How Do You Avoid Financial Ruin in Divorce?

How Do You Avoid Financial Ruin in Divorce

Divorce is one of those unpleasant life-events that many of us face. It can be emotionally challenging — even paralyzing, before, during and after. Along with the significant changes in their lives (and lifestyles), divorcing people are often subject to a complex and lengthy legal process where the outcome is anything but certain. (Imagine a divorcing woman, sitting alone, on a bench in the hallway while her future is being decided by two attorneys and a judge in the courtroom).

Often lost in the emotional challenges of the divorce are the financial aspects. Rarely does the question, “What will my financial life look like post-divorce?” get evaluated in detail and this is often the area of greatest anxiety and uncertainty. Not only is a divorcing woman going through an emotional transition, but a significant financial transition as well. “What will happen to me? Will I be able to pay my bills? Will my children be okay? How will I survive?” These concerns are continually on her mind, especially if she will have custody of the children, has not been the chief income-earner of the family or if she has been financially-dependent upon her husband for many years.

Despite the social advances in our society, women are frequently the victims of financial inequality, especially in the cases where there is a large income disparity or she has given up her career to focus on child-rearing, freeing her husband to be the chief income-earner for the family and develop his career. What many chief income-earners fail to realize, however, is that despite the romance and emotion that accompanies the nuptials, marriage is an economic partnership. Both spouses invest time and effort into that partnership to grow its economic value. Once that partnership is dissolved via divorce, both spouses should realize an equitable share, even if one or the other has been responsible for most (or all) of the material, tangible contributions, including a value for the “professional development” often realized by the one career-focused spouse.

This is where a divorcing woman often feels most vulnerable: her husband may have been the primary income-earner for the family and handled all the finances. Now that divorce is imminent, she may feel lost in the financial details, unsure of what all these numbers, statements, documents, etc., mean. In addition, her husband may take a hard stance in the divorce, seeking to minimize or eliminate alimony payments, or attempting to dictate what and how much of the marital assets she will get from the divorce settlement. This creates genuine fear and uncertainty about her financial future and that of her children.

For these reasons, a Certified Divorce Financial Analyst (CDFA™) can be a crucial member of your divorce team. Decisions during the divorce process are often made with a short-term perspective but could significantly impact your long-term financial security. Often, such decisions are made without knowing the potential financial consequences, resulting in tax mistakes, cash-flow problems and rapid financial asset depletion. Attorneys and family court judges are intelligent professionals, but are trained in the law, not finance. As a result many financial aspects may be overlooked when negotiating divorce settlements. Too often, the settlement may look equitable in the short-term, but the longer-term effects can be quite different and possibly detrimental to the financial future of either or both spouses. There are few “do-overs” in divorce, so getting the numbers right before the divorce is finalized is critical.

Having a CDFA™ on the team can help bring financial clarity to the process and enables a divorcing woman to fully understand the implications that the negotiations could have on her financial future. A Certified Divorce Financial Analyst is uniquely qualified to integrate the methodology of financial planning directly into the divorce process and can help ensure you have the most comprehensive and accurate financial information and analysis of the divorce negotiation. With analysis, guidance and insight, you will be better equipped to achieve an equitable settlement and safeguard your financial future.

A CDFA™ doesn’t dictate the process or negotiation (the attorney is still the quarterback), but the CDFA™ can be an integral resource to both the attorney and the client. A CDFA’s skills and expertise also work well within a mediated divorce between two spouses. In mediation, the CDFA™ works to show how both spouses might fare in the future, given certain settlement terms, and can suggest alternative solutions that may work for both parties.

Read other articles we have published in the Rhode Island Women’s Journal, or contact us via our Contact Us page to receive other free articles and information about divorce finance and planning.