Individuals are encouraged to plan early and often for goals like homebuying, raising kids, funding education savings accounts, and saving for retirement. People rarely anticipate planning for a divorce, yet careful consideration and advice of the associated financial planning implications are critical to ensure those goals can still be achieved in a reimagined post-divorce future.
What does a Chartered Divorce Financial Analyst do?
With a Chartered Divorce Financial Analyst (CDFA) among the list of credentials represented by our team, we provide specialized divorce financial planning. A Chartered Divorce Financial Analyst can help you by:
- Holistically evaluating the household assets and liabilities to assist in preparing the property division spreadsheet, often referred to as the 90.1 table under Alaska law
- Optimizing property division considering the underlying tax implications and future impacts to wealth
- Preparing for negotiations
- Applying expertise from recognized industry credentials to each unique circumstance
Going through a divorce undoubtedly brings forward a range of emotions. We recognize this heightened emotional state can cloud decision making. As a result, one of our primary goals in working with individuals during this type of transition is to help separate the emotions from the lasting financial decisions that must be made in divorce negotiations. Sometimes we hear the desire to “give away the farm” just to get the process over with, which we can certainly understand from an emotional standpoint. From the perspective of long-term planning impacts, our Chartered Divorce Financial Analysts think it is prudent to help clients advocate for an equitable outcome that leaves both parties in a position to get back on their feet and re-envision their new path forward.
Financial Planning Considerations:
Each divorce is unique, with a number of factors to evaluate, both quantitative and qualitative. There are certain areas that most commonly lead to questions or require more advanced planning. A Chartered Divorce Financial Analyst will help you consider the following things:
- All assets are not equal from a taxation standpoint. A $50,000 Roth IRA is not equivalent to a $50,000 traditional IRA, for instance. The taxation of different types of assets (IRAs, Roth IRAs, home sale proceeds, etc.) must be considered when proposing settlement options.
- Not every asset or liability needs to be divided. Conversations and negotiations around particular preferences may inform one party keeping an asset in its entirety (such as the house), resulting in an equalization payment or trading of another asset.
- There may be reasons for an unequal settlement/property division, such as loss of health insurance, tax equivalency calculations, income potential, etc.
- Certain assets/liabilities may be considered non-marital or pre-marital and therefore not factored into the property division negotiations.
Financial planning considerations with a divorce should not only include the property division, but also the optimization of those assets after the divorce is finalized. Helping clients envision their post-divorce life and how best to meet their new goals is one of the most rewarding parts of being involved in the planning process.
Meghan Carson, CPA, CFP®
Commentary: The opinions expressed are those of Alaska Wealth Advisors Investment Team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward looking statements cannot be guaranteed.
Note: This material should not be construed as tax advice. You should always consult with your tax professional with regard to specific tax questions and obligations.
Adviser Disclosure: Alaska Wealth Advisors is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2, which is available upon request.