Divorces have a reputation for being messy and pitting couples at each other’s throats. Much of the controversy surrounding divorces stem from the allocation of assets and other financial concerns. You can reduce the associated stress when you use a Financial Neutral in collaborative divorce cases.
A collaborative divorce is a divorce process where each party is represented by an attorney that has been trained in the collaborative process but rather than taking a specific position, the parties and their attorneys work together to come up with solutions that are in everyone’s best interests. There is an agreement not to go into litigation. If the collaborative divorce doesn’t work out, then the parties can choose to go for litigation but are required to hire new attorneys that were not involved in the initial collaborative agreement. That’s a big incentive for everyone to keep moving forward toward an agreement.
As part of the collaborative divorce process, neutral specialists are frequently consulted to provide relevant information, so the parties can make informed decisions. For example, a mental health professional could be consulted to give advice relating to the welfare of the children. There could also be a Financial Neutral who provides financial education and analysis around key financial issues.
A Financial Neutral is a financial expert, who is usually a Certified Divorce Financial Analyst (CDFA), meaning the individual has extensive education in the financial and tax implications of financial decisions made during a divorce. The Financial Neutral provides educational and informational advice that will enable the parties to make wise decisions about their assets and their cash flow.
Clients may begin the collaborative process by first engaging the collaboratively trained neutral professional or by first retaining collaboratively trained attorneys. If the Neutral is hired first, both parties must agree to the same professional as the Neutral is hired jointly. To prevent any issues of bias, the Financial Neutral cannot have worked for any of the parties in the past. For example, the parties should not hire their financial advisor or tax accountant. The Financial Neutral also agrees not to work for either of the parties in the future.
It is worth noting that the Financial Neutral does not have to be someone local. Many, including Great Lakes Divorce Financial Solutions, are offering their services virtually. Meeting with your Financial Neutral virtually can be a convenient and cost-effective solution.
The following are some of the reasons why you should hire a Financial Neutral for your collaborative divorce case.
In traditional divorce cases, the couples each hire a separate financial expert to give them advice on financial matters such as business valuations, separate property tracing, dividing assets, etc. With a Financial Neutral, the couple jointly hires a financial advisor, reducing the costs that they would otherwise incur if they hired separate advisors.
With a Financial Neutral, the parties work together to come to an agreement regarding their financial assets. Since the Financial Neutral is working for both parties, the focus is identifying a balanced financial settlement that is mutually beneficial to the parties.
A lot of people depend on their attorneys to advise them on financial issues like taxes, and the IRS. Attorneys might have gotten experience on these issues over the course of their practice. However, this isn’t their expertise and as such, they might not be as knowledgeable as you might want.
A Certified Divorce Financial Analyst (CDFA) on the other hand, is specifically trained on divorce-related financial issues such as separate property tracing. All the Financial Neutral’s billable hours are devoted to offering financial expertise. So, make sure you utilize the expertise to the fullest.
The Financial Neutral helps the parties collect financial data that would be relevant to the eventual settlement. This would involve things like preparing a report on the assets, income, and debt of the parties. The report is usually supported by backup documentation the spouses provide. The Financial Neutral also helps couples come up with current and projected budgets that can help guide further discussions about support.
In a divorce where there are children involved, the Financial Neutral can help the couples identify future expenses related to childcare. For a lot of couples, funding the child’s post-secondary education is usually a major issue. The Financial Neutral can advise the couple on their options for financing their child’s post-secondary education.
The Financial Neutral considers not only the short-term implications but also the long-term implications of financial decisions and creates various models for property division, maintenance, and child support. The parties are then at liberty to choose which of these models suit their own unique needs.
Often times, individuals are concerned about how the divorce affects their retirement and future financial situation. To remedy this, the Financial Neutral can prepare long-term financial projections for the parties. This way, they would be able to see how the divorce affects their finances in the long term.
During the team deliberation, the Financial Neutral in collaborative divorce cases will chime in with the relevant financial information. S/he can inform the deliberators of how certain assets appreciate or depreciate over time as well as how taxes affect the decisions the parties want to adopt.
There is also less financial conflict at this stage since the Financial Neutral works for both parties. This is compared to a situation where there are two diametrically opposed financial experts trying to fend for their individual client. In the end, the parties merge the Financial Neutral’s advice with the legal advice of their attorneys, leading to a more sophisticated and nuanced divorce settlement.