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Your Bank > Education and Advice > CNB University

Navigating the Financial Impact of Divorce

D Cator 2014
Donna L. Cator, CFP®, CDFA® is Vice President - Investment and Financial Planning Officer and can be reached at DCator@CNBank.com or (585) 419-0670 x50623.

Anyone who has been through a divorce knows the emotional and financial challenges it may bring. Even the most amicable divorce brings major life changes. Having the guidance of a qualified team of professionals will put the odds in your favor to emerge from your divorce in a financially stable place where both parties believe the divorce settlement was fair. 

There are three key professionals you may want on your divorce team. A therapist, a divorce attorney and/or mediator, and a financial planner who specializes in divorce planning, preferably one having the Certified Divorce Financial Analyst (CDFA) designation.

A CDFA professional is skilled at analyzing and providing expertise on the financial issues of divorce. The role of the CDFA is to assist the client and his/her attorney to understand how the financial decisions he/she makes today will impact the client’s financial future based on certain assumptions. 

What are the realities of divorce? 

  • Plan to live on less income: You very often go from a two person income in one household, to two households each with one income. Income is often cut in half while expenses increase. 
  • Not all assets are equal: The taxation of an asset, the liquidity of an asset, and the future growth potential of an asset all need to be considered in the division of assets. One spouse generally wants to keep the family home. Think twice about that. The family home has upkeep and maintenance, property taxes and takes away from cash flow for daily living. 
  • Don’t let your emotions rule: It is important to be thoughtful about your financial future and that of your children, if applicable. Knowledge and understanding of information is key to negotiating a fair and equitable settlement. 
  • Wait, we had more assets than this! It is common for one spouse to try to hide assets. Gather at least three years of tax returns to look for differences and discrepancies to what is being disclosed today. For higher net worth couples, consider hiring a forensic accountant to ensure all assets are discovered. 
  • QDRO? What’s that? A QDRO or qualified domestic relations order is a judicial order used to divide a 401(k). Always be sure to confirm with the 401(k) plan provider to make sure they allow for the QDRO. It is very important that the 401(k) be divided properly or taxes and penalties may apply.
  • Make sure your interests are insured: If spousal support and child support are being paid as part of the settlement, make sure that life insurance and disability insurance are being considered as a requirement. This will ensure that payments will continue to be made in the event of pre-mature death or disability of the payer.

These are just a few of the realities. The goal is to make informed decisions while going through the divorce process to set yourself up for the best financial outcome possible. As a CDFA, I am happy to sit down with you to talk about your options. Please call me today at (585) 419-0670, ext. 50623 or DCator@CNBank.com.

This material is provided for general information purposes only and is not a recommendation or solicitation to buy or sell any particular security, product or service. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.

Tax information presented is not to be considered as tax advice and cannot be used for the purpose of avoiding tax penalties. Canandaigua National Bank & Trust does not provide tax, legal, or accounting advice. Please consult your personal tax advisor, attorney, or accountant for advice on these matters.