Why a Certified Divorce Financial Analyst is Essential to an Optimal Financial Settlement

A couple’s finances constitute a large component of their divorce and can bring significant anxiety and stress. Most wonder how support will be determined, how marital property should be divided, whether they’ll have to divide their pensions or retirement accounts, and more. Unlike any other divorce professional, a Certified Divorce Financial Analyst (CDFA®) is uniquely equipped to address these issues.

What does a Certified Divorce Financial Analyst (CDFA) do?

A Certified Divorce Financial Analyst is a professional equipped with specialized knowledge in financial matters related to divorce. These experts undergo rigorous training and examination to earn their certification, making them well-versed in the intricacies of divorce finances.

CDFA’s help individuals and couples determine an optimal financial settlement agreement that helps answer the questions “will I have enough to pay my bills after the divorce” and “in the future, will I have sufficient net worth to meet my longer term objectives?” Assets are not all alike and shouldn’t necessarily be split 50/50 down the middle. Assets may be a mix of marital (subject to division) and separate, they have varying tax consequences, impact on cash flow, and rates of return. Thus, optimal settlements take into account taxes (income and capital gains), accurate valuations, and determination of what is marital vs. separate, and the short-term impact on cash flow, as well as the longer-term impact on future wealth. 

A CDFA can also help determine the right level of child support and alimony needed for the lesser-earning spouse to meet their post-divorce budgets. In most states, child support is based on state legislature guidelines based on the parents’ incomes, but they are just guidelines and only provide minimums. Alimony is a subjective determination based on a variety of factors including age, earning potential, and likelihood of future inheritances.

Benefits of Working with a Certified Divorce Financial Analyst

A CDFA empowers individuals to make informed financial decisions, avoid common pitfalls, and ultimately secure a more stable and equitable post-divorce future post-divorce. Let’s look more closely at some of the benefits of working with a CDFA.

1. Inform Financial Settlement Decisions

In essence, the CDFA acts as a financial compass during the divorce process, steering individuals and couples towards informed choices that guide them toward their future true north. This clarity goes beyond a mere snapshot; it extends to a detailed examination of their short and long-term priorities and goals along with an exploration of assets, debts, income streams, and potential future financial scenarios.

A CDFA’s focus on long-term financial planning is a forward-looking approach that transcends the turbulence of divorce proceedings. It ensures that clients not only secure a fair divorce settlement but also position themselves for a stable and prosperous financial future, laying the groundwork for a new chapter with confidence and foresight.

Cash flow is typically an immediate concern and a significant source of anxiety. So, the first step is to get a snapshot of the current financial situation,  including current spending. From there, the CDFA helps clients build a post-divorce budget based on their specific objectives and priorities. Next comes identifying future financial goals, e.g., buying a house, funding children’s or grandchildren’s educations, and retirement. We are then able to look at how various support and marital property division scenarios will affect their ability to meet these goals. The outcome of these exercises allows divorcing individuals and couples to make informed settlement decisions. Lawyers, judges, and courts don’t provide that kind of information and blind settlement decisions lead to lost opportunities and highly consequential financial mistakes. 

2. Safeguard Financial Assets and Income 

The Certified Divorce Financial Analyst’s role in asset protection becomes a linchpin in fostering financial resilience and ensuring that clients can embark on the next chapter of their lives with a robust and safeguarded financial foundation. Most divorcing couples avoid the possibility that alimony and child support could terminate upon the provider’s incapacitation or death. CDFA’s will work with you to determine if an alimony buyout will be in your best interests and examine such safeguards as purchasing life and disability insurance or establishing a trust for the children to reduce the risk of a financially catastrophic event.


Here’s a detailed example to illustrate the potential mistake of opting for periodic alimony payments over a one-time alimony buyout.

