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Sallie Mullins Thompson, CPA PLLC

Navigating Your Financial Life Through Effective Tax Strategies

 

Divorce Stories

| June 27, 2022
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How Divorce Mediators can Benefit from Working with a Certified Divorce Financial Analyst (CDFA)

Recently, I have been involved, as a CDFA, in several mediated divorce cases where asset division mistakes were avoided, taxes were saved, and all the financial details were covered.  

Today I want to share two of those stories with you.

One case involved a situation where the couple, as part of their divorce equitable division plan, was planning to withdraw a large sum of money from a retirement plan to pay off multiple debts. Fortunately, the mediator reviewed this idea with me. After gathering data and performing an analysis, I determined they would owe an estimated 48% in income taxes and the after-tax amount of the withdrawal would only cover an estimated 65% of the debt.  

  1. Options were identified to deal with the various debt types in a more tax-efficient manner.
  2. The debt pay-off schedules were aligned with the future budgets of both parties.
  3. The retirement plan participant kept more money, enabling the desired retirement plan.

The other case related to a disparity in earning power between the 2 parties. The mediator working with the couple referred them to me to perform a divorce financial analysis. Part of that process includes projecting, and graphing, after-tax cash flow over 30+ years.

  1. When the better-positioned party saw what the future status of the other would be, some of the parameters of the separation agreement were revised to compensate for the difference.
  2. In addition, educational planning and funding was put in place for the less-prepared party. 

In both cases, the entire family was taken care of, there were no losers, and everyone was ready to go - financially at the end.   

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