Five other questions were posted in my previous blog. Answers to these questions may help you determine which professional is the best choice for you.
6) “I would like to add a trained Divorce Financial Planner to my team to help me be better educated on the things we currently have, understand all my financial options, and visualize what my financial future may look like. Do you do that?”
If the answer to this is anything but “Yes”, please beware! Why would an Attorney not want you to have all the information you need to make the smartest choices? Your Attorney may not be aware that CDFAs® (Certified Divorce Financial Analysts®) exist, the scope of our work, and the value we can bring to you and their case. I would be happy to speak with them and answer any questions they may have.
Some Attorneys are very protective of their billable hours and aren’t really interested in delving into the intricacies of the financials, and most are not financial specialists. They may not consider anything other than a straight 50/50 split on every asset and debt, which is rarely the best option for any couple. A CDFA® can potentially save the two of you thousands of dollars in both taxes and Attorney’s fees.
7) “I think my spouse may be hiding assets. How will you be sure we know about everything?”
They should respond to this question with assurances that at a minimum, they will be reviewing several years of tax returns, bank, and credit card statements to look for any anomalies. However, in order to try and determine if assets are being hidden or diverted, a forensic accountant or CDFA® may be necessary to do more detailed work. Bringing in these professionals would increase your cost and doesn’t necessarily guarantee anything out of the ordinary will be identified. You yourself would need to determine if that is a good cost/benefit option for you.
8) “My spouse owns a business and says it’s not worth anything, but we live on over $100,000 per year. How can we know the true value of the business and their true income?”
They should answer that a formal business valuation may be needed in order to establish a fair market value of the business. To determine an accurate assessment of annual income, a Lifestyle Analysis should be done. I’ve never known an attorney to do these services in-house. They could bring in a CDFA® to establish the basis for an annual income claim.
9) “Right now I feel like it’s important to keep the house, but I don’t know if I can afford it. What are my options?”
In my experience, most attorneys will say you have 2 options, either refinance the home in just your name or sell it and equally split the proceeds.
If they do not suggest that you speak early on with a CDFA® to analyze your income and expenses to determine future affordability, AND to consult with a divorce-trained mortgage specialist about all your refinancing options, again beware!
I typically don’t see Attorneys suggest other options, but here are a few that a CDFA® can help you explore:
- Continue to own the house jointly for a period of years, usually 3-5, at which point you would either sell or refinance and split the proceeds.
- Continue to own the house jointly for a period of years, usually 3-5, but the spouse not living there would receive other assets in lieu of his/her share of the equity. To protect their credit, a clause can be written in that you must provide proof of mortgage payment each month and if at any point the mortgage is more than 30 days past due, the house must be sold.
- Continue to own the house jointly and rent it out. A CDFA® can help with the terms of such an arrangement.
10) “The only assets we have are 401(k) accounts, but I need money for a down payment on a new house. Can I get access to those accounts?”
A Family Law Attorney should be able to clearly describe this as an option for you. Pursuant to divorce, if 401(k) assets are transferred directly to the non-employee spouse via QDRO (which is a Qualified Domestic Relations Order), this provides ONE opportunity to remove cash from that account with no early withdrawal penalties. But, the amount would still be taxed as ordinary income, but if correctly done any early withdrawal penalty could be avoided. This method can be a great way to get cash in your hands.
