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Rebecca Williams, client director at Brown Shipley, says that cash flow modelling can make all the difference during divorce negotiations when securing the right settlement for your client and helping them to plan new financial goals for their future. The use of modelling tools enables lawyers and wealth managers to work together to support their clients going through a separation and create a structured plan for the long term.
Building a plan helps the client understand what kind of settlement they need and what they can achieve going forward. For those who have already received their settlement, it is about making sure they do not run out of money and managing realistic expectations of spending in the future.
The importance of cash flow planning during a divorce – preparing for the future
A cash flow model is effectively a client’s personal balance sheet. It takes into account all assets, liabilities, income streams and spending.
For clients going through a divorce, building a cash flow plan will help them understand how much income they need for the rest of their life. It takes into account day-to-day spending and any number of other requirements including; school fees, holidays, retirement and ad-hoc items such as buying a new car. Assumptions about inflation, investment returns and taxation are built into the bespoke model.
It may be that the client will not be able to maintain the same standard of living following the divorce and a cash flow plan can help prioritise spending and manage budgets going forward. A number of scenarios can be modelled to reflect different spending patterns so that comparisons can be made and discussed as part of the negotiation.
Once the required amount of income is agreed, the model is then used to look at the capital sum needed to produce it. It is impor
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