Divorce Financial Planning
Divorce financial planners can explain financial options, help set priorities and lead clients through the hard choices ahead. The use of financial planners in the divorce process is a relatively new but rapidly growing trend. The reason for this is simple. The divorce process involves the untangling and separation of assets and income. Achieving this in a fair and workable fashion often requires broad expertise in personal finance, something for which attorneys and mediators are often not educationally well-equipped. If clients make poorly-informed decisions in divorce, they will more than likely have to live with the negative consequences of those decisions. And this can be financially and emotionally devastating.
Unlike most divorce professionals, who have limited education and training in the economics of divorce, our divorce financial planning team has been broadly trained, with continuing education and experience in professional ethics and personal finance, including tax planning, retirement planning, present and future value calculations, employee compensation and benefits, economic forecasting, estate planning and risk management. This broad perspective has given our team the unique ability to analyze assets and liabilities and income and expenses as they integrate and interact with one another in both short- and long-term contexts. Because of this, clients often acquire a better and more realistic understanding of their financial options and become better empowered to make informed decisions. Cases involving divorce financial planners can often be resolved more quickly, with better results and at lower cost than those relying on traditional methods alone.
In divorce financial planning, the principles and methods of traditional financial planning are applied to the divorce process, whether it be litigation, mediation, collaborative or cooperative. These include collecting, clarifying and analyzing data; studying this data in a long-term economic context; evaluating the financial viability of alternative settlement scenarios; conducting periodic monitoring and recommending adjustments when post-divorce circumstances or changes in financial goals so dictate.
When Should the Divorce Financial Planner Enter the Process?
The earlier the financial planner becomes involved in the divorce process, the more likely the situation will not escalate out of control and the more likely good financial decisions will be made. The financial planner can help stabilize the situation, including helping determine short-term support needs or paying abilities, closing or re-registering accounts, changing beneficiaries on insurance policies, notifying credit card companies or establishing credit.
One of the most important steps in the divorce financial planning process is rigorous discovery — the collection of accurate, complete and reliable financial data. The earlier the discovery process is initiated, and the more scrupulously it is done, the better off the client will ultimately be. Collecting, inventorying, organizing and analyzing historical data is one of the cornerstones of the financial planning process and is probably best done by the divorce financial planner. The less reliable the information, the more likely bad decisions will be made, and bad decisions made early can complicate financial issues and cause more bad decisions or other serious problems in the future.
The more meticulous the data collection process, the more reliable and useful the input of the financial planner will be. Therefore, it is extremely helpful if the financial planner is intimately involved in this aspect of discovery. Proper collection of data is a time-consuming, but important, aspect of the divorce process and should not be left to a paralegal. Further, negotiation of financial issues should not be initiated without a complete understanding of all financial parameters.