A divorce is a life-altering event that affects you emotionally, mentally, and financially. Separating assets, untangling joint accounts, and dividing retirement funds needs more than an educated guess. While your attorney can provide the legal framework of your divorce, by working in conjunction with a financial planner, you can create a plan that offers a clear strategy, structure, and a future path to keep you protected during what feels like an uncertain future.
The impact of divorce is usually first felt emotionally. It marks the end of a significant era of life. It can change your relationships with friends, family, and sometimes even coworkers. However, a divorce is also an economic division, and probably the most painful part of the process. You aren’t merely dividing assets and debts, you are possibly saying goodbye to your home, deciding how to divide assets (which frequently hold memories), sorting out tax issues, and developing a plan to transform one household into two.
An emotional separation is unavoidable, which is why it is vital to have a financial advisor to avoid making decisions out of guilt, fear, or anger. A financial advisor can provide a panorama of your current economic standing and 5, 10, or more years in the future. Their objective analysis can protect you from signing an agreement that is something you may regret when the dust settles.
Before any financial decisions can be made, you must have a clear perspective of the household’s financial situation. A financial planner can identify shared and separate assets (real estate, bank accounts, investment portfolios) as well as liabilities (loans, tax obligations, and other debts). A financial planner can uncover forgotten or hidden items, such as offshore accounts or unclaimed real estate. A complete inventory is required to negotiate a fair settlement.
Once the assets have been identified, they must be categorized according to their value. Some assets can be more complex and require a financial planner to invite the help of appraisers or forensic accountants. This happens frequently with family businesses where investments and profits are intermingled between spouses and other partners. A financial planner can also evaluate investment portfolios with attention to factors such as liquidity (their present worth in cash), tax consequences, or potential growth.
Many people don’t understand the role taxes play on their finances after a divorce. What looks like an equitable division on paper may present dramatically different outcomes once capital gains or income tax come into play. Your financial planner can guide you in choosing the best ways to limit your tax burden.
A financial planner can look ahead and create a budget for your post-divorce needs. This can range from new living arrangements, potential alimony, child support, and healthcare needs, to adjusting for inflation and changes in your income. Many unforeseen financial changes occur in a divorce, and having a knowledgeable resource to provide expert advice can save you thousands.
Lastly, your financial planner can reframe your long-term goals, such as retirement, college expenses, homeownership, building savings, or planning for retirement. It may seem as though those decisions are a long way off, but it is essential to address them sooner than later. The more time there is to prepare, the better it will be for you. For some, it is the first time making independent financial decisions. A financial advisor can make the difference between confidently moving forward and staying stuck in survival mode.
In New Jersey, equitable distribution is the standard for dividing assets and liabilities. The courts aim for fairness, not necessarily a 50-50 split. This requires a detailed, accurate understanding of your finances.
1. Asset Valuation
2. Income Analysis and Projections
3. Debt Assessment
4. Tax Implications
5. Financial Modeling and Settlement Options
6. Expert Witness Testimony
Real estate values can vary widely across the state, which complicates valuation. Financial planners can coordinate appraisals to assist in determining a fair market value for marital and individual properties. They can identify comparable real estate prices and calculate potential property taxes to help you decide whether to keep or sell the property.
Dividing retirement assets in New Jersey can be complicated and often requires a Qualified Domestic Relations Order (QDRO). Your financial planner can explain the implications of splitting retirement accounts and the potential penalties or tax consequences. They can provide a projection of the long-term impact of each option and help you make the best choice for your situation.
New Jersey is composed of many family-owned businesses. When one or both spouses have an ownership interest, a financial planner plays a central role in obtaining or interpreting business valuations. When business ownership extends to other family members, the selling or buying of shares in the business, overall costs, and total profits can be used by the financial planner to map out the best solution.
This analysis goes beyond a review of tax returns. It is a study of all sources of income (salaries, passive income, commissions, bonuses, and side hustles). The financial planner will examine the complete earning history, current income, and future potential. This is particularly important if the stay-at-home parent is going back to work. Calculations of extra studies or training must be a part of the plan.
Projecting future income is a financial planner’s estimation of the possible earnings of each spouse after their divorce. Factors such as education, training, experience, job market trends, and age play a part in creating a financial plan. The courts consider each party’s ability to maintain a comparable lifestyle to that enjoyed during the marriage, and these projections are often critical to alimony negotiations and long-term planning.
