Latest / Divorce Dialogues / When Support Stops: Protecting Your Family with Jeff Landers
Transcript
- Jeff Landers (00:00): If you do a good negotiation and you come out okay with your settlement so financially you're okay, your kids are okay. I think it's that peace of mind and not looking back and having regrets, which is why you want to do it right the first time because as I often say in most instances, there's no do overs. Katherine Miller (00:21): Welcome to Divorce Dialogues. I'm Katherine Miller. This is where we have honest, thoughtful conversations about divorce, the emotional, financial, legal and family questions no one prepares you for. From deciding whether to separate to navigating the process with dignity to rebuilding what comes next, divorce dialogues is here to help you find clarity, perspective, and a better way forward. One of the hardest things about divorce is that people are often making long-term decisions while they're still in the middle of emotional survival mode. And the focus is usually on getting through the immediate crisis and the short term, the legal process, the parenting schedule, the finances short term, and the uncertainty about the future. But what many, many people don't realize it's that some of the most important decisions in divorce involve protecting against risks that may not appear until years later and really thinking that through. What happens if support suddenly stops or someone dies? (01:31): What if the person who's paying support becomes disabled and how do you create enough long-term financial stability for the whole family to actually begin rebuilding your life? My guest today is Jeff Landers. He's a divorce financial specialist and the founder of Hello Monthly Income, a company focused on helping divorcing people protect alimony and child support through life and disability insurance strategies. Jeff has worked on more than 1000 divorce cases nationwide and has been a guest on this program before and has spent decades helping people avoid financial mistakes that can have lasting consequences long after the divorce is finalized. Today we're talking about the financial protections that people often overlook in divorce. Why these issues become so emotionally charged for parents and families and the questions people should be asking before signing an agreement they'll have to live with for years to come. Welcome, Jeff Landers. (02:27): It's a pleasure to have you back on the show. Jeff Landers (02:29): Great to see you again. Katherine Miller (02:31): One of the things that you talk about is how fragile support payments can actually be. And oftentimes when we're negotiating them, we're thinking about, well, what we expect to happen, but thinking about what might happen, of course you don't want to be too hung off on what might happen and not what you expect to happen either, but what is it that you think that people misunderstand about alimony or maintenance, as we call it in New York and child support after the divorce is finalized? Jeff Landers (02:58): I think they assume that it's negotiated, it's in the settlement agreement, it's signed, sealed, delivered. There's the divorce decree and it's cast in stone and people just don't think, especially if people at that time are healthy and relatively young, nobody's thinking about dying or getting cancer or becoming disabled, having an accident at work or whatever. So it just falls by the wayside. I don't know how many settlement agreements I've reviewed. Not all of them have life insurance, some do. And I can't recall a case where disability insurance has been included, but the reality is, and according to the Social Security Administration, people are three or four times more likely to become disabled during their working years than to die. I think Catherine, it's a thing where all the negotiations happening and as you said, there's the custody and the parenting and the division of assets and the payment of alimony and child support. (03:58): And I think just having insurance fall through the cracks or even if it's discussed, then there's pushback from the paying spouse saying, "Look, I can't take any more monthly expenses. It's enough I have to pay child support and alimony. I can't afford any premiums or anything like that. " And a little pushback and it's like, "Okay, we tried." But then stuff happens, the unexpected. Katherine Miller (04:22): It might be true that the paying spouse really doesn't have a lot of room in his or her budget to pay disability insurance, for example, which can be very expensive. And life insurance can be prohibitively expensive if someone has already had a previous health concern that can make life insurance really expensive. Jeff Landers (04:41): Although that can be excluded. I think some of the bigger issues come when you have older people, the so- called great divorce and then it becomes much more difficult and you're in your 60s to get life insurance coverage. And then there are other ways to get around that hopefully. But at some point, sometimes it's just not doable. But for most divorces, I think it's just something that