Written by: Manjula Shaw, CFP®, CDFA®
“Tips from the Trenches” is a series of articles based on conversations with professionals who work with
individuals facing or considering the prospect of divorce. Watch this space for conversations with
professionals in family and collaborative law, such as forensic-certified public accountants, mediators,
marriage counselors, family court judges, and valuation specialists.
Manjula Shaw is a Certified Financial Planner (CFP®) and an Asst. Vice President at Tanglewood Legacy
Advisors. As a Certified Divorce Financial Analyst (CDFA®), Manjula specializes in helping individuals
navigate the financial complexities of late-stage divorce, including asset division, alimony, and child
support.
Manjula’s conversation is with Karen King, a certified public accountant and a CDFA® with over 30 years
of experience in accounting, including forensic and tax consulting. Karen’s practice focuses exclusively on
the financial aspects of divorce and family law, and she is most passionate about serving as a Financial
Neutral in Collaborative Divorce cases.
Why Do You Need a Certified Divorce Financial Analyst®’s (CDFA®) Advice?
One of the crucial financial aspects of a divorce is gaining a comprehensive understanding of your
finances. This includes identifying your assets, such as your home and savings, as well as your liabilities,
like your mortgage and car notes. If your financial situation involves assets like commercial real estate, a
family business, a company pension, or a retirement plan such as a 401(K), a CDFA® can provide
invaluable assistance. They can help you evaluate the value of these assets and demystify complex
financial terms, making it easier for you to comprehend.
Your family law attorney knows the law but may not be trained in-depth or willing to advise you on the
financial nuances that arise during a divorce.
To prepare for a potential divorce, you may need to gather and organize your financial documentation,
such as bank statements, tax returns, investment account statements, and property deeds, for accurate
financial disclosure during the divorce process. During a Collaborative Divorce conference, Karen walks
her clients through a sample balance sheet with examples of the types of assets and liabilities that a
couple may need to look out for. Sometimes, a couple may think they have gathered all the information
and, upon closer inspection, realize they neglected to list essential items.
Another aspect is figuring out what is fair. A CDFA® can help you determine what is fair when splitting
up your money and assets with your soon-to-be ex-spouse, including the tax implications of such a
division. This helps ensure that you both get a fair share. Splitting $500,000 in a non-retirement
investment account is not the same as splitting $500,000 in your traditional Individual Retirement
Account (IRA). When you take a distribution from your traditional IRA, that distribution is considered
income to you. You may be liable to pay income taxes on the distribution. On the other hand, taking a
distribution from a non-retirement investment account is not income taxable. The division of a 401(K) or
a company pension needs to be done by drafting a document called a Qualified Domestic Relations
Order (QDRO). It is a legal document that allows each spouse to get a division without facing tax
withholding or penalties.
Planning for the future, a CDFA® can create a plan for your finances after the divorce, like helping you
figure out what your current lifestyle may cost. As a Certified Financial Planner™ with more than two
decades of experience, I know that most individuals are unaware of their exact lifestyle numbers. During
a divorce, a CDFA® can help you figure out what your new lifestyle may look like and help you plan for
long-term financial goals, such as paying for health care costs, family travel, long-term care, and funding
your grandkids’ college education.
If you have children and need financial support from your ex-spouse, a CDFA® can help you sort out
child support. Collaborating with family lawyers and mediators, a CDFA will work to ensure the asset
inventory, asset division, and budgets are accurate and complete. They can also explain the financial
jargon in plain language so you can understand the proposed changes and feel confident that your best
interests are considered.
A CDFA® could be an expert witness if the divorce negotiations get complicated and you end up in court.
Stay tuned for the following article on my conversation with Karen King about common financial pitfalls
in divorce.
PLEASE SEE IMPORTANT DISCLOSURE INFORMATION at
www.family-cfo.com/important-disclosure-information/
