Key Takeaways
A CDFA helps you make objective financial decisions during divorce.
They provide clarity on asset division, taxes, and long-term consequences.
Early involvement saves you money and reduces stress during negotiations.
Life Events
Zoe Team
5 min read
Frequently Asked Questions
What is a Certified Divorce Financial Planner (CDFA)?
A CDFA is a specialist who helps you understand the long-term financial impacts of divorce settlements, including tax and asset distribution issues.
Why involve a CDFA early in the process?
Early involvement helps you navigate the divorce with a clear plan, preventing poor financial decisions that could negatively affect your future stability.
Do I need a CDFA if I have a lawyer?
While lawyers handle the legal aspects, a CDFA focuses specifically on the complex financial outcomes of your settlement to ensure you are protected.
In this article: A certified divorce financial planner will prepare you to make the best financial decisions during your divorce. Published Nov. 3, 2020
Among the leading causes of divorce is financial disagreements. In fact, a survey of divorce finance professionals found that money issues were the primary cause cited for 22% of divorces. Arguments over a family’s finances are particularly common due to “the emotional connection of money with safety and security,” according to one respondent. If you’re considering a divorce, the first professional you’ve likely considered hiring is a lawyer. Yet, the complex nature of a divorce, especially one caused in part by financial disagreements, merits the help of a divorce-focused financial planner, officially known as a certified divorce financial analyst (CDFA).
With emotions running high and daily obligations to handle, thinking about your finances shouldn’t have to be yet another cause of stress. Opting for a divorce is never easy, but a financial planner can help you navigate each stage of the divorce process. They can prepare you to make the best financial decisions at the time of your divorce, which can help you avoid “starting from scratch” or worrying about your finances during the next stage of your life.
Why Hire A CDFA?
A 2019 survey by Worthy and the Association of Divorce Financial Planners found that only 6% of women in the U.S. work with a CDFA. One reason that number is not higher is that 60% of respondents said they did not know about these professionals. Unfortunately, women are often the “out spouse” in a divorce, meaning that throughout the marriage they have less insight into existing assets, insurance plans and even monthly household budgets. Additionally, as the “out spouse” you may not have a relationship with your family’s accountant, attorney or wealth manager.
Even though it might seem like an extra cost, the long-term benefits for your finances can be substantial. Amicable divorces make the transition easier on your joint wealth because you won’t necessarily need to hire lawyers or spend long periods of time going through divorce proceedings. A CDFA works with one or both spouses to ensure the division of assets is fair and equitable when ending a marriage.
What Exactly Does A CDFA Do?
A CDFA works with you and your lawyer to achieve the best possible financial objectives during and after the divorce. These professionals achieve this by:
Collecting financial and expense data.
Developing a budget.
Setting retirement objectives.
Helping identify financial goals.
Discussing investments.
Determining what kind of lifestyle you want and can afford.
Assessing the costs of children’s education, if relevant.
Their job is to ensure the decisions you make today will build a strong financial future beyond your divorce. This includes going over things you might not think about like your wedding rings, fine jewelry, heirlooms and college savings account.
After The Divorce: Empower Your Financial Future
Not only does a divorce financial planner help you sort out your finances through your divorce, but they also help to set a budget and a strategy for after the divorce. Hiring a financial planner can also help you gain a comprehensive understanding of your current household’s finances so you know how much you can afford and how prepared you are for negotiation.
When they join your team, they become responsible for identifying and educating you on how you will be affected in regard to dividing property, tax issues, retirement and, when applicable, the needs of your children. They can also evaluate whether you can afford to stay in your current home and help determine your insurance needs. This way, they ensure you go forward in a positive mindset and are financially prepared for whatever is next.
How Will This Affect Your Future?
With the divorce rate for people ages 25-49 roughly twice as high as the rate for those over 50, thinking about what you want the rest of your life to look like is important. A CDFA will guide you in seeing the whole picture and understand how your decisions now will affect you in the long term. They can help you set a budget and think about your standard of living. Most importantly, they will also encourage you to consider saving for retirement.
A CDFA is perhaps even more relevant when you divorce and are over 50. According to the Pew Research Center, this type of divorce is rising and can lead to less financial security and affect your financial comfort and life satisfaction. A specialized financial planner will guide you on how you can divide your assets and manage your money differently, considering your goals, now that you will be divorced as you near retirement.
Hiring A Divorce-Focused Financial Planner
If you already have a financial planner, they’ll likely be able to help you manage your finances when going through a divorce. That said, working with a financial advisor or planner with extensive experience navigating comprehensive financial matters during a divorce can make a difference in your future post-divorce.
CDFAs, in particular, have specific requirements that make them ideal professionals to work with during a divorce. They go through a rigorous process to get certified by the Institute for Divorce Financial Analysts. This includes having substantial experience, completing a full education program and passing an exam that covers divorce financial and tax issues. When looking for a financial advisor, particularly a CFDA, you should make sure they are a fiduciary, which means they are focused on your best interests. After all, it’s your new life and financial security you are putting in their hands.
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