Top 3 Financial Questions You Can't Answer but a Financial Advisor Can
As a divorce attorney, your role is pivotal in guiding clients through the legal complexities of divorce. However, financial nuances often present challenges that fall outside your legal expertise. While you excel at navigating the legal terrain, many clients seek clarity on critical financial aspects of their divorce settlements. Here are the top three financial questions that a Financial Advisor or Certified Divorce Financial Analyst (CDFA®) can expertly address, providing essential insights that complement your legal advice.
1. What Will My Financial Situation Look Like Now and in the Future?
Divorce profoundly impacts an individual's financial landscape. Clients frequently ask, "What is my current financial situation, and how will it change post-divorce and in retirement?" This question encompasses several critical components:
Current Financial Assessment: Understanding the present financial status, including income, expenses, assets, and liabilities, is crucial. A CDFA® performs a comprehensive analysis of these elements, providing a clear picture of where clients stand before and after the divorce.
Post-Divorce Financial Projection: Divorce often leads to significant lifestyle changes. A financial advisor can project how these changes may impact clients’ budgets, savings, and investments. This projection helps in understanding how divorce can affect their day-to-day finances and long-term financial goals.
Retirement Planning: Ensuring financial stability in retirement is a major concern. A CDFA® evaluates how the divorce settlement will influence future retirement plans, including adjustments needed to maintain financial confidence during retirement years.
2. Can I Afford to Support My Children and Maintain My Lifestyle?
Clients often worry about their ability to provide for their children and uphold their standard of living post-divorce. The main financial concerns here are:
Childcare and Education Costs: Clients need to know if they can manage ongoing expenses such as daycare, education, and medical needs. A CDFA® analyzes these costs and helps clients plan for them within their new budget.
Lifestyle Maintenance: Beyond basic needs, clients may worry about maintaining their pre-divorce lifestyle. A financial advisor assesses how the division of assets and ongoing support payments can affect their ability to sustain their current way of life.
Tax Consequences: Understanding the tax implications of child support and asset division is crucial. A CDFA® provides insights into how these factors can affect the client’s overall financial situation and tax liabilities.
3. What Is the Financial Impact of My Divorce Settlement?
Divorce settlements involve complex financial decisions, and clients often seek guidance on:
Fairness of Asset Division: Clients want to know if the division of assets will enable them to pursue their goals and continue their lifestyle. A financial advisor evaluates whether the proposed asset division is equitable and feasible based on the client’s financial goals and needs.
Tax Implications: Different assets have varying tax consequences. For example, dividing retirement funds and pensions can lead to significant tax impacts. A CDFA® can help clients understand and plan for these impacts, as well as help ensure fairness in asset division by considering tax liabilities. If one partner inherits a taxable asset while the other does not, this disparity should be balanced in the settlement.
Impact on Future Financial Goals: Beyond immediate concerns, clients need to know how the settlement will affect long-term financial goals. This includes analyzing how asset division impacts retirement savings, investments, and overall financial security.
Conclusion
Integrating the expertise of a financial advisor or Certified Divorce Financial Analyst (CDFA®) into your practice can significantly enhance the support you provide to your clients. By addressing these key financial questions, a financial advisor offers invaluable insights that complement your legal guidance, helping to ensure clients are well-prepared for their financial future post-divorce. Partnering with a financial advisor not only helps in achieving fair and balanced settlements but also empowers clients to make informed decisions that support their long-term financial stability and well-being.
About Tamara Smith CDFA®
Tamara Smith is a seasoned financial professional with extensive expertise in divorce financial analysis. As a Certified Divorce Financial Analyst (CDFA®), Tamara helps clients navigate the financial complexities of divorce, focusing on asset division, tax implications, and long-term financial stability.
With Tamara Smith’s expertise, individuals and families can navigate the financial complexities of divorce with confidence, ensuring a fair and informed settlement that supports their long-term financial health and security.
1 Legacy Financial Group does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.
