Here's a hypothetical example of how a CDFA can help: John and Jane are 40 years old and have two children. They own a home worth $165,000 with net equity of $77,500. Their IRAs and 401(k) retirement plan total $165,500 in value. John earns $90,000 a year and has take-home pay of $68,760 a year. Jane has never worked outside the home and has no job skills, but she hopes to get a job for $5 an hour with take-home pay of $8,900 a year.

The following settlement has been suggested. After the divorce, Jane and the children will live in the house, which will be deeded to her. She will also receive $44,000 of the retirement funds and John will receive $121,500, thus dividing the assets equally. John will pay Jane alimony of $600 per month for 5 years and child support of $225 per month per child. He will also pay college costs which start in 4 years.

Regardless of Jane's additional awards in this example, John's surplus still leaves him several viable options for retirement planning.

John's expenses include his normal living expenses, child support, alimony and college costs. Jane's expenses include support of the children and are reduced when each child leaves home.

This appears to be a reasonably fair settlement. However, an analysis creates the financial future illustrated in the graph above. Jane's assets will be completely depleted within seven years while John's will have grown dramatically.

To improve Jane's financial future, the settlement could provide her with increased alimony of $1,500 per month for 10 years. This would actually cost John $1,005 per month in after-tax dollars. The correct child support according to the Child Support Guidelines is $1,125 per month for two children for a couple with their income. Jane also could be awarded an additional $24,300 from the retirement plans. She also may need to cut her expenses by 10%. These changes in the original settlement can produce the results illustrated in graph #2.

This sample case illustrates the value of financial planning as a means of reaching more equitable divorce settlements. If the court's intent is to treat both parties in a divorce as equitably as possible, it is essential to analyze the marriage as if it were a financial contract, with tangible investment into it by both parties.

    -- Example provided by the Institute for Divorce Financial Analysts.

Hypothetical example used as illustration only. Actual results will vary.

Securities offered through National Planning Corporation (NPC), Member FINRA/SIPC. Wealth Strategies Group and NPC are separate and unrelated companies.