By Diana Shepherd
During and after divorce, many people report that their standard of living decreases—sometimes significantly. Unless you change your occupation for one with a higher paycheque, you’ll have the same amount of income but more and higher expenses: where there once was one, there are probably now two homes, two cars, two sets of furniture, two sets of children’s clothes and toys, etc. During your separation, you need sound financial advice to ensure the settlement is fair to both parties; afterwards, you’ll probably need help adjusting to your new circumstances and planning for a secure future. Here’s an introduction to some of the financial professionals you may need—along with some suggestions of how to find and work with them.
An accountant—a Chartered Professional Accountant (CPA)—can handle many of the financial aspects of your separation. His or her responsibility is to calculate your net worth and your spouse’s net worth, and to produce figures that are agreeable to both you and the courts. There are a number of accreditations given to accountants, and you’ll find these designations after their name. Wading through the differences between someone who is a Certified Fraud Examiner (CFE), or a Chartered Business Valuator (CBV), or a Specialist in Investigative and Forensic Accounting (IFA), may seem a daunting task.
In most cases, you’ll be looking for an accountant with practical experience in family law matters. Look for someone with good analytical skills and some background in forensic accounting so they will be able to ferret out the details behind what’s on the face of the statement.
Ask your lawyer, CDFA® professional, or personal accountant to recommend an accountant who has experience with family law. “Trust your instincts at all times when deciding whether to use Accountant ‘A’ or Accountant ‘B’," says Esther M. Berger, a Certified Financial Planner® and the author of MoneySmart Divorce (Simon & Schuster). Look for someone honest and forthright, and who offers reasonable economic terms.
A CFP’s job is to give you an understanding of your financial needs. Divorce inevitably creates changes in your financial situation, and you may need some help in adjusting to your new lifestyle. A CFP can help you with budgeting and investing, and some can also assist with tax, estate, or retirement planning. He or she will help you organize your financial future by proposing a personalized plan with a time horizon, and a solid investment strategy to help you towards financial stability for tomorrow. Ask professionals for referrals, or ask your friends who have similar financial situations to recommend a CFP.
A CDFA professional—often also a financial planner or an accountant—is a financial professional who has specialized skills and experience that enables him or her to analyze the long-term financial impact of divorce. Financial professionals who have met specific education and experience requirements have been designated a CDFA professional by the Institute for Divorce Financial Analysts™ (IDFA™).
CDFA professionals receive special training in divorce-related financial issues such as tax and property division. A CDFA professional can take the offer on the table and project out 5, 10, or even 20 years to show you what you’ll have to live on if you sign the agreement. If the projections show that you’re going to run out of money after 18 months, you’ll need to renegotiate your settlement. That’s why it’s so important to meet with a CDFA professional before you sign your agreement. If this advice comes too late for you, meeting with a CDFA professional could still be worthwhile: he or she can look at your financial situation and show you how to improve it by making some spending/saving changes.
Once you’ve set up an initial interview, there are a number of questions you should ask to make certain you’re dealing with a competent professional—and someone who’s right for you.
When you sit down at the initial interview, you may choose not to bring any important paperwork with you. It’s important to establish a good rapport. It’s a meeting of personalities, and you’re looking for respect, understanding, and an ability to talk freely.
However, once you start into the financial legalities of the case, there are several important documents your CDFA professional or accountant will need to see:
You’ll also need valuations or other paperwork detailing property you and your spouse own together or separately—from the contents of a safety deposit box to the car to your home. Although you’ll be dealing mainly with "big ticket items" here, if something is very important to you, make sure it’s on your list. If a business is involved, brokerage statements or corporate minute books will also be required. Basically, your accountant or planner needs to see any major paperwork that involves the transaction of money—for both you and your spouse.