification is awarded to financial professionals, including financial planners and counselors. It shows that the holder has studied and shown a special expertise in the financial and accounting issues that frequently occur while negotiating a divorce. This certification does not license or authorize the holder to help couples negotiate their divorces. Any financial professional can perform this service. Instead, the CDFA simply indicates a higher degree or skill and specialty in that field.

It is also critical to understand that the CDFA is not a law degree or license. It does not authorize the holder to help couples with any of the legal issues that come up during a divorce. This is particularly important because of how often legal and accounting issues overlap during divorce proceedings (such as with child support calculations).

This certification was formerly known as a Certified Divorce Planner.

How Do You Become a Certified Divorce Financial Analyst?

The Institute for Divorce Financial Analysts issues the CDFA credential. To receive one, the applicant must meet the following requirements:

• A bachelor’s degree or higher AND three years of relevant experience OR at least five years of relevant experience.
• Complete and pass the four-hour certification exam.
• Maintain 30 hours of continuing education every two years.
• Maintain the $345 annual fee. ⁴

The CDFA exams cover the following four subjects:

• 1. The basic structure of divorce procedure and law, and the role of a CDFA in those proceedings.
• 2. The financial aspects of divorce, ranging from alimony and real estate to pre-marital assets and retirement accounts.
• 3. The tax issues raised by divorce.
• 4. Practical case studies, with a particular emphasis on building settlements and finding errors in example settlements.

The cost of all the exam by itself is $495. A self-study exam PDF costs $1,600, and a 10-module training course is available online for $1,675 with a $200 add-on for a weekly online class. Both the PDF and training course fees include a voucher for the exam. ⁵

If you have to retake an exam, it costs $225 per retake. You can retake the exam as many times as you like, but there is a 30-day waiting period after you fail an exam. You’re only allowed to take an exam three times in any 12-month period. ⁶

Why Hire a CDFA?

You should hire a CDFA for the same reason you’d hire a financial professional in any complicated matter: They know answers and questions that you don’t.

Divorce is messy. It can touch almost every aspect of your legal, financial and personal life. It can be hard to manage this large, complicated problem.

A CDFA will know how to approach your taxes in a way that you might not consider. They will know obscure clauses in your retirement plan that you wouldn’t know to look up, will think to research encumbrances on real estate, will consider familial vs. personal assets and much more. By nature of doing this professionally, a CDFA will simply know what issues to look for and what questions to as. You might not.

When to Hire a CDFA vs. a Divorce Attorney vs. Both

Divorce involves legal decisions and financial decisions, and they overlap more often than most people realize. Knowing which professional handles which piece helps you avoid paying for the wrong expertise or worse, making a major financial decision without any professional guidance at all.

A divorce attorney handles the legal side of the process. That includes filing paperwork, representing you in court, negotiating custody arrangements, enforcing your legal rights and making sure the settlement agreement is legally binding. An attorney can tell you what you are entitled to under state law, but most attorneys are not trained to model the long-term financial impact of different settlement options. They can negotiate a 50/50 split of assets, but they may not catch that one side of that split carries a much larger tax burden than the other.

A CDFA handles the financial analysis behind the settlement. That means valuing assets, projecting the tax consequences of different division scenarios, calculating the real cost of keeping the house versus taking a larger share of retirement funds, identifying pension and Social Security implications and flagging hidden costs in a proposed agreement that looks equal on the surface but is not. A CDFA does not represent you in court, file legal documents or advise you on custody or legal strategy.

When You Might Need Both

In most contested divorces or divorces involving significant assets, hiring both professionals produces better outcomes than hiring either one alone. An attorney negotiating without financial modeling may agree to terms that cost you money over the next decade. A CDFA without legal representation cannot protect your rights if the other side has an attorney. The two professionals serve different functions, and the settlement is stronger when both functions are covered.

In some cases a CDFA alone may be sufficient. If both parties are going through mediation, are cooperative and have relatively straightforward finances, a CDFA can help ensure the financial terms are fair without the cost of full legal representation. But even in mediated divorces, having an attorney review the final agreement before you sign it is a safeguard worth the cost. A settlement is permanent, and the financial consequences of a bad one last far longer than the legal fees you saved by skipping the review.

How a CDFA Can Protect Your Financial Future After Divorce

Most of the financial damage from a divorce does not show up on the day the settlement is signed. It shows up years later when the terms that looked fair in the moment turn out to cost more than expected. A CDFA is trained to identify these long-term risks before the agreement is finalized so you are not locked into a deal that quietly erodes your financial stability over time.

Asset Protection

Keeping the family home is one of the most common examples. In the emotional context of a divorce, holding onto the house can feel like a victory. But on a single income, the mortgage payment, property taxes, insurance, maintenance and utilities may consume a larger share of your budget than you can sustain. A CDFA can run the numbers on what the house actually costs you each month and each year compared to selling it, splitting the proceeds and renting or buying something smaller. Sometimes keeping the house is the right call. Sometimes it is the most expensive mistake in the entire settlement.

Retirement accounts are another area where the settlement terms and the actual value are not the same thing. A 401(k) worth $500,000 and a Roth IRA worth $500,000 are not equal even though the balances match. The 401(k) will be taxed as ordinary income when you withdraw it, reducing its real value by your marginal tax rate. The Roth comes out tax-free. A CDFA calculates the after-tax value of each asset so the division reflects what you actually end up with, not just what the account statements say.

Alimony, Child Support, and Other Long-Term Plans

Alimony and child support structures also carry tax and cash flow implications that extend years into the future. A lump-sum alimony payment may create a large tax event in a single year, while structured monthly payments spread the impact out. The timing of when payments start and stop relative to your other income sources affects your tax bracket, your eligibility for certain credits and your ability to contribute to retirement accounts. A CDFA models these scenarios across multiple years so you can see the full financial picture before you agree to anything.

Beyond the settlement itself, a CDFA can help you build a post-divorce financial plan that reflects your new reality. Your income, expenses, tax filing status, insurance coverage and retirement timeline all change after a divorce, and the financial plan you had as a married couple no longer applies. A CDFA can help you set a realistic budget based on your new income, determine how much you need to save going forward to stay on track for retirement and identify any gaps in insurance or estate planning that need to be addressed now that your marital status has changed. Starting over financially without a plan is one of the biggest risks after a divorce, and it is entirely avoidable with the right guidance.

Bottom Line

A CDFA is a credential indicating that a financial professional knows how to navigate the financial and accounting issues associated with divorce. While other financial advisors can take on that role, a CDFA indicates a higher degree or skill and specialty in that field. The CDFA is not a law degree or license and doesn’t authorize an advisor to help couples with any of the legal issues of divorce. However, it does indicate that they might be the right advisor for you if you’re going through a divorce.

Financial Tips

• A divorce has serious financial implications that a CDFA and other financial advisors can help you sort out. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Think of the bright side though! Most marriages actually do make it, and when yours thrives you’ll need these four wealth management tips for married couples.

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