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Get Financial Advice Before Your Divorce

You need a lawyer in divorce, but you need a financial adviser too

Wooden figures of people on scales and dollars banknotes between them. The concept of separation of money. Property division. Divorce and legal services.
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Stephanie Fritts is a CEO and founder of a company that provides a virtual assistant for small business and entrepreneurs. She’s business savvy, which is why going to the financial adviser that she and her soon-to-be ex-husband had used during their marriage seemed the best course to an amicable split.

“Neither one of us wanted to go the lawyer route because lawyers tend to stir things up and make them more difficult. We were both in agreement on that,” says Fritts, 55, of Austin, Texas. “That’s why we initially went to our financial adviser.”

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The couple — married for 21 years — learned “it’s not as simple as dividing all assets down the middle when it comes to divorce,” she says. That prompted her to seek a financial adviser with a divorce specialty known as a Certified Divorce Financial Analyst (CDFA). She hadn’t heard of it before, but those with the extra training know more about divorce laws and procedures, including tax issues, marital and separate property, and pensions and retirement plans, as well as child and spousal support.

The pair agreed to separate in May 2021, but Fritts says she didn’t file for divorce until the financial details were completed in September. By the end of the year, the divorce was final.

“We could not have done it ourselves,” Fritts says.

Fritts is among the now divorced or those in the midst of divorce after a long marriage who are learning about this divorce specialty. Increasing numbers are opting for financial advisers with extra training to bypass what can be lengthy and costly negotiations through lawyers. Marital splits are never easy. But because divorce laws differ by state, so much depends on where you live, how long you’ve been married, what you’ve earned, and your future earnings and benefits. Getting to a workable agreement before lawyers write the divorce decree can well be a money-saving move.

Working with financial planners in divorce

Michelle Smith, of Manhattan, has been a financial adviser for 29 years and received her CDFA in 2004. It’s offered by the Institute for Divorce Financial Analysts, based in Durham, North Carolina.

“We can uncover the financial hot issues sooner,” she says. “I get started before the lawyers are hired, and then they get the lawyers involved.”

Attorney Brent Cashatt, president of the nonprofit American Academy of Matrimonial Lawyers, says lawyers don’t view financial experts who are well versed in divorce laws as competition for a divorcing couple’s dollars.

“I don’t do cases now without business advisers,” he says. “It helps through the entire process. I always tell my clients to get a forensic accountant or business expert to explain to them better than I can.”

“The hourly rate and retainer and overall fees of a financial adviser are generally less than an attorney,” says Cashatt, of Des Moines, Iowa. “I never had a case where someone had spent $10,000 to $15,000 on a financial adviser or a business evaluation expert or a forensic accountant where it wasn’t worth it.”

Such advisers know the ins and outs of dividing pensions, retirement benefits, 401(k) assets, community property, savings, and health insurance, as well as future earnings and Social Security benefits. How the parties emerge from the financial settlement can affect lifestyle, from living arrangements to current and future employment and whether to retire or keep working.

Amy Colton, a financial adviser for 13 years, says she earned her CDFA to help women in “major life transitions, such as going through a death, divorce or sudden inheritance.”

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“I wanted to make sure I took care of people going through those very emotional times who need a lot of hand-holding and need a lot of guidance,” says Colton, who’s also a Registered Social Security Analyst.

Among her clients in Arizona, California, Florida and Texas, most are dissolving marriages after a couple of decades, with 80 percent of her clients over age 50. One couple is divorcing after 40 years. Such agreements usually take three months, but she says some take as long as six months.

“If they haven’t accumulated anything, they probably don’t need someone like me or an attorney,” Colton says. “The house is usually the biggest asset. It benefits them to use someone like myself because I don’t charge hourly. I can get it done quicker. I can work with both parties, which attorneys can’t do.”

Smith says her career was inspired by her divorced single mom’s financial challenges.

“I grew up with it and experientially know how important ownership of your finances is,” she says.

“I’ve had a lot of divorcing or divorced women walk into my office with very large divorce settlements, and a lot were very fuzzy on the details. They were giving the divorce attorney the power,” Smith says. “It all comes down to the concept of literacy.”

Divorce and financial literacy

That’s one reason she launched a financial literacy platform in 2019 called Wife2CFO for divorced women or those going through divorce.

Divorced women fare worse economically than divorced men following the end of a long marriage. A 2021 study in The Journals of Gerontology: Series B found that women experienced a 45 percent decline in their standard of living compared with the men’s standard, which dropped by 21 percent.

The study, coauthored by sociologist Susan Brown, of Bowling Green State University in Bowling Green, Ohio, also found that these “negative economic outcomes associated with gray divorce persisted over time, indicating that gray divorce operates as a chronic economic strain.”

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For women who have left the workforce to care for children or scaled back to a part-time job, the consequences of not paying into Social Security may leave them in a financial bind, says Jocelyn Elise Crowley, a professor of public policy at Rutgers University in New Brunswick, New Jersey.

“For every year a woman is at home taking care of their kids, Social Security puts in a zero. For their final yearly benefits, women receive thousands of dollars less in Social Security than men,” she says.

Social Security does permit some divorced individuals to be eligible for half of the ex-spouse’s benefits under certain conditions, including being married for at least 10 years.

Cashatt, Colton and Smith agree they’re now seeing more clients in which the wife earns as much or more than her husband or is the sole wage earner.

It doesn’t always work

Obstetrician Dafna Trites, of Tarzana, California, is hoping her divorce will be finalized by this summer. Trites, 57, was married 20 years before the couple separated in November 2018. He filed for spousal support in May 2020, and she says she responded with divorce proceedings as well.

“Because the proceedings of the divorce were going so badly and we were not getting anywhere, I was referred by a friend of a friend to try this way,” says Trites, who wasn’t aware of the divorce financial specialty. “We were already a year and a half into attorneys’ fees for both of us.”

“This seemed like such a great fit because it was someone acting in an impartial manner trying to get information financially from both of us to a cohesive, understandable format to look at it and figure out who owes who,” she says. “Unfortunately, in my case, it didn’t work.”

After seven months, they couldn’t come up with an agreement.

“It takes both spouses to give the full picture of their financial information. Until you have a full picture, you can’t get anywhere,” Trites says. “It has to involve two people willing to give all their information and get to a solution. It can’t be a one-sided situation.”