CDA Estate Planning & Post-Divorce Financial Transition Flashcards

What is the recommended timeframe for a newly divorced person to complete a comprehensive financial plan and estate document update?

Answer: Within 30 to 90 days of the divorce being finalized

Financial and estate planning documents should be reviewed and updated within 30 to 90 days of divorce finalization to ensure complete protection.

After divorce, a client receives the marital home with a cost basis of $200,000 and a current FMV of $500,000. If they sell it two years later as a single filer, how much gain can they exclude under IRC Section 121?

Answer: Up to $250,000 as a single filer who owned and used it as a primary residence for 2 of the last 5 years

Single filers can exclude up to $250,000 of capital gain on the sale of a primary residence under IRC Section 121 if ownership and use requirements are met.

A client is 52 years old and receives a significant lump-sum cash settlement from the divorce. What is the most important financial planning consideration for this settlement?

Answer: Investing the funds according to a personalized plan reflecting updated goals, risk tolerance, and time horizon

Divorce settlement funds should be invested according to a personalized financial plan reflecting the client's new life stage, goals, and risk profile.

Which of the following is the key benefit of a CDA presenting a 'settlement spreadsheet' to clients during asset division negotiations?

Answer: It shows the after-tax and after-cost values of different assets so clients can make truly equitable and informed divisions

A settlement spreadsheet shows real after-tax and after-cost values, preventing clients from making trades that appear equal on the surface but are actually unequal.

When a recently divorced client has no individual emergency fund because all savings were joint, what is the standard financial planning recommendation for how much to accumulate?

Answer: 3 to 6 months of living expenses in a liquid, easily accessible account

Standard financial planning guidance recommends 3 to 6 months of living expenses in a liquid emergency fund, which is especially critical during the post-divorce financial transition.

How does the role of a Certified Divorce Advisor (CDA) differ from that of a Certified Divorce Financial Analyst (CDFA)?

Answer: The CDA credential equips advisors to guide clients through the holistic financial and practical aspects of divorce, while the CDFA is a financial industry credential focused specifically on financial analysis within the divorce process

The CDA credential focuses on holistic guidance through the financial and practical aspects of divorce, complementing but distinct from the CDFA's more narrowly focused financial analysis role.