With financial modeling during the divorce process, the clients understand their settlement offers and have a financial roadmap for their life post-divorce.
Michael P. Black, Certified Divorce Financial Analyst
Divorce lawyers traditionally try to achieve a 50/50 split of marital assets, negotiate spousal support, apply the statutory guidelines for child support, and negotiate custody and parenting. Easy, right?
Rarely is it that easy. You must determine the marital assets/separate interests, coverture fractions, tax impact, challenge the opposing party’s AFI, create your client’s AFI, and try to explain to your client how life is going to be different moving forward; two divorced people cannot live the same lifestyle as when they were married.
The Financial Impact of Settlement Offers
Most of the above issues are financial issues impacting the divorce legal processes, yet most attorneys are not trained in the financial arena. That’s where a Certified Divorce Financial Analyst (CDFA) can use a software program to analyze the financial impact of a settlement offer or create one based on the unique financial needs of the client.
Once the data is gathered, we use software that builds the marital balance sheet and income and expense statement. We work with the client to determine their financial needs, starting with the AFI. This is the starting point to discuss with the client what post-divorce life will really look like, not what they hope, expect, or insist on.
We then allocate assets based on those needs and determine the support needed or payable, for both parties. This allocation of assets, liabilities, income, and expenses is projected into the future to show the “life” impact of an offer to make or accept. Based on your client’s needs, it becomes readily apparent if the plan works or not. We paint the picture of reality.
Financially Modeling a Divorce
In negotiations, we can remodel counter offers under the same theory, by testing against needs. This process is invaluable in a mediation. It takes the process from a yes/no, I’ll give on this if you give on that, to a discussion of what works and the reasoning behind it. In litigation, the CDFA can present to the courts why the proposed property settlement and support payments works for both parties. It paints a clear picture.
Without financially modeling a divorce, the attorney cannot truly know if an offer made or received actually works for their clients. It may meet all the legal requirements and be disastrous financially.
With financial modeling during the divorce process, the client understands what they got and why they got it and has a financial roadmap for their life post-divorce.
Michael Phillips Black, CFP, CDFA, has been a financial planner for over thirty years in the Scottsdale and Phoenix , and a Certified Divorce Analyst for over 20 years. www.mpblack.com
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