  • Spouse A earns significantly more than Spouse B.
  • The settlement options include alimony payments or a one-time alimony buyout.
Option 1: Periodic Alimony Payments
  • Alimony Agreement: Spouse A pays Spouse B $3,000 per month for 10 years.
  • Total Alimony Paid Over 10 Years: $3,000 x 12 months x 10 years = $360,000.
Financial Implications for Spouse A
  • Income Stream: Regular monthly payments provide a steady income.
  • Inflation: The value of the $3,000 monthly payment will decrease over time due to inflation.
  • Dependency: Financial dependency on Spouse B for the duration of the alimony payments.
  • Risk: If Spouse B’s financial situation changes (e.g., loss of job, disability), the payments might be reduced or terminated.
Option 2: Alimony Buyout
  • Buyout Amount: A lump sum, let’s say $250,000, paid to Spouse A instead of periodic payments.
Financial Implications for Spouse A
  • Lump Sum: Immediate access to a significant amount of money.
  • Investment Opportunity: Potential to invest the lump sum in a diversified portfolio or other investment vehicles.
    • Example: Investing $250,000 with an average annual return of 5% for 10 years.
  • Tax Implications: Depending on jurisdiction and laws, the lump sum might have different tax implications than periodic payments.
  • Financial Independence: No dependency on Spouse A for future payments.
  • Inflation: The lump sum can be invested to potentially outpace inflation.
Potential Mistake in Choosing Periodic Payments
  • Opportunity Cost: Spouse B misses out on the potential growth of the lump sum investment.
  • Financial Risk: Relying on Spouse B’s ability to make future payments.
  • Inflation: Decreasing value of the $3,000 monthly payment.

If Spouse B opts for the alimony buyout and invests the $250,000 lump sum with an average annual return of 5%, after 10 years, this investment could grow to approximately $407,224. This amount significantly exceeds the total of $360,000 that would be received from periodic payments.

  • Lump Sum = $250,000
  • Rate = 5% (or 0.05)
  • Years = 10

Investment Growth: The lump sum investment option potentially offers Spouse B a higher total return, assuming an average annual return of 5%.

  • Financial Independence: Choosing the lump sum also grants Spouse B immediate financial independence and flexibility, without relying on Spouse A’s future payments.
  • Risk Mitigation: It eliminates the risk associated with Spouse A’s ability to make future payments.
  • Inflation Protection: The investment can potentially outpace inflation, preserving or even increasing the purchasing power of the initial amount.

3. Avoid Financial Settlement Mistakes

There are many costly mistakes that can be avoided by working with a CDFA.

Example 1: Keeping the Marital Home

One of the most common financial mistakes that divorcing individuals make is keeping the marital home because of emotional attachment and/or desire to keep the children in the same neighborhood or school district. Keeping the house, though, can have serious financial consequences. Many do not anticipate the real cost of maintaining a house, e.g., unexpected repairs, taxes, or homeowners’ association assessments, the increased cost of a mortgage after refinancing, or they don’t fully appreciate the impact of foregoing the proceeds of the sale of the house.

  • Marital Home Value: $500,000
  • Remaining Mortgage: $300,000
  • Other Assets: $200,000 in savings, $300,000 in a retirement account

Spouse A decides to keep the marital home, while Spouse B takes the retirement account and half of the savings ($100,000).

Spouse A assumes the mortgage, taking full responsibility for the remaining $300,000 debt.

Financial Implications for Spouse A

  • Equity in Home: $200,000 (the home value of $500,000 minus the mortgage of $300,000).
  • Cash Assets: $100,000 (half of the savings).
  • Debt: Assumes the full mortgage of $300,000.
  • Liquidity: Low, as most of Spouse A’s assets are tied up in the home.
  • Maintenance and Upkeep Costs: Ongoing expenses for maintaining the home, can be substantial and often underestimated.
  • Property Taxes and Insurance: Continuing obligations that can be a significant annual financial burden

Challenges for Spouse A

  • Affordability: If Spouse A’s income is not sufficient to cover the mortgage payments, property taxes, maintenance, and other living expenses, they might face financial strain
  • Refinancing the Mortgage: Spouse A may need to refinance the mortgage to assume it solely, which could come with a higher interest rate or unfavorable terms
  • Lack of Diversification: Spouse A’s financial situation is heavily invested in a single asset (the home), which can be risky, especially if the real estate market fluctuates
  • Selling the Home in the Future: If Spouse A needs to sell the home, they might incur real estate fees, and if the market is down, they could sell at a loss. Also, the home’s equity might not have increased as expected

Financial Implications for Spouse B

  • Spouse B walks away with liquid assets ($100,000 in savings) and a retirement account worth $300,000, which likely will grow over time and is diversified
  • Spouse B has more financial flexibility and potentially less financial stress

With a CDFA ‘s guidance, individuals will be guided to accurately estimate future expenses and assess the impact on longer-term financial health.

