One of the many benefits of working with a financial professional specializing in divorce issues is reduced liability: they make sure that all the financial “bases” are covered to avoid nasty surprises from unhappy clients down the road.
By Laurie E. Ingwersen, Financial Professional
Some industries have to deal with lawsuits more often than others. The American Bar Association (ABA) reports that family law attorneys, who often deal with divorce, are the third most sued group of attorneys, behind personal injury and real estate attorneys. The ABA reported that between 1995 and 2007 the number of lawsuits against family law attorneys doubled. According to the ABA, the top ten reasons matrimonial lawyers get sued are:
- Client emotion
- Unreasonable expectations
- Incomplete information
- Settlement perception
- Retaining experts
- Fee disputes
- Client selection
- Drafting documents
- Multi-jurisdictional issues
- Poor client relations
Unreasonable Expectations and Clients’ Emotions
One of the biggest reasons attorneys find themselves dealing with lawsuits is that the client has unreasonable expectations of what they are going to get from their divorce. Add in the fact that divorce is an emotionally charged situation and the result may be a client who is disappointed with the final settlement. “A second opinion from a financial professional is useful to help clients accept reality,” says attorney Gina Ghioldi. A financial professional working in the divorce arena can work with clients and attorneys to evaluate a client’s financial future based on a proposed settlement.
Divorce is an emotional time and most people don’t make sound financial decisions when they are in this state of mind. Important information can be missed because clients may be distracted by their feelings. Attorneys working in partnership with financial professionals can utilize their expertise to help gather all of the relevant financial information and work on uncovering assets that will be part of the final settlement. Many allegations against divorce attorneys revolve around lawyers not searching hard enough for hidden assets. Settlements negotiated before any hidden assets are uncovered could easily result in a significant loss, and this may open up the potential for a malpractice lawsuit against the attorney.
Settlement Perception and Retaining Experts
A substantial portion of lawsuits against family law attorneys result from advice that leads to financial losses to their client. These losses can result from advice given on division of retirement assets, the forced sale of a home to cover liabilities, or simply not understanding what the long-term effects of the settlement offer will be. According to an article in the New York Law Journal by Noeleen G. Walder, a doctor brought a claim against his divorce attorney when he had to pay significant taxes after withdrawing a large sum from his retirement accounts to fulfill his settlement agreement.. Had a financial expert been consulted, this tax liability could have been addressed.
Working with a Financial Pro
A financial pro can help gather the necessary financial data, run long-term projections of settlement options, give advice on how retirement assets are treated differently, and provide the client with a clearer picture of what to expect in the future. A financial pro will make sure your client understands the short-term and long-term financial impact of different settlement proposals, managing expectations and reducing misunderstandings.
Additional benefits include:
- Case preparation and settlement is easier since the financial professional does the detailed financial work for you – everything from lifestyle analysis (to provide evidence for a spousal-support claim) to tracing marital/separate assets to tax consequences to evaluating your client’s insurance needs.
- Reduced liability by having in-depth financial research to support your case.
- Reliable financial expert witness testimony if your case goes to court.
To learn about how Certified Divorce Financial Analyst® (CDFA™) professionals fit into the divorce process, visit www.InstituteDFA.com.
Laurie E. Ingwersen (CFP®, CRPC®, CDFA™) is vice president, wealth management, of The Harvest Group in Wellesley, MA. For more than 40 years, The Harvest Group has been dedicated to helping families achieve their financial and lifestyle goals while providing exceptional service, communication, and advanced wealth-management solutions. www.ubs.com/team/theharvestgroup.