Financial analysis is crucial in all divorce cases, particularly in high asset divorce cases or cases involving complex financial arrangements. (Don’t even get me started on bitcoin, that is the subject of a separate article in itself!) Financial questions are faced by lawyers and their clients in every divorce case. Not only the cost of their attorneys and related professionals, but more importantly, looking ahead to see how you, the client, will be living once the case is over. Many lawyers may struggle with the intricate financial details concerning tax issues, capital gains, dividing retirement accounts, and clients who want to equalize their marital share using different types of assets (like retirement accounts, which are taxable, and the marital home, profit from the sale of which is usually not). Lawyers go to law school to become experts in the law, not to become financial experts, and even if lawyers do gain a level of financial expertise (for example, at Lady4Justice, we have handled many high asset divorce cases in our combined 50+ years of practice), we cannot testify on behalf of our clients in court.
That’s why smart lawyers know it is just good sense to bring a financial expert into the case from the start. But not just any financial expert, since they can vary widely. Typically a CPA can look at the financials and see how much income is available for paying support and such, while financial advisers focus more on the best investments to make based upon their clients’ risk tolerance. These are good. To be most helpful to their clients, however, lawyers need to bring in a financial expert with a financial, accounting, or legal background who has undergone extensive training to become skilled in analyzing and advising on the financial issues of divorce, and is aware of the background issues that arise in a divorce.
Such experts are known as Certified Divorce Financial Analysts, CDFA for short. They become part of the divorce team as needed, identifying the short-term and long-term implications of property division, analyzing tax issues (including those related to pensions and retirement plans), considering their clients’ future insurance needs, establishing assumptions for projected inflation and rates of return, and overall, helping to craft creative approaches to settling cases. They also provide both the client and their lawyer with data (charts) that show the financial effect of a given divorce settlement, and are able to testify as an expert witness at trial or arbitration. They are invaluable as they are familiar with tax issues that can arise after divorce, are trained to interview clients to obtain accurate financial information, help them define their future financial goals and develop a budget to reach those goals, and think about what kind of lifestyle the clients want, post-divorce. As they provide these services, they acquire valuable information beyond the typical scope of what is called “discovery” (which is usually either completing a verified financial form or answering questions that lawyers call “interrogatories”), that is very helpful to your lawyer in preparing for mediation, arbitration, or trial, helping to reach a better result for you.
Are CDFAs expensive? Depending on the complexity of the case and the analyst’s experience, they can be. Ranging from flat fees to hourly rates that can range from $150 to $500 or more, using a CDFA can increase the cost of your divorce. But is the extra cost worth it? In all but cases involving a short-term marriage with no children and no assets, absolutely, and the wisdom of gaining and utilizing this financial information when you need it – when you are in the process of divorce – cannot be overstated. Going through a divorce, even in the best of times, is emotional and painful. Having a financial expert advise you on the best approach to take when dividing the marital assets can be priceless, and enable your lawyer to do what they do best: Fight passionately for you, well-armed with the information they need to ensure that their clients will live happily ever after.
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