Example 2: Treating All Marital Assets Equally

Another example of a mistake that can be avoided is treating all assets as essentially the same. Many couples strive for a 50/50 division of their assets but are they really dividing things equally? Not all assets (and debts) are created equally. Assets are taxed differently, have varying growth returns, and impact on liquidity. Consider this situation where the property division doesn’t consider taxes:

Total Assets: Let’s assume the couple has a total asset pool of $1 million, which includes a house valued at $500,000, a stock portfolio worth $300,000, and savings of $200,000.

  • House: Spouse A keeps the house (valued at $500,000). Usually, there might be capital gains tax considerations if the house is sold, but in this scenario, we’re not accounting for that.
  • Stock Portfolio: Spouse B receives the stock portfolio ($300,000). Normally, selling stocks might incur capital gains tax, but it’s not considered here.
  • Savings: The savings ($200,000) are split equally, giving each spouse $100,000.


  • Spouse with House: Spouse A has an asset worth $500,000, but if they decide to sell the house later, they might face a substantial tax bill, which hasn’t been accounted for in this division
  • Spouse with Stocks: Similarly, Spouse B has stocks worth $300,000. If they sell these stocks, they might incur capital gains tax, which can significantly reduce the actual value they receive from this asset
  • Savings: Both have liquid assets of $100,000 each, which are not typically subject to immediate taxes
  • Liquidity: Spouse A who kept the house and stocks might face liquidity issues as their assets are not readily convertible to cash without potential tax implications

Fairness: The division might seem equal in terms of gross value, but after considering taxes on the sale of assets, one of these spouses will likely end up with significantly less net value

Take Control of Your Future

When you consider divorce, or if you know someone who is contemplating divorce, one of the biggest realities for those in the divorce process is the financial settlement and financial analysis post-divorce. Get the assistance of Berni Stevens, a Mediator, Certified Divorce Financial Analyst® (CDFA®), and divorce coach.

Berni provides step-by-step guidance on matters related to divorce. With a wide range of experience and expertise related to divorce issues, Berni will simplify the process and provide much-needed clarity in areas such as long-term tax consequences, asset, and debt analysis, dividing pension plans, continued health care coverage, stock option elections, protecting support with life insurance, and much more. She can also guide you through building an effective parenting plan, and getting your divorce processed through the court.

Schedule Your Complimentary Divorce Strategy Session Today!

11 Costly Financial Mistakes in Divorce Settlements


11 Costly Financial Mistakes in Divorce Settlements

Divorce is expensive even without mistakes and getting comprehensive guidance on divorce financial planning is critical. Read on to learn of the top eleven most common financial mistakes made in divorce.

1. Mis-Specifying Marital vs. Separate Assets

What’s considered marital property and subject to division? Most will say that any comingling of assets (e.g., depositing the funds in a joint account or using marital funds to pay the mortgage) constitutes an asset as marital. And in some states and counties, even if a portion of an asset that was separate on the date of marriage will, over the years, transition to marital. This can impact considerations of real estate, retirement, inheritances, and more.

2. Dividing Each Asset 50/50

Too often, lawyers, hearing officers, and judges take the easy way out by forcing division of each asset equally. Why? It’s easy and not easily challenged. This approach, though, fails to consider the needs and wants of each spouse, as well as the tax consequences of and administrative effort in dividing each asset.

