The Role of a CDFA In a Divorce 

    A CDFA is a certified financial professional who has completed intensive training in pre-divorce financial planning matters and passed an exam issued by the Institute for Divorce Financial Analysis (IDFA). CDFAs also complete several hours of continuing education every year to maintain their credentials. 

    CDFAs help clients and their divorce attorneys understand the implications of divorce decisions on their financial future.  

    They work with one or both spouses to navigate the myriad of choices that arise during divorce. They provide extensive financial analysis which may help clients make informed decisions now to protect their immediate interests while working with them to budget and invest for post-divorce financial stability.

    A CDFA reviews the couple’s financial data and uses this information to show the impact of a certain divorce settlement—highlighting the risks, benefits, and alternatives of various options. 

    They apply their in-depth knowledge of tax laws, asset distribution, and financial planning to help couples arrive at a fair and equitable settlement. 

    Post-Divorce Tax Implications & Liabilities

    Dividing assets in divorce comes with significant tax implications and liabilities. Proceeding too quickly without considering these issues can be costly for both spouses now and over time. 

    For example, the timing of divorce can affect the couple’s tax filing status. Waiting to divorce after year’s end gives them the option to file jointly one last time, which may be beneficial for many. 

     

    CDFAs help clients plan retirement and pension plan transfers from one spouse to the other with a goal to save taxes upfront. The same is true for moving assets between spouses. Some assets are potentially nontaxable, provided the transfer takes place within a year from the divorce date, or up to six years for transfers made pursuant to the divorce agreement. 

    But there are also future tax liabilities to consider when certain assets are sold or converted to cash. A CDFA looks at the entire financial picture to help clients and attorneys plan strategically to minimize tax consequences and avoid unexpected tax bills whenever possible.   

    Support & Alimony Financial Planning

    CDFAs use the financial information provided by divorcing couples and their lawyers to assess the short- and long-term impact of child support and alimony proposals. They can make recommendations for the amount and duration of alimony and highlight the tax ramifications of paying it in a lump sum versus scheduled payments over time. 

    They evaluate how child support and alimony payments affect each spouse’s overall financial picture—and the divorce settlement overall. This helps to keep either party from being taken advantage of or missing out on payments that are rightly theirs. 

    Dividing Investments and Retirement 

    Retirement funds and other investments are subject to distribution in divorce as long as they are identified as marital property. Separate property consists of assets brought into the marriage and assets a spouse inherited or received as a gift during the marriage. 

    Before marital assets can be divided, the CDFA determines:

    • What they are worth on the balance sheet 
    • The estimated fair value market if they were to be sold

    From there, they can offer several possible scenarios for distributing these assets, considering IRS requirements, tax implications, and each spouse’s financial past contributions and future needs. 

    Post-Divorce Financial Planning

    While on the surface it may seem reasonable to split everything 50/50 in a divorce, this approach does not always make sense for spouses who play different roles in the family finances. 

    Financial planning is more complex than simply drawing a line down the middle. It requires detailed analysis and the ability to account for present- day needs, while projecting into the future. 

    Looking forward, a CDFA helps divorcing clients: 

    • Set future financial goals 
    • Consider what type of lifestyle they want after divorce
    • Create a practical post-divorce budget 
    • Plan for retirement 

    CDFAs do not stop guiding you once your divorce is final. If either spouse remarries, changes employment status, or experiences another milestone event, they can assist your attorney as they revisit your divorce agreement to reflect these changes. 

    Whether you are just considering divorce, or have already taken steps to dissolve your marriage, CDFAs at EP Wealth offer invaluable guidance to help you make informed choices for a secure future. 

    Call or connect online to learn more about divorce financial planning and locate a CDFA near you.

    DISCLOSURES

    • EP Wealth Advisors (“EPWA”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. All expressions of option are subject to change without notice. 
    • The Certified Divorce Financial Analyst (“CDFA®”) that are employed by EP Wealth Advisors, LLC are not practicing attorney, accountant, tax professional, or legal expert. All assessments and subsequent recommendations limited and are performed exclusively under the guise of financial planning. An attorney must be retained in order to professional and accurately assess legal options and/or to provide counsel. We also recommend consulting a CPA, accountant, or tax professional. 
    • Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment, tax, or legal advice nor is it intended to supplement professional individualized advice by the appropriate professional(s). 
    • The decision to work with a CDFA® professional will differ amongst clients and depend on individual circumstances of each respective client. There is no guarantee or warrantee that the services offered by EP Wealth Advisors, LLC and/or a CDFA® will satisfy your divorce service needs. Services offered by other professionals may align more to your specific needs.  
    • Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings / checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
    • EP Wealth Advisors, LLC. Is registered as an investment advisor with the SEC and only transacts business in state in where is properly registered or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the commission, nor does it indicate that the advisor has attained a particular level of sill or ability.

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