the divorcing people don't think about and their attorneys don't necessarily think about. Katherine Miller (05:12): So what could actually happen if the paying spouse dies or becomes disabled? I mean, dies okay. Jeff Landers (05:19): Well, it usually stops when either party dies. So yeah, then it's done. If someone becomes disabled, it depends what kind. Is it a short-term disability for a couple of months? Then many times they're covered by short-term disability, let's say from their job or whatever. But if God forbid they get in a horrible car accident or they get some serious illness that they just can't work anymore and they have no income coming in, what could they do? They could go back to the court and either have the support obligations reduced, which could be detrimental to the receiving spouse. So the answer really is to have private disability insurance, not the group from your job, because many times that's just not sufficient to cover your income. In fact, many times it's if you could get another job, doesn't matter if you're making 100,000 a year, but the group disability insurance will be, "Well, if you could flip hamburgers, that's good enough so you can work and the disability doesn't kick in. (06:24): So you need the type of disability and I don't want to get too technical, but it's for your own profession. So if you can't do what you've been doing and you're disabled and that prevents you, then it kicks in and you get those payments you're entitled to. " Katherine Miller (06:39): It's kind of interesting because sometimes people come in in the way that you are describing, really just focusing on everything's going to stay the same except we're going to get divorced, which is obviously a big change and we're all going to keep doing what we're doing and all of this sort of stuff and tend to minimize the risks that you're talking about. And sometimes people come in really worried about the risk and not focusing on so much like, "Well, what if that thing doesn't happen?" And I think that it's kind of an interesting thing. It's kind of a balance between what are we going to do if everything stays the same and then what are we going to do if things are different? And I think that it makes sense to think about let's make a plan for what's going to happen if everything stays the same and then let's do a risk analysis of the what ifs. (07:21): What if someone dies? What if someone becomes disabled? What if there's other stuff? Because that way people at least know what it is they'd be changing instead of what seems like the tail wagging the dog. What do you think about that? Jeff Landers (07:31): When it's hard to calculate that list. You could sign the settlement agreement and yay, we're finally divorced and then the paying spouse walks out, it gets hit by a bus. Katherine Miller (07:41): Exactly. But you're not going to start your negotiations saying, "Well, what if I get hit by a bus?" And that's what I'm just talking about the timing just for the listeners to think, "Oh my God, oh my God, I need to worry about this and that and the other thing." Jeff Landers (07:53): Well, you know what I like to compare it to, Catherine, I've been paying homeowners insurance for decades yet my house has never burnt down once, but yet I paid tens of thousands of dollars if not more on home insurance and nothing's ever happened. But if my house did burn down and I had to rebuild at current prices, it could be absolutely unaffordable and devastating. I mean, look what happened in California to the Palisades where people don't have the insurance money and they can't rebuild and they've lost everything. And especially when you have a situation where the recipient of alimony and child support, they are totally dependent on that. Maybe they're keeping their house and that's the only way they'd be able to afford the mortgage is because of alimony and child support or maybe just to cover their basic needs. Maybe they were a stay-at-home mom or dad or they have a part-time job because they have very young children or whatever and that alimony and child support is critical for them to pay their bills. (08:57): You got to protect that because if that goes away, you're in a financially desperate situation. Katherine Miller (09:02): Yeah. And let me just go back and say I've been paying homeowners insurance for decades too and I did have a fire in my house. It didn't burn down in May of 2020, great timing and right in the beginning of the pandemic and we had to really do a huge renovation and live out of this house for a year and just a year before, and you're going to be happy with this one. I'm about to say just a year before, my husband and I were saying, "Wow, we're paying an awful lot for homeowner's insurance. Maybe we should pay less." And we looked around and then we're like, "Yeah, but none of this coverage is really good enough." Thank goodness because we had an insurance company that paid pretty much everything we needed them to do to make our house actually way better than it was before the fire, but it's really worth it to have those plans in place for something