3. Not Considering an Alimony Buyout

No one likes alimony. Payors hate writing the check and the recipient hates depending on it. Plus, if the payor dies or is disabled, the payments stop (an example of why insurance is important post-divorce). Instead, if there are sufficient assets to cover it, calculate the present value of the stream of anticipated payments at an appropriate discount rate and build it into the division of assets.

4. Errors in Valuing Executive Compensation

If there’s one financial topic that befuddles many, it’s how to treat deferred compensation, including stock options, both qualified and not qualified, as well as restricted stock and restricted stock units. Are they marital or separate? Are they based on past or future performance? Can they be transferred to a spouse/former spouse? What is the correct valuation method: intrinsic value, Black-Scholes, or the binomial method? How are taxes accounted for?

5. Not Considering the Possibility of Hidden Assets

Given the opportunity and motive, many a spouse will start stashing away funds in anticipation of a divorce, whether for financial security, sense of ownership, or vindication. Tax returns, W-2’s, credit card statements, and bank account statements are all sources to identify diverted funds. Even when not suspected by a client spouse, a quick review of these documents may reveal otherwise unidentified assets.

6. Not Looking at Creative Settlement Options to Meet Each Spouse’s Unique Needs

What if a spouse wants to keep the house for and can’t get approval for a mortgage buyout? It’s easy to just say “sell” and move on, but there are ways to facilitate the desire of a spouse who wants to remain in the home for a period without undue legal or financial burden to the co-owner spouse. As another example, maybe retirement funds are of utmost concern and alimony/cash flow not so much? A skilled divorce financial expert will come up with alternative settlement options to address the unique needs of each spouse.

7. Mistakes in Retirement/Pension Valuation and Division Orders

Retirement plans, and especially pensions, are widely misunderstood in divorce. The one who’s name is on the retirement plan thinks they are the rightful owners. Some incorrectly think the “current value” on a pension statement is the value of the pension. Pensions of all kinds, and especially military and federal pensions, require an expert for valuation and drafting of appropriate orders for submission to the custodian.

8. Failing to Consider Tax Consequences

All assets are not alike when it comes to splitting them in divorce. $250,000 in a 401k is not the same as $250,000 of equity in a house. The former is taxed at an ordinary income tax rate upon withdrawal while the latter may be largely excluded from any taxation and otherwise taxed at the capital gains rate.

9. Allowing One Spouse to Keep the House When it’s Not Financially Feasible or Beneficial

The marital home is an asset laden with emotion and sentimentality. It’s common to want to keep the house for emotional stability without consideration of the impact on future financial health. Houses don’t necessarily appreciate significantly over time, maintenance expenses are often overlooked or discounted, and a house is not a liquid asset. An objective evaluation is critical before deciding to keep or sell the marital home.

10. Not Properly Accounting for a Closely Held Business

If a spouse owns a business, is it a source of income, an asset to be valued and divided, or both? If a source of income, do we just look at the tax returns for the business? If to be valued, do you pay a business valuation expert thousands of dollars to get an accurate figure? Get the advice of a divorce financial expert is necessary if one of the spouses owns a business.

11. Not Accurately Budgeting for Your Post-Divorce Life

Do you have a good hold on where your money goes? Have you really assessed how much you will need post-divorce? Your choice in divorce settlement options needs to be balanced between short-term cash flow needs and long-term net worth.

Work with a qualified divorce financial professional, i.e., a Certified Divorce Financial Analyst® (CDFA®) to help you avoid costly mistakes in divorce. You only get one chance to get it right.

Take Control of Your Future


When you consider divorce, or if you know someone who is contemplating divorce, one of the biggest realities for those in the divorce process is the financial settlement and financial analysis post-divorce. Get the assistance of Berni Stevens, a Mediator and Certified Divorce Financial Analyst® (CDFA®.)

Berni provides step-by-step guidance on matters related to divorce. With a wide range of experience and expertise related to divorce issues, Berni will simplify the process and provide much-needed clarity in areas such as long-term tax consequences, asset, and debt analysis, dividing pension plans, continued health care coverage, stock option elections, protecting support with life insurance, and much more.

Schedule Your Complimentary Divorce Strategy Session Today!

