Why I Became a Certified Divorce Financial Analyst
Alternative Methods for Separating
Divorce has always surrounded my life. Throughout my early years living with my parents, I witnessed my father's innumerable telephone conversations with his clients whose divorces he was handling as their attorney. I had close friends whose families were impacted by divorce. The day after my wife and I returned from our own honeymoon, my parents announced their separation. Divorce has always been there in the background for as long as I can remember.
A number of years ago, a close friend, who is a mental health professional, told me about a new way to divorce that was designed to be family-centric and produce much healthier results than what I had ever been exposed to through the traditional litigation approach. Within the last five years, she has literally transformed her practice. Today she dedicates the vast amount of her time and focus towards assisting families transitioning through separation by working as a divorce coach and parenting plan coordinator.
The idea of a family-centric, healthy divorce seemed like an oxymoron, but very intriguing. What I learned is that there are essentially four methods for going about separating and dividing assets and income. The alternatives are litigation, mediation, pro se, which means self-representation, and collaboration. I could provide an overview of each method as well as the pros and cons of each, but that is not the scope of this discussion. Suffice it to say that irrespective of the mode, the logical and sensible objective in divorce should be how to move forward, retain the bonds of family as expeditiously as possible, and retain as much money for the family rather than watch it dissipate to periphery parties. While I realize that this may sound lofty and far too idealistic because this topic involves such strong emotional pains, one should never underestimate the prowess of a skilled mental health coach. There are many families that thrive after separation. There are many parents who relate to each other much better after they separate and parent their children more favorably because they have resolved their differences and/or have simply benefitted from the detachment of space and time. The point is divorce does not have to mean war, and it does not have to necessarily be a bad thing or considered a failure.
A Healthy Divorce
So, how do we increase the odds of a healthy, family- centric divorce? Just as there are no two marriages that are exactly alike, no two divorces are the same. The universal, central undercurrent in every divorce relates to the finances. How the couple navigates through the financial maze has a direct impact on the vibrancy and sanctity of the family, and perhaps forever. Without sounding sensational, anyone who has ever gone through divorce or is involved in the business of divorce will affirm that finances become THE central core and crux of the matter. Yet, there are very few certified divorce financial analysts. Something is just not right with this picture. If finances are the central area of contention and resolution, then why are the vast number of divorces managed without bringing in a divorce financial specialist? I don't care if one handles her divorce pro se, or through mediation, or with litigating or collaborative attorneys, shouldn't she know the financial implications of different ways to "equitably" distribute the assets? And, shouldn't she know the financial implications of various settlement outcomes? After all, an agreement is reached on a specific date, but the financial ramifications of the agreement last a lifetime.
We ordinarily think of financial planning and analysis around major life changes, such as death, disability, graduation, and retirement. Well, divorce is arguably an even more significant life change. It seems penny wise and pound foolish not to incorporate a financial coach into such a momentous life event. Plus, anyone who has ever gone through divorce or is in the business of divorce will tell you that our system is broken. When I went to Amazon and ordered the documentary, "Divorce Corp", I knew immediately that I had to get involved as a catalyst for change. The documentary narrates the horrors and expense associated with ways with which we typically associate with divorce. Families can easily watch their children's college savings and their own retirement savings become evaporated. Judges are mere mortals with their own biases and prejudices. Lawyers relate to clients that one never knows the outcome of a family law trial because so much depends who the lawyer on the other side is and who is the presiding justice. Although we ordinarily think of the "law" as anything but arbitrary, it is in fact very cloudy.
Perhaps the documentary had an even greater impact and call to action for me because over the years, I have seen far too many clients whose lives were devastated financially post-divorce because they never received the proper financial analysis during the divorce. They outsourced their divorce to professionals who were not trained as financial analysts and who were therefore more concerned with reaching an agreement than the long-term, post-divorce financial implications. I recently met with one of the most highly regarded family lawyers who told me that she hesitated enlightening clients so much on the financial implications of what she negotiated for fear that they would perhaps want more money or the deal structured differently and therefore might become far less impressed with her legal acumen. She told me that many of her clients will live beyond the money that she was able to negotiate for them, but that was quite frankly not her problem, and was beyond the scope of her engagement. This is not an indictment on all lawyers. Mediators also are ranked based on how fast they can effectuate agreement.
Being educated financially during the divorce process and its post-divorce implications should be a baseline, but very few are even offered any kind of exposure to the service. I want to be very clear and emphatic. Divorce incorporates both business (legal) and financial aspects and outcomes. No one should go through this process without having independent legal representation. It is just frankly too significant an event not to have a family law specialist in your corner and engaged in final agreements. Cheap gets expensive, and omitting an attorney and the value that the attorney brings is far, far greater than the hourly rate charged. There are costs associated with divorcing. It may not have been the desired outcome of one or both spouses, but life can bring curve balls. Being shortsighted and thrifty can be financially ruinous. Similarly, it can be just as financially ruinous not to include onto the team a divorce financial analyst.
Divorce Financial Analysis
As a divorce financial analyst, I have evaluated the need for spousal maintenance and the sources of income to support the maintenance. We have considered implications of governmental assistance such as Medicare and Social Security at the appropriate ages. We have calculated future values and determined if those future values should be adequate to maintain lifestyle after spousal support ends. We have determined the value of both marital and non-marital property when assets share qualities of each. We have proposed a variety of settlement options along with their associated tax implications. We have evaluated alternative funding vehicles that have enabled spouses to comfortably come to an agreement. We have also calculated the present value of a pension plan as well as valuations of stock options and restricted stock. In short, divorce is both legal and financial. Anyone going through this process should be equipped with experts from both disciplines. In fact, my rate as a divorce financial is significantly less than the lawyer's rate. The good family law attorneys appreciate this fact and are anxious to bring the best experts in their respective fields to provide the best outcomes for their clients in the most cost effective manner. Many lawyers are advocating for the introduction of a divorce financial to distinguish their practices and demonstrate value add. Also, many clients are being enlightened about the importance of divorce financial planning through the internet and otherwise, and they are requesting us.
Many people however do not appreciate the distinction between "traditional" financial planning and divorce financial analysis. Let me explain why I am not such an advocate for traditional financial planning, but have a passion for divorce financial analysis. The problem with traditional financial planning is that it incorporates so many assumptions over such an extended period that it becomes unreliable and filled with boilerplate fluff. Divorce analysis incorporates all the wisdom of financial planning, but it does so much more with a focus on the here and now and provides useful frameworks from which to negotiate and structure workable settlements. Having the financial facts and analysis of the facts generates clarification and leads to favorable resolutions.
In an information age with constrained finances, divorce is evolving because it has to. Divorce is emotional. It is financial. And it is legal. Having the right mental health, divorce financial, and legal team can make one of life's worst experiences a whole lot better for everyone involved and forever. That is why I am honored and grateful to have expanded my practice into this important resource.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.