that doesn't work. (09:55): So we all live in houses, just to continue with our example here. Some of us live in bigger houses, some of us live in apartments where homeowner's insurance is less expensive because the risk is less. So are there particular situations or types of family arrangements where you think there is more risk than less? Jeff Landers (10:13): I think the risk is if you're totally dependent on receiving that alimony or child support, or let's say you have a great job or whatever and you're not entitled to alimony, it's just child support, but you need that because many times, let's say you have the house and you got a mortgage and let's say the paying spouse makes a lot more money and together you were able to afford that mortgage. But afterwards, if you're taking that on by yourself, but with the alimony and child support, you're able to make those payments. If that goes away, you could lose your house. How do you make up for that? And also it's important to realize that the life insurance is not necessarily just to protect alimony and/or child support, it's to protect all the financial obligations that the paying spouse would have, let's say future college expenses if that's been agreed to. (11:12): Let's say you're still responsible on a joint mortgage, things of that nature. Especially now, people stay jointly on the mortgage because they have two and 3% interest rates and now I think today it's like 6.7%. Nobody wants to refinance. So if there's still that joint obligation, that could be covered by the life insurance as well. Katherine Miller (11:34): Yeah. I mean, I think the things that you're talking about here, Jeff, are problems for families in general, especially when you have on income or one substantial income and one less income because the post-divorce financial plan is still a family financial plan. And if you're thinking about it kind of like an overview that you might not feel so wonderful about it post-divorce, right? It might not feel as collaborative as it felt when you were putting it together as an intact family, but it's still a financial plan and thinking about what your contingencies are in the event of something really difficult happening I think is what we're talking about. Jeff Landers (12:14): Right. And that's why I actually suggest that people get the life insurance and disability policies while the divorce negotiations are going on because post-divorce, you may no longer have the cooperation from your ex- spouse, which you need because they may have to take a medical exam and they have to give their consent to have this insurance because it's being placed on their life even though the receiving spouse could actually own the policy, which I also always suggest so you make sure that the premiums are always paid on time and the beneficiaries aren't changed and all of that, but it's best to get this done or if you try to get it during the divorce negotiations and it turns out that the other party's uninsurable or the cost is prohibitive, then you want to make other arrangements as you're still negotiating, not post-divorce where it's signed, sealed, delivered, and you may not be able to go back and amend anything. Katherine Miller (13:15): So Jeff, in all of the cases that you've worked on, the divorce cases, what are some of the biggest and most common mistakes that you see people making? Jeff Landers (13:23): Oh God, so many. And not necessarily related to insurance. And as you know, I'm also a CDFA, so I do a lot of the financial aspects of divorce. I always assume that people live to the age of a hundred. So you've got to figure out your budget of how post-divorce, you've divided assets, whatever you have, whether you've gotten some of the share of the 401k or other retirement plans or real estate or whatever, you need to understand how to make that money last and you have to come up with a realistic post-divorce budget. I mean, I tell women all the time when I'm looking through their financial disclosures or a New York statement of net worth and what their expenses are and I see that they have $30 a month for clothing or something like that. And I'm like, okay, you may not be thinking about it now, but at some point post-divorce, you're going to start dating again. (14:23): Okay. You may want a new wardrobe, you may want to get your many petties and your hair done. You have to think about your budget, how to allocate what's going on, how to invest those assets. And a lot of people just aren't that financially literate. And so I think there's always a lot of mistakes. I think during the divorce process, oftentimes people just had enough and they're overwhelmed and it's like, "Yeah, whatever, let me just sign it and get it over with. " That is always a critical mistake. And then things related to insurance, and this is a biggie, if you're not getting new insurance and you're using, let's say, a current policy where the receiving spouse is the beneficiary on an existing insurance policy, 26 states, including New York and New Jersey, automatically revoke the beneficiary designation upon divorce, which means