Getting divorced can take a toll mentally and emotionally, but it can also upset your financial plans. Hiring a divorce financial advisor is something you might consider if you’re concerned about reaching an equitable agreement with your soon-to-be former spouse. Understanding what a divorce financial advisor can (and can’t) do can help you to decide if working with one makes sense. If you already know that you could benefit from working with a financial advisor, consider using SmartAsset’s free tool to find one who serves your area.
What Is a Divorce Financial Advisor?
Financial advisors work with clients to help them create a strategy for managing their money and achieving their financial goals. Divorce financial advisors do something similar but target their advice to issues that commonly arise during the divorce process.
A divorce financial advisor may hold a professional designation as a certified divorce financial analyst (CDFA). That designation means that they’re knowledgeable about specific aspects of divorce, including:
- Alimony and child support
- Division of personal and marital property
- Treatment of retirement accounts
- Tax implications of divorce
- Insurance planning
A CDFA is different from a divorce lawyer and it’s a good idea to have an attorney to represent you throughout the filing. Their job is to manage the legal aspects of getting a divorce. A CDFA or divorce financial advisor can, however, work alongside your attorney to help you get the best settlement possible.
What Does a Divorce Financial Advisor Do?
Divorce financial advisors concern themselves with the financial aspects of the divorce process. Generally speaking, their primary goal is to help their clients obtain an equitable settlement, in accordance with the divorce laws in their state. In terms of how divorce financial advisors do that, it can depend on the specifics of the situation.
For example, some of the things a divorce financial advisor might do include:
- Creating a detailed inventory of assets
- Generating accurate valuations for those assets
- Ensuring transparency throughout the divorce process
- Offering advice on the division of assets
- Providing recommendations for alimony or child support
- Discussing the tax implications of getting divorced
- Coordinating with other members of your divorce team, such as your attorney or a mediator
A divorce financial advisor should not offer legal advice, as that’s the job of your divorce attorney. And while they may discuss potential tax consequences associated with financial decision-making during a divorce, they won’t offer direct tax advice either. For that, you may want to consult a certified public accountant or another tax professional.
Once the divorce is finalized, a divorce financial advisor may help with creating a realistic budget or setting financial goals. That can be helpful if divorce significantly changes your circumstances and requires you to rethink your financial strategy.
Who Needs a Financial Advisor During a Divorce?
Hiring a financial advisor to see you through a divorce could be appropriate if there are significant assets at stake or there are special circumstances. For example, you might consider hiring an advisor if:
- One or both of you owns an interest in a business (or you own a business together)
- One or both of you inherited wealth from a parent or other relative after the marriage took place
- You’ve accumulated extensive real estate holdings or other investments together
- You need help determining how to divide retirement accounts
- Alimony or child support payments are on the table
A good minimum standard is that if you don’t fully understand the nature or value of the assets that you and your spouse have accumulated, you may benefit from a divorce financial advisor’s expertise.
An advisor can also ensure fairness throughout the process. If you suspect that your spouse is hiding assets, for instance, your divorce financial advisor might be able to track them down. Or they might recommend that you hire a forensic accountant to review your marital financial records to make sure you’re working with a level playing field.
Again, your advisor can also help you find your footing once the marriage has formally ended. If your former spouse was responsible for managing the family budget, for instance, an advisor can help you to examine your income and expenses. They can also offer advice on saving and retirement planning as a newly single person.
On the other hand, hiring a financial advisor specifically for a divorce may not be necessary if you and your spouse understand the assets that you have and agree about working with one another to end the marriage amicably. Likewise, you may not need a separate financial advisor if there are few assets at stake and neither side is looking for alimony or child support.
How to Hire a Financial Advisor Who Can Help With Divorce
If you’re interested in working with a divorce financial advisor, it’s important to first consider what you need help with. You might have a laundry list of questions, for instance, and you want to work with an advisor who’s able to address them. Or you may just want another set of eyes in addition to your attorney to examine your financials so you can get an equitable settlement.
You can begin your search for a financial advisor online and you may also ask friends or family members for recommendations. Once you have a short list of advisors you’re considering, you can schedule an initial consultation. Whether you’ll pay for this meeting or not will depend on the advisor.
When meeting with divorce financial advisors, there are some important questions to ask:
- How much experience do you have with divorce financial planning?
- Is there a particular type of divorce case that you specialize in?
- Who is your typical client?
- How much do you charge and how are your fees structured?
- What’s your preferred method of communication and how often will we communicate?
- What services do you offer once a divorce is finalized?
You can also ask about professional certifications or credentials if you’re interested in working with a certified divorce financial analyst. CDFAs go through extensive training and education, which may be reassuring if you want to work with an advisor who’s well-versed in the ins and outs of divorce.
The Bottom Line
Hiring a divorce financial advisor may be a necessity in situations where there’s uncertainty or disagreement over assets. The end goal should be to walk away from a divorce as financially intact as possible. And after working with one, you might decide that it’s worth your while to hire a regular financial advisor in order to help you shape your financial plan. They can help you establish your financial goals, create a plan to meet those goals or even manage your investments for you.
Tips for Financial Planning During Divorce
- As we’ve discussed above, having a financial advisor during and after a divorce can help you greatly improve your overall financial situation. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Creating a financial planning checklist for divorce can make it easier to navigate the process. Your attorney or a divorce financial advisor may provide you with a list of things to do (or avoid) as you move ahead with your filing. For example, you may be advised to open a new bank account in your name only or cancel joint credit card accounts so that your spouse can’t create new debts in your name.
- Once your divorce is final, remember to update your beneficiary designations. If you have a 401(k) or IRA, for example, you may want someone other than your former spouse to inherit those assets if you pass away. And if you have a life insurance policy in place, you’ll need to decide who should receive the death benefit if you no longer want your ex-spouse to be the beneficiary.
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