Divorce Financial Analysis provides information upon which divorce decisions can be made. These decisions are unique to the circumstances surrounding divorce. They include the division of assets and liabilities and financial support. The analysis is focused on understanding and estimating the long-term effects of financial decisions. Some of the factors considered are inflation, cost-of-living adjustments, changes in custody agreements, employment, retirement and other issues. Financial mistakes made during a divorce are difficult to change.
A Financial Neutral may be employed by the one or both parties. They are an experienced financial professional and is also often a Certified Divorce Financial Analyst® (CDFA). A CDFA® is an expert in those unique financial circumstances that surround a divorce. A Financial Neutral may be employed by the one or both parties during a mediated or litigated divorce.
Much of the Financial Neutral's role is to collect and review the client’s financial data and develop analysis based on the client’s settlement scenarios. This helps manage the client’s expectations of their financial future. Financial Neutrals will not give advice. They are skilled at analyzing and providing expertise on the financial issues of divorce like:
- Understanding the short-term and long-term effects of dividing property,
- Understanding tax issues,
- Analyzing pension and retirement plans,
- Calculating the present value of a pension,
- Determining the cost basis and capital gains on the sale of the marital home,
- Determining if the client can afford the marital home, and if not, what can he or she afford,
- Evaluating the insurance needs of the client,
- Determining earning capabilities,
- Establishing assumptions for projecting inflation and rates of return, and
- Providing the client and attorney/mediator with data that show the financial effect of any given divorce settlement.
These are some of the questions the divorce attorney faces in each divorce case. What many attorneys struggle with, however, are the intricate financial details, such as tax issues, capital gains, and dividing assets, including pensions. Attorneys attend law school to become experts in the law, not to become financial experts.
In part From the Institute of Divorce Financial Analysts