10 Common Questions When Getting Divorced
When significant changes hit your life, it usually involves complicated financial details, and divorce is no different. Women who find themselves in such circumstances are often faced with weighty financial decisions that will affect their future and the future of their families. You will have many questions, a few of the most common questions we hear in our office, along with their answers, are below.
I have a lawyer. Do I need a financial planner and, if so, when?
The financial issues of divorce – taxes, capital gains, dividing pensions, property distribution and more – can be very complex. Attorneys are experts in the law, but not necessarily the intricate details related to short-term and long-term effects of complicated financial decisions. More and more lawyers have seen the value of bringing in a financial expert at the very start of the divorce process. Early engagement with a CDFA®/CFP® Professional can streamline the process and give the client confidence for the process.
Can I survive financially?
That’s a great question, one that should be asked early in the divorce process. A CDFA® looks at all financial information to determine the impact of different decisions regarding the division of assets. No two cases are exactly alike, so an analysis of your personal financial data is the best way to find out what will work for you.
How do I know if my settlement is fair?
The State of Florida operates under the laws of “equitable distribution,” which essentially means that during a divorce all assets and liabilities are to be divided between the spouses in a fair and equitable manner. Your attorney and your financial professional will help you set reasonable expectations for what is equitable.
How do we split our assets/property including retirement accounts?
Keep in mind that “equitable distribution” does not mean that everything will be split 50/50. Considerations are given for the needs of those involved and the complexity of splitting some assets like land or businesses. It’s best to work with a financial professional and an attorney to determine what the best course of action is in regard to splitting assets and meeting your most pressing needs.
I’ve never managed my own finances before; how am I going to do it now?
The good news is that there are highly qualified professionals who can help. When choosing a CFP® and CDFA®, look for one who has experience working with clients like you and who has an educational mindset. Having someone in your corner will reduce stress level and leave you energy to focus on other parts of your life.
Should I be concerned about tax issues?
There are several areas that may significantly impact your taxes. Some are the taxability of the assets being divided, the sale of property, filing status at the end of the calendar year, dependents, IRA’s and retirement plans, and stock options and deferred compensation to name a few. Your financial professional can help you determine the ramifications of the division of each of items.
These are some questions you may want to ask when deciding to work with a financial professional:
Are you a CFP® Professional and a CDFA®?
CERTIFIED FINANCIAL PLANNINGTM Professionals are fiduciaries, so they work in the best interest of the client. They must master 72 Principal Knowledge Topics in an approved financial planning curriculum, pass a comprehensive exam, complete thousands of hours of experience and abide by the CFP Board’s Code of Ethics. Certified Divorce Financial Analyst® practitioners are experts at data analysis that show the financial effect of any given settlement including short and long-term effects of dividing properties, analyzing pension and retirement plans, identifying future financial goals and developing a budget, and recognizing tax consequences of different settlement proposals. They may also offer help by acting as an expert witness or consultant in court or mediation proceedings.
What types of clients do you typically work with?
Make sure your advisor is used to working with clients in your situation and is available for phone calls and emails outside of appointments. Also, some financial planners prefer to work with clients whose assets fall within a particular range, so it's important to make sure the planner is a good fit for your individual financial situation. Keep in mind that some planners require you to have a certain net worth before offering services. When you search for a CFP® professional, find a financial planner whose services best match your needs
How do I know if my financial planner is reputable?
CFP Board, the Financial Industry Regulatory Authority (FINRA) and your state insurance and securities departments each keep records on the disciplinary history of financial planners and advisors. Ask which organizations the planner is regulated by and contact these groups to conduct a background check. CFP® professionals are subject to disciplinary action if they violate CFP Board's standards.
How much will I be charged and how will I pay for my financial planning services?
Although what you pay will depend on your particular needs, the planner should be able to provide you with an estimate of possible costs based on the work to be performed as well as a list of services included to make it easy to compare planners. Costs should include the planner's hourly rates or flat fees, or the percentage of commission received on products you may purchase. As part of your written agreement, your financial planner should make it clear how they will be paid for the services to be provided.
At Stonebridge Financial Planning Group, LLC®, we are committed to helping demystify the financial complexities that accompany significant transitions in life. As CDFA® and CFP® Professionals, working together, we can help develop a plan that fits your life and gives you financial freedom and confidence going forward.
