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Divorce is one of the most financially complex events a person can go through. Beyond the emotional toll, the decisions made during this process — about property division, retirement accounts, support obligations, and taxes — can have lasting consequences for your financial future. Yet many people navigate these waters without professional financial guidance, often to their detriment.
Alongside an experienced family law attorney, a financial advisor can be an invaluable partner throughout your divorce process. By partnering with an experienced financial advisor and family law attorney, you can set yourself up for financial success in your post-divorce life. Here are three compelling reasons why working with a financial advisor during your divorce can be beneficial to you.
Many divorces involve the division of significant and valuable assets – including real estate, retirement accounts and other investment accounts. Understanding the true value of these assets is critical to obtaining a fair division of the assets. For example, consider the division of one spouse’s $500,000 retirement account and $500,000 in home equity in the marital home. These values may look the same on paper, but their after-tax values can be dramatically different. Withdrawals from a traditional 401(k) are taxed as ordinary income, while the sale of a primary residence may qualify for significant capital gains exclusions.
A financial advisor can model out the real, net value of each asset — accounting for taxes, penalties, and liquidity — so you’re not trading a dollar for what turns out to be seventy cents. This analysis is particularly critical when dividing pensions, stock options, deferred compensation, and business interests, all of which carry unique financial and tax considerations that require expert evaluation.
Keep in mind that you want the expertise of a financial advisor during your divorce – not just after it has been finalized. During your divorce process, you will need to make a number of important decisions that will impact your financial future. By working with a financial advisor during this process, you can put yourself in the best position for future financial success.
Your attorney’s job is to protect your legal rights. A financial advisor’s job is to help you understand what your financial life will actually look like once the divorce is finalized. These are two very different and equally important perspectives.
The dividing of assets and finances – an important and necessary part of the divorce process – often leaves both parties leaving the marriage with a different financial outlook than they had become accustomed to. In many cases, retirement funds are transferred from one spouse to another, proceeds from the sale of a marital home are received and other assets are being transferred. The untangling of marital finances often gives rise to new questions which each spouse needs to consider, including the affordability of their current living situation with one income, retirement planning based on the allocation of retirement assets during the divorce and other considerations.
A financial advisor can help project your post-divorce financial picture and develop a plan which meets your goals. This forward-looking financial planning empowers you to negotiate from a position of knowledge rather than anxiety, and to make settlement decisions rooted in your actual financial needs and long-term objectives.
Many people hesitate to hire a financial advisor during divorce because of the cost. But the right financial guidance can save you far more than it costs. A single overlooked tax consequence, an improperly titled asset transfer, or a missed QDRO (Qualified Domestic Relations Order) filing can result in penalties, unexpected tax bills, or the permanent loss of retirement benefits.
Perhaps most importantly, a well-structured settlement agreement — one that accounts for taxes, liquidity, cash flow, and long-term growth — can be worth tens or even hundreds of thousands of dollars more than a settlement negotiated without financial expertise. The cost of not having a financial advisor is often far greater than the cost of hiring one.
Divorce is a legal process, but the financial ramifications cannot be understated. The decisions made during your divorce process will shape your financial security for years to come. Surrounding yourself with the right team of professionals, including both an experienced family law attorney and a qualified financial advisor, puts you in the best position for success once your divorce is finalized.
The attorneys at Greenberg Legal Group LLC have extensive experience handling both contested and uncontested divorces in Maryland. We work routinely with clients and financial professionals towards a common goal of protecting our client’s financial interests during the divorce process. If you are considering or going through a divorce, please contact our office for further assistance.
