As anyone who's ever been through a divorce can attest, the pain of parting with your spouse isn't just emotional—the fallout from divorce can wreak financial havoc as well long after the dust in the courtroom has settled. Accountants can help both parties move forward with their lives, thanks to their unique knowledge and skills.
In the past, the only professional advisors most people relied upon during their divorce proceedings were divorce attorneys who, while well-versed in issues like child-custody, dividing marital assets, and spousal support, weren't trained to deal with the complex financial nuances of divorce, such as long-term tax issues and property valuation.
But now, a growing number of accountants are stepping up to help their clients with the complex financial details of divorce by becoming Certified Divorce Financial Analysts (CDFAs).
Professionals say becoming part of this emerging niche market allows them to provide financial peace of mind to their divorcing clients, and gives them the chance to grow their practices by offering a much-needed service.
"As painful as divorce is, clients need trusted financial experts to assist them, and their attorneys, with the financial implications and income tax ramifications of their divorce settlement", said Edward Hrunek, EA, CDFA, senior accountant of Porte Brown LLC, an accounting firm in the greater Chicago area.
"Clients who are divorcing have myriad issues that need to be addressed before their divorce is finalized…dividing the marital assets, child custody, how the children are going to be supported, and what lifestyles is everyone going to have after the divorce is finalized", Hrunek said. "But people often overlook the income tax aspects of a divorce: the taxability of alimony, receiving a part of the ex-spouse's retirement account, or selling the marital residence. They also need to address how they will live on a single income."
To help his clients manage the financial issues surrounding divorce, Hrunek attained his Certified Divorce Financial Analyst certification from the Institute for Divorce Financial Analysts. The certification prepares professionals to address financial issues associated with the estimated 1 million divorces that take place in the United States each year.
As a CDFA, Hrunek is trained to provide financial information and assistance divorcing couples, including evaluating the tax issues arising from the division of marital property, understanding the settlement options for dividing pensions, and the awarding of child and spousal support. Hrunek also has access to specialized software to develop informational reports to better communicate the financial information to the divorcing couples, attorneys, courts, and mediators.
Porte Brown Partner Jeffrey Smiejek said Porte Brown has an array of specialized services, and the firm felt that incorporating a CDFA would help the firm stand out. It's not alone. According to Jessica Pierce, CDFA, general manager for the IDFA, in the past year alone the Institute has seen a 47 percent increase in growth, with CPAs accounting for approximately 20 percent of this.
Pierce mainly attributes the increase to brand awareness. "Many lawyers have become aware of the importance of not only having a financial professional on their team, but a financial professional who specializes in divorce", Pierce said. "Additionally, divorce rates continue to rise and CPAs have to figure out how to handle these cases. Many times, CPAs realize they need more specialized training after handling one or two divorce cases."
Tracy Stewart, a CPA/PFS, CFF, and CDFA in Bryan, Texas, said firms have also begun to recognize the growth potential in bringing a CDFA on board. "The investment advisors are seeing an opportunity to bring in more AUM by courting the spouse in litigated divorces who does not control the money. Post-divorce, this ex-spouse will be looking for an investment manager, and who better than the one who helped with the financial aspects of the divorce."
Working as a Divorce Specialist
To earn the designation, the participant must complete a series of self-study course modules and pass an exam for each module.
Hrunek said it took him approximately four months to attain the certification. As a CDFA, Hrunek said, he is able to assist clients and their attorneys with the following:
- Marital property
- Retirement plans
- The marital home
- Spousal support
- Child support
- Social Security benefits
- Insurance (health and life)
- Marital debt
Stewart said CDFAs can also be called on to help clients:
- Gather and organize financial information concerning the clients' marital assets and liabilities, including preparing a draft of a joint inventory and schedules of identified property.
- Trace separate property or reimbursement claims.
- Gather and organize financial information concerning clients' income and expenses.
- Prepare a financial projection of future estimated cash flows.
- Develop federal income tax estimates.
- Provide tax-affected estimates of the value of marital property.
- Prepare present or future value calculations on marital assets and liabilities.
- Develop and analyze options for allocation of the clients' income and expenses.
CPAs who specialize in divorce may further specialize in forensics and business valuations in divorce to determine the valuation of personal property or business valuation that may be in question in more contentious divorces, Stewart said.
In addition to the technical skills needed to excel as a CDFA, CPAs who want to enter this field also require a specific temperament and special set of interpersonal skills—not to mention the sheer willingness to insert themselves into what can be can be an emotionally charged and messy personal process even under the best of circumstances.
The most critical trait for prospective CDFAs, Hrunek said, is the ability to remain calm and objective when discussing a client's divorce.
"When dealing with contentious couples, it is very difficult to find an equitable resolution to the issues at hand. Emotions are running very high and each spouse's attorney wants the best for their client—that s what they are getting paid to do", Hrunek said. "As a CDFA, I cannot give legal advice and cannot tell a client that 'they should do this or that.' I ask the client 'what if?' What if you get alimony…this is how much income tax you would pay. What if sell your home? This is the possible tax ramification."
Ultimately, both Hrunek and Stewart say, attaining their CDFA has been well worth it—for their own professional growth; for their firms, which can now offer a wider array of services; and, most importantly, for their clients, who now have a familiar and trusted advisor to guide them through one of life's most difficult transitions.
"I live by the mantra you never stop leaning. The more you know, the more information and service you can offer and provide to your clients", Hrunek said. "Today, clients want and need more than the basic accounting and tax service. They want to know what else we can do for them."
About Deanna Arteaga
Deanna Arteaga is a professional freelance writer and public relations specialist who for the past six years has covered CPA industry trends for AccountingWEB. She also writes about CPA firm marketing, higher education and professional development for CPAs, and workplace trends in the accounting profession. She has more than 20 years of journalism and public relations experience, including her tenure as a former newspaper reporter in suburban Chicago where she covered breaking news, municipal politics, and state legislative issues.