Checklist for Getting Your Best Divorce Settlement

Knowing that you got your best divorce settlement means you’ve considered a lot of things that aren’t necessarily on an attorney’s radar or within the realm of his capabilities. There are many mistakes that can be made. Here’s a list of items that you should include when putting together your divorce settlement agreement. A CDFA® divorce financial planner or mediator is your best resource for ensuring you and your spouse are agreeing on a settlement that is fair and strategically planned for an optimal outcome.


Proper identification of marital and separate property You split marital assets but keep your own separate property. It’s not always clear about what constitutes marital property. Co-mingling of funds, growth on real estate and owned businesses may have an impact on the amount to be divided. A Certified Divorce Financial Analyst (CDFA) can conduct a separate property tracing to determine what is marital and what is separate.
Assessment of tax implications No all assets are treated the same with respect to taxes. Trading assets of equal value but different tax treatments can have a huge impact on long-term financial health. What are the applicable tax classifications for retirement funds vs. real estate vs. stock options, etc.?
Consideration for both short- and long-term financial implications Alimony, child support, and how you split assets can result in substantial differences in long-term financial health even when the short-term needs are met and the division of assets looks fair. It’s important that you look at the impact of the divorce on near-term as well as future financial health. A CDFA can provide financial projections for both spouses before they agree on a particular settlement.
Provision for allowing spouse to remain in marital home under adverse financial circumstances Sometimes one spouse wants to continue to live in the marital home but can’t re-finance it on their own. Maybe, too, the house is “under water” and can only be sold as a short sale or foreclosed. Additionally, there are capital gains tax exclusions considerations to consider when transferring ownership to one spouse. There are some clever ways of handling the marital home to allow one spouse to continue living in the property for a period of time without the other losing out.
Accurate valuation and division of pensions Many misunderstand what figures to use for division of a pension. Pensions are subject to a coverture fraction, accurate identification of payout amounts, cost-of-living increases, and the appropriate discount rate.
Streamlining of asset division Simplify administrative and legal follow-up Sometimes it’s better to leave a pension, other retirement account, or business owned whole and aligned with just one of the spouses. Other assets or structured notes can be used to avoid selling assets or dealing with Qualified Domestic Relations Orders (QDRO’s).
Treatment of employee bonuses and other non-cash benefits Executives and business owners may receive a large portion of their compensation in the form of bonuses, stock, car allowances, and other benefits that don’t readily show up as income or assets. It’s important to thoroughly review employee agreements for executives and accounting records for business owners.
Proper accounting of stock options and restricted stock units (RSU’s) Employee stock options earned while married are a marital asset whether or not paid before separation or divorce. Determining the marital portion, vesting, and valuation of stock options and RSU’s is complicated and best left to financial specialists.
Option for alimony buyout Nobody likes alimony. Alimony payments are painful to the obligor and uncertain to the obligee. Why not just determine the present value of the future payments and include it in the division of assets?
Accurate identification of separation date The separation date can have substantial impact on valuation of assets. Is it the date the divorce complaint is filed, the spouses started living in separate bedrooms, or something else? What if there is a temporary reconciliation?
Optimizing filing status and deductions The difference between filing single vs. head of household can make a big difference in tax payments. Under shared custody arrangements, child exemptions can be rotated to allow both parents to file as head of household.
Protection of future alimony and child support with life insurance If a buyout isn’t possible, the oblige should have protection is something happens to the obligor. Obtain insurance protection that you know won’t be cancelled.
Inclusion of a detailed parenting plan Even if you and  spouse fundamentally agree on custody and how to raise the children, there may come a time when circumstances change or there is a difference of opinion. Parenting plans that address a wide array of issues should be included in a property settlement agreement to protect the children and both parents.
Impact on future college financial aid for the children Custody decisions and child support can have implications for college financial aid. One should consider how settlement decisions might affect future financial aid to pay for college expenses. 529 plans should be managed so they have minimal impact on financial aid awards.
Assurance that all assets have been accounted for Are there any suspicions that one spouse has been “preparing” for the divorce and diverting assets? Consider the use of a forensics specialist to examine financial records for hidden assets.
Accurate business valuations There are a variety of ways to value businesses in divorce, some more expensive and time-consuming than others. Make sure you have an accurate valuation of businesses owned before settlement options are reviewed.
Timing of divorce on Social Security Timing of divorce can impact future social security payments. You may want to delay your divorce to optimize future social security.
Identify follow-up tasks to ensure compliance It’s not time to rest when the property settlement has been filed and the final divorce decree is received. Follow-up is essential to obtaining and protecting rights to assets. Insurance, QDRO’s, quit-claim deeds, beneficiaries, and more need to be handled after a divorce. Make sure you get a comprehensive list of what still needs to be done once your divorce is final.




