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How cash flow modelling can help in divorce

Divorce is, for some, an unfortunate life event which can create an unsettling financial insecurity. It may throw an individual’s financial and investment plans into disarray and can cause concern that their future lifestyle aspirations will be negatively impacted.

Cash flow modelling during divorce negotiations can help to assess and identify the individual’s financial needs and make sure that any financial settlement which is reached is fit for purpose.

In the situations where your client has already received their settlement, the emphasis in on managing realistic expectations of spending and lifestyle goals for the future and ensuring that they don’t run out of money.

Our specialist, professional advisers at Cowgills Wealth can be instrumental in helping your clients review their circumstances, establish their objectives and navigate their way through what may be uncertain territory. The knowledge that your client’s financial situation is being individually reviewed by an independent financial adviser can help deliver peace of mind.

What is a cash flow model and why does your divorce client need one?

Essentially a cash flow model is a summary of your client’s finances. It takes into account all assets, liabilities, income streams and expenditure.

It can be difficult for some clients to organise and gain a firm grasp of their finances especially in circumstances where they have not been directly responsible for them during the marriage and building a plan with them helps them to understand what type of settlement they require.

For those clients going through a divorce, building a realistic and sensible cash flow model will help them ascertain how much income they will need for their future. In addition to taking into account day-to-day spending it will also include additional requirements for example income required during retirement, the cost of dependents such as school fees, expenditure on holidays, and ad-hoc items such as buying a new car and major household repairs. Inflation, returns on investments, interest rates and taxes are also factored in.

It is not always possible for the client to maintain the same standard of living in the aftermath of a divorce and a cash flow model can highlight this and help the client to manage spending and expectations going forward.

Different scenarios can be modelled in order that comparisons can be made and discussed as part of the negotiations.

What about post settlement?

A cash flow model is essential for managing future expectations. If it highlights that the client is likely to run out of money, it is far better to know this at the outset and review spending accordingly, rather than receive a nasty surprise further down the line.

Establishing a financial plan once they have reached a settlement is essential for your client but this will be worthless if they fail to continue planning and it’s vital that they review their objectives at least annually to assess whether they are on track to achieve their lifestyle aspirations. Changes might have to be made or objectives amended as time progresses.

If a capital sum has been awarded, a cash flow model can be used to work out how to structure assets to provide income in the most tax efficient way and also in line with the attitude a client has to investment risk.

Why work together?

Our cash flow modelling and budgeting capability tools enable lawyers and us as wealth managers to work alongside each other to support clients going through a divorce and create a structured plan for the long term.

With expertise in ever evolving areas such as pension sharing, investments and financial protection, our specialist team is here to help your clients through all stages of the divorce process and to enable then to view the future with confidence.

By working together, lawyers and wealth managers can ensure that clients going through divorce can undergo as smooth a transition as possible to their new lives. Our cash flow modelling tools are a brilliant way of ensuring that a client has sufficient money to fund their day to day life, future needs and aspirations and their retirement.


The Financial Conduct Authority does not regulate Cash Flow Modelling or Tax Advice.

Wealth Management
Posted by Chris Harrington
23rd July, 2019
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