How a Financial Advisor Can Assist You in Mediation
Mediation is an excellent alternative to working with a traditional lawyer and can save you quite a bit of money in the divorce process.
One thing you need to know before working with a mediator is that mediators can provide legal information, but they cannot provide legal or financial advice to either party.
If you believe your understanding of your household financial situation is limited, or if you feel you do not have a good handle on how to manage debt or the investments in your brokerage and retirement accounts, consider hiring a certified divorce financial analyst (CDFA).
A CDFA provides information that allows you to advocate for yourself and negotiate a settlement or separation agreement to meet your current and future financial needs.
The job of a CDFA
A CDFA can help you:
- Gather information about your financial situation
- Analyze your spouse's disclosures
- Suggest various ways to divide assets fairly
- Obtain accurate data for use in child support and alimony calculations
- Forecast the short-term and long-term financial implications of proposed settlement options
When it comes to calculating child support or alimony (which may be called maintenance or spousal support, depending on the state), determining the income available for support can be complicated if the income of one or both spouses varies from year to year. A CDFA can review tax returns and other documents to identify income sources available for support.
How much do CDFA services cost?
CDFAs generally charge an hourly rate, but that depends on the CDFA. After charging by the hour for several years, I realized that my clients wanted to be able to call, text, or email me between our scheduled meetings without having to worry about every 15 minutes here and there adding up to extra billable hours each month.
So, while clients can still pay for my CDFA services by the hour, I launched MediationMoneyMentor.com to provide financial analysis, planning, and support for 60 days at an affordable flat rate.
Here are my four tips for obtaining a favorable financial outcome in mediation.
1. Make sure your financial affidavit is accurate and complete
One of the first steps in the mediation process is for you and your spouse to complete financial affidavits.
Terms and requirements vary from state to state, but generally, you and your spouse will be required to disclose separate and marital assets, debts, and information about your income and expenses.
These forms can be overwhelming. However, they must be accurate and complete. If not, it will be impossible for assets and debts to be divided fairly, and mistakes in calculating child support and alimony could occur.
If you haven't been the one in charge of the household finances, you might struggle to provide even the most basic information. Enlisting the help of a CDFA enables you to complete the forms much faster.
What's more, you will gain a full understanding of the significance and value of each item, such as a pension, life insurance, deferred compensation, stock options, restricted stock units, or non-publicly traded investments.
2. Understand what each asset is worth
Some mediators have experience working on high-net-worth cases. Their financial expertise is quite sophisticated. Others do not. A CDFA can help you evaluate what everything is really worth so you can negotiate a fair division of assets.
For instance, keeping a house with a large mortgage and home equity line of credit may be less valuable than half of your spouse's pension. A Roth IRA is worth more than a traditional IRA even though the balances may be similar. A brokerage account that contains securities worth $100,000 may be worth tens of thousands of dollars less once liability for capital gains taxes is factored in.
3. Be open to different ways of slicing the pie
You and your spouse may have different financial priorities. Through mediation, you can find creative ways to slice the pie to best meet everyone's needs.
This is something a judge may not be able to do. A CDFA can model various scenarios – accounting for current and future values – to help you achieve a financially favorable outcome.
4. Consult legal counsel before signing your settlement agreement
CDFAs provide financial analysis, not legal advice.
There will be times when you may need to consult a mediation-friendly attorney to understand your legal rights regarding property, child support, or alimony. The attorney will find the CDFA's analysis helpful and will be able to zero in on items that should be modified to strengthen your marital settlement before you sign it.
Looking for support from a CDFA in your mediation or divorce? Laurie offers a $50 discount to the Hello Divorce community. Visit her website, MediationMoneyMentor, and mention "Hello Divorce" when you contact her.
Not sure if mediation will work for you?
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