Divorce involves more than simply dividing assets. It can require both spouses to rethink what their financial lives will look like independently, often while making significant decisions during an already emotional period.
For someone who has not traditionally managed the household finances, that uncertainty can be particularly challenging. Questions may quickly arise: Will I have enough to support my lifestyle? What will my budget look like? Will I need to return to work? Can I afford to stay in the home? How will the decisions I make today affect me years from now?
In a collaborative divorce, attorneys, financial professionals, and mental health professionals can each bring a different perspective to the process. In certain situations, a financial advisor working as an allied professional can provide individual support to one spouse, helping that person understand what the financial decisions being considered could mean for life after divorce.
The Role of an Allied Professional
It is important to distinguish an allied financial professional from a financial neutral.
A financial neutral works with the collaborative team to help both parties understand the financial picture. An allied financial professional, on the other hand, may be retained to work specifically with one spouse and help that individual evaluate the financial implications of the options being considered.
This can be particularly valuable for someone who has had less involvement in the family’s finances or is preparing to manage their finances independently for the first time.
Rather than looking only at how assets are divided today, the financial advisor can help the individual consider a broader question: What could my financial life look like after the divorce?
Understanding How Settlement Options Could Affect Your Financial Future
A settlement option may look reasonable on paper, but understanding how it could affect someone’s life over the next several decades requires a different type of analysis.
A financial advisor can incorporate proposed settlement scenarios into longer-term financial projections. Depending on the circumstances, that analysis may consider income, expenses, assets, housing, taxes, support payments, employment assumptions, longevity, and other factors.
The goal is not to predict exactly what will happen. Financial projections rely on assumptions, and circumstances can change. Instead, the analysis can help someone understand the potential tradeoffs associated with the different options being considered.
For example, keeping one asset may have very different long-term implications than receiving another asset of similar value. Selling a marital home can create questions about what to do with the proceeds. Someone who has not previously invested independently may need help understanding how newly received assets could fit within a broader financial plan.
As Marianela Collado, CPA/PFS, CFP®, CDS®, shared:
“Financial planning is helping them really map out and paint the picture of not only the options that were built by the collaborative team, but incorporating all of their worst fears.”
Those concerns might include returning to work, earning less than anticipated, changing housing, or wondering whether available resources will be sufficient. Modeling different scenarios cannot remove those uncertainties, but it can give someone more information with which to evaluate the decisions in front of them.
Bringing Financial Questions Back to the Collaborative Team
Sometimes the analysis may indicate that a proposed option aligns with the individual’s financial goals and the assumptions being used. Other times, it may uncover a concern that deserves further discussion.
When appropriate and authorized by the client, an allied financial advisor may communicate with the attorneys and other professionals involved in the collaborative process to explain the financial considerations behind a client’s concerns.
Instead of simply saying that a spouse is uncomfortable with a proposed arrangement, for example, the advisor may be able to illustrate how certain assumptions affect that person’s longer-term financial plan.
That additional perspective may help the collaborative team explore alternatives. Depending on the circumstances, those conversations could involve asset allocation, support, housing, financing, or other financial considerations. Any proposed solution should be evaluated based on the client’s individual circumstances and with the appropriate legal, tax, and financial professionals.
Looking Beyond the Settlement Date
The financial work does not necessarily end once the parties reach an agreement.
An important part of financial planning is considering how decisions made during divorce will actually be implemented afterward.
If the agreement calls for selling a home, what happens to the proceeds? If someone receives investment assets, how will those assets be managed? If ongoing support is an important part of the financial plan, what risks should be considered? How could taxes affect the decisions made during and after the divorce?
An allied financial advisor may also review the financial implications reflected in a draft agreement and identify financial or tax questions for the client to discuss with counsel.
Marianela describes that process as thinking beyond the immediate agreement:
“We’re helping think long range. Here’s how it looks, and what are the risks? What are the risks you’re taking by agreeing to this plan, and how do they mitigate those risks?”
Those considerations might include taxes, dependents, support obligations, insurance, or other risks that could affect the client’s financial plan. The attorney remains responsible for legal advice and drafting, while the financial advisor helps the client understand the financial implications and identify questions that may warrant further discussion.
Helping Someone Move From Uncertainty to Understanding
For someone who has not historically been responsible for the family’s finances, divorce can mean an abrupt transition from shared financial decisions to making those decisions independently.
A financial advisor can help make that transition more understandable.
Rather than evaluating a settlement based only on the numbers presented at the negotiating table, financial planning can help connect those numbers to future income, expenses, housing, investments, taxes, and personal goals.
It does not eliminate uncertainty, and no financial advisor can guarantee that a particular settlement or financial strategy will produce a certain outcome. What a financial advisor can provide is additional analysis and context to help someone make more informed decisions.
When Should a Financial Advisor Become Involved?
In Marianela’s experience, involving an allied financial advisor earlier in the collaborative process can provide more opportunity to evaluate financial and tax considerations while options are still being developed.
She shared that being involved earlier allows the financial professional to conduct exploratory planning from the outset, rather than analyzing decisions after many of them have already been discussed.
Every collaborative divorce is different, and not every individual needs the same professional support. For someone facing significant financial complexity, unfamiliar assets, tax considerations, or uncertainty about managing finances independently, the potential role of an allied financial advisor may be worth discussing with their collaborative attorney.
Collaborative Experience at Tobias Financial Advisors
At Tobias Financial Advisors, the CEO and Senior Wealth Advisor, Marianela Collado, CPA/PFS, CFP®, CDS®, and Senior Wealth Advisor, Yesenia Realejo, CFP®, are collaboratively trained financial professionals and members of Collaborative Family Law Professionals of South Florida. Marianela is also a member of the Florida Academy of Collaborative Professionals (FACP) and assists clients in the role of an allied financial advisor during the collaborative process.
For clients navigating a collaborative divorce, working with a collaboratively trained financial advisor means the advisor is familiar with the interdisciplinary nature of the process and the distinct roles of the professionals involved. This perspective can help the advisor provide financial planning support while coordinating, when appropriate, with the client’s attorney and other members of the collaborative team.
At Tobias Financial Advisors, our role is to help individuals understand how decisions made during a major life transition may fit into their broader financial plan, including cash flow, taxes, investments, housing, risk management, and other long-term goals. For someone preparing for financial independence after divorce, having an advisor who understands the collaborative process can provide another source of financial context as they consider what comes next.
Tobias Financial Advisors is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission, nor does it indicate that the advisor has attained a particular level of skill or ability. The information presented is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. It is for information and planning purposes only.
Professional advisors, accountants, and licensed attorneys should be consulted before implementing any of the options presented. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. This is a representation of a general case scenario, however individual client timeline and experience may vary due to one’s unique circumstances.