A financial planner helps identify all liabilities, including mortgages, credit cards, personal loans, auto financing, student debt, and tax obligations. A planner determines how best to allocate these debts based on each party’s income, credit standing, and ability to pay the debt. Planners also calculate how different debt arrangements will affect each spouse’s credit, borrowing capacity, and financial flexibility post-divorce. For example, if a spouse wants to keep the marital home and the mortgage is in both spouses’ names, they will have to refinance the mortgage in their name alone. Not everyone has the financial resources to take on a mortgage independently. A financial planner can provide acceptable alternatives.
A financial planner can flag potential options if they feel the tax burden outweighs the asset. They will calculate the true value of the asset after taxes. Capital gains tax laws are intricate and complex. The gains may be partially protected but only under certain conditions. For example, if you decide to sell your home there is an exclusion on the capital gains tax of up to $250,000 for an individual and $500,000 in you file jointly.
A divorce settlement involves a series of trade-offs. To quote the Rolling Stones, “You can’t always get what you want, but if you try real hard, you’ll get what you need.” A financial planner will guide you in choosing to leave yourself in the best financial position in a way that will provide for your needs. They can see the long-term impact of your financial decisions when you are still focused on your present situation. Your emotional choices can come back to bite you later, and by having a financial planner, rest assured that their knowledge will heavily influence your decision-making process. They will create a model that shows your projected income, investment growth, expenses, and future costs such as college or elder care.
In contested or complex divorces, a financial planner can provide expert testimony regarding income analysis, business valuation, cash flow projections, and investment portfolios. Their testimony can support or challenge alimony and child support calculations. The courts often use the information provided by the financial planner as a part of their decision-making. Having a qualified financial expert who can present findings clearly and credibly can be a key advantage in litigation.
Not all financial planners are familiar with the unique challenges a divorce presents. Equitable distribution, state tax laws, and other aspects of a financial plan can stump even the best planners. It isn’t easy to navigate the financial roadmap of a divorce, and you must hire a financial planner with experience in divorce cases.
Start by verifying that the planner holds respected, relevant certifications. A Certified Financial Planner (CFP) brings broad-based expertise in areas like investments, tax, insurance, and retirement planning. If the planner is a Certified Divorce Financial Analyst (CDFA), that reflects specific training in divorce-related financial issues. A planner with both designations offers a rare combination of depth and specialization.
When you are going to work closely with someone and put your financial future in their hands, you want someone who is objective and honest. A good planner will crunch the numbers and provide the most hones result, even when it is not what you hoped for. They should be able to use plain language and speak clearly. Keep this in mind as you meet with potential candidates. Ask them about their experience, how they view their role, and how much they charge. No matter how impressive their resume is, not every candidate will be a good fit. A divorce is extremely personal and you want someone who has the competence and composure to get the job done.
In New Jersey, divorce settlements are hinged on financial variables that require the collaboration of your divorce attorney and financial planner. The attorney is the legal advocate. They are responsible for understanding the laws governing asset division, custody, alimony, procedural requirements, etc. The financial planner’s role is different, but also essential. They provide clients with the financial knowledge to make decisions during the divorce. When financial planners and attorneys work together, the client benefits from a unified approach. Their collaboration can avoid expensive mistakes, such as overlooking the true value of an asset after taxes or agreeing to an alimony structure that could provide serious financial hardships over time.
Divorce is hard, and there is no two ways about it. But it can be less complicated with excellent legal representation and a financial planner who works in tandem to protect you financially. This partnership often leads to better choices and more confidence to make them. Being informed and having professionals you know will always have your best interests in mind can make it easier for you to make hard decisions.
The Bronzino Law Firm has helped hundreds of clients like yourself during the divorce process. We will work with the financial planner of your choosing to protect your financial interests and provide you with the best possible outcome. Our law firm helps clients in Barnegat, Atlantic Highlands, Freehold, Spring Lake, Red Bank, Toms River, Rumson, Tinton Falls, Holmdel, and across Southern New Jersey. If you have questions about your divorce or any other legal matter, and would like a consultation, call us today at (732) 812-3102 or reach out to us online
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