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Top Three Divorce Settlement Agreement Mistakes

When it comes to divorce, there are many areas where we feel vulnerable. When it comes to the divorce settlement agreement or property agreement, we rely on the advice and judgment of our trusted advisors. What would you rather hear: “everything will be okay, don’t worry,” or “things will be okay but you’re going to have some tough choices to make?” I feel strongly that there are too few divorce professionals who truly tell it like it is. They either tell you what you want to hear so you’ll continue paying their outrageous hourly fees or they simply don’t know any better. Either way, they’ll lead you to some stupid, easily avoidable mistakes.

Here are a few things that I see repeatedly after settlements are agreed to and the judge has signed off on the divorce. Remember, unlike alimony and child support, property settlement agreements are final—you don’t get to go back again to re-do them!

These divorce settlement mistakes can be very costly and easily avoided by using the right professionals to support you in your divorce.

Mistake #3: The settlement doesn’t consider taxes—at all!

 We all know that Uncle Sam will dive into our pockets at every opportunity. When it comes to divorce settlement agreements, not all assets are alike and tax implications do make a difference! What people often find is that the tax burden on their half of the marital assets is significantly higher than their spouse’s, making their “half” of the assets worth significantly less than they thought. Don’t expect your attorney to know this! Attorneys are not trained as accountants or divorce financial analysts and a lot of them don’t bother to warn you of that. Buyer beware.

Mistake #2: Pension is split “50/50”

Over and over I see divorce decrees that order pensions split 50/50 but no one has any idea what will happen when payout begins or what that means under various circumstances. When do you start collecting? Is there an option to take a lump sum? Will there be a cost of living increase each year? What if you or your spouse dies? Will it keep paying? Will it double? When I ask these questions, no one has ANY IDEA what the answers are. These are questions that should be asked during the valuation of the pension and preparation of the divorce settlement agreement. How can you possibly agree to a settlement without understanding something so crucial to your retirement? Again, do not expect attorneys or non-CDFA® mediators to be of much help here.

Mistake #1: Marital home is kept by one spouse who is unable to afford it

 One of the most common divorce settlement mistakes I see time and time again is one spouse keeping the marital house they really can’t afford. I understand how one can get emotionally tied to the family home and want to stay. Before really considering this option, though, you must do a realistic budget that takes into account upkeep, property taxes, improvements, homeowner’s insurance, replacing the water heater, fixing the roof after the tree falls, etc. I have witnessed where one or two years down the road the spouse who “won the house” has run out of cash and realized that they can’t sell a window to put food on the table, they can’t refinance because now they don’t have enough income to do so, and they have no choice but to sell. The selling costs are about 7% and there’ll be capital gains taxes after the sale – all of which would have been split 50/50 with the ex if they had sold the house as part of the divorce. Ugh, that was not the smartest decision, right?

These are but a few of the financial divorce settlement mistakes that are avoidable but too often made in divorce settlement agreements. Truthfully, you can’t be expected to know all the ins and outs, nor should a lawyer. Just realize you don’t know what you don’t know and that lawyers are in generally the same boat. You can hire a CDFA® on an hourly basis to supplement your lawyer or mediator’s proposed settlements or use a CDFA-Mediator who can advise you and your spouse on both the short and long-term implications of the decisions you are making. Either way, just make sure you’re fully informed before you sign the papers!



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