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Do I need a financial specialist as well as a lawyer for my divorce?

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By Cathleen Collinsworth, CDFA®, MAFF®
www.cccfda.com
949.262.3692

 

Do I need a financial specialist as well as a lawyer for my divorce?  Won’t I be paying twice the money for two professionals to be doing the same work?  As in all questions relating to divorce, the answer is, “It depends.”  If the marital estate consists of assets such as a residence, retirement accounts, investments, and or credit card debts, you should consider hiring someone to assist you in fully understanding all the financial issues relating to the marital estate.

Misinformation and misconceptions about the divorce process can be detrimental.  Many have false expectations that they will be able to secure a divorce settlement allowing them to continue with their accustomed style of living.  Financial divorce analysis helps to ensure a good, stable economic future and prevents long-term regret with financial decisions made during the divorce process.

The financial work provided by a lawyer is not the same as that provided by a trained financial professional specializing in the divorce process.  In addition, being a CPA or a CFP does not mean that individual has specific training in family law financial matters.

As you go through the divorce process, finding the right professional to help you can become challenging.  Do your homework.

  • Find a financial analyst who has experience in family law.
  • Find someone who knows that there can be significant tax implications when the parties divorce.

A Certified Divorce Financial Analyst (CDFA®) is someone trained in finances who has also taken financial courses specifically designed for the knowledge relating to divorcing couples.

 

Remember Assets Are Not Equal

Example 1:

Swapping a $50,000 interest in a joint savings account is not the same as receiving a $50,000 interest in a 401(k) plan.

There are no tax consequences to withdrawing the money from the savings account.

There will be current tax consequences as a result of withdrawing money from the 401(k) plan: You will pay ordinary income taxes on the amount withdrawn and, depending on the circumstances, you can pay a combined 12% penalty.

Example 2:

Swapping the family residence with $100,000 of equity with a stock account that currently has a $100,000 capital gain is not equal.  If the family residence is sold there could be no capital gains tax owed because there is a $250,000 ($500,000 if married) capital gain exclusion relating to the sale of the family residence.

Stock with a cost of $100,000 is sold for $200,000.  Gain of $100,000 could be taxed as high as 23.8% for the Federal Government or $23,800 thus leaving cash available of $76,200.

As you navigate through the divorce process you can make better decisions when you are fully informed of the impact of your financial decisions going forward.  The decisions you make now can impact your future financial status.

As you can see, not hiring the right financial professional can be costly.  Don’t roll the dice and hope for a good outcome.

Please do not hesitate to call if you have further questions, comments or would like additional information.

 

© 2018 Cathleen Collinsworth, CDFA®, MAFF® Cathleen Collinsworth is a CDFA®, Certified Divorce Financial Analyst, and a MAFF®, Master Analyst in Financial Forensics, who has been practicing as a sole practitioner in Irvine since 2000.  She has been retained as a forensic accountant and expert witness to provide services in family law for 20+ years.  As a member of Collaborative Divorce Solutions of Orange County (CDSOC) since 2007 she has provided services as a Neutral Financial Specialist and team facilitator.  Cathleen has served on the Board of Directors of CDSOC and served as the President for 2016-2017.  She has extensive training in mediation and the interdisciplinary team model of collaborative practice and frequently mentors’ collaborative practitioners.  She has authored articles, presented seminars, been a guest speaker and has prepared instructional videos in the field of finances and family law during the last 20 years.  She currently serves on the Collaborative Divorce Education Institute’s Leadership and Training team and is a frequent trainer at the annual conferences of Collaborative Practice California, the International Academy of Collaborative Professionals, the Association of Family and Conciliation Courts, and other professional conferences throughout California.  In 2015 Collaborative Practice California (CP Cal) awarded Cathleen the Eureka Award, which recognizes those who have made significant contributions and demonstrated an abiding dedication to establishing and sustaining Collaborative Practice in California.  Cathleen also serves as a CP Cal Delegate and is a member of the International Academy of Collaborative Professionals (IACP).  A detailed list of her training can be found at https://www.collaborativepractice.com/members/2328.  For additional information, please visit her website at www.cccdfa.com.