post-divorce, you have to redesignate the spouse that was the beneficiary to now ex- spouse. (15:32): If you don't, then you could run into trouble because maybe this paying spouse remarries and put the new spouse on it and now you have a fight if that spouse dies of, wait a second, I was originally on the beneficiary, why was my name taken off? Why is the new spouse? And you get into all sorts of big problems. So it's important post-divorce as soon as possible to redesignate if that's what the arrangement is, the former spouse to actually be former spouse as the beneficiary and probably a good idea to send notification and writing certified mail to the insurance company. Katherine Miller (16:14): Let's add to that a life insurance trust, because a lot of people very wisely have life insurance policies owned by life insurance trusts. And yes, usually those designate the surviving spouse if there is one, but oftentimes they define that person as married to and living with. Sometimes they say, "You know what? My policy is for Jeff, and it doesn't really matter what my relationship is with Jeff. When I die, Jeff gets the benefit." But if it says, "My husband, Jeff, my husband, Jeff, so long as I'm married to and living with. " And a lot of these say that because a lot of times the trust and estates lawyers who are drafting these things really have a very crude understanding of divorce. And so they don't really think through or talk through and the people who have signed these and pay legal fees to have these trusts drafted are not thinking about divorce. (17:13): And so they're just scanning over these 20, 30, 50, 100 pages in the trust and they're just like, "Oh, I had no idea." Jeff Landers (17:21): And the wills normally get revoked upon divorce as well, which a lot of people don't realize, to bring up what people should do, you need to redo your will post divorce because you don't want now your ex- spouse to continue to get your estate upon your death. Or again, in a lot of states, it might be automatically revoked upon divorce. So all of those things, whether it's a trust or a will or life insurance, even like banks transfer on death, you want to change all of those things post-divorce. And these are the little things that fall through the cracks. I guess it depends who the attorney is. Some are very astute and they give that advice and others are off to their next case and, okay, this is over and done with, and that's the end of it. So there's really a lot of things to think about. (18:12): But yeah, going back to having life insurance and disability insurance to protect the receipt of alimony of child support and any other obligations that are part of the settlement agreement Katherine Miller (18:27): Divorce Dialogues is brought to you by Miller Law Group. We believe divorce isn't just a legal process, it's a human transition. At Miller Law Group, we help people navigate divorce with dignity, clarity, and respect, focusing on conversations that lead to better outcomes for families. Learn more at miller-law.com. A lot of people hear life insurance thing immediately, turn right out. It's too technical. It's intimidating. It's thinking about something I don't really want to think about. So is there a simpler way or more human way that you wish people could understand how it works? Jeff Landers (19:04): I think that you want to look at it as something that's protecting your receipt of this money. You put your money in a bank and it's protected up to 250,000. You want to think of your alimony and child support and any other financial obligations as something that needs to be protected in case the unexpected happened going back to homeowner's insurance. It's the same thing. Nobody wants to pay it. It's expensive. I live in Florida and the numbers are through the roof like they are in California, but it's like, okay, what happens like in your case, there's a fire. Do you have a million dollars or whatever it is that you could come out of pocket to rebuild? Most people don't and that would be financially devastating. The life insurance that we use is very simple. We use term life insurance. It's typically the cheapest. Again, you only need the term. (20:03): When you're married, you might have a 30-year term because you assume you're going to remain married and maybe it'll last until after retirement or whatever, but when it's done for the purposes of alimony and child support, you only need a term that matches when the last obligation ends. So if your child's going to reach the age of emancipation and New York's 21 and most other places it's 18 and let's say you have 10 years to go, then all you need is a 10-year term insurance. Now what I do, the toughest part of this, and this is where I come in, my expertise is to figure out how much should that death benefit be? Yeah, Katherine Miller (20:43): I was going to ask you that question because it's not just add up all those payments. Jeff Landers (20:48): And the perfect example is let's say in 10 years there's college expenses that you want to cover that because your ex- spouse is going to pay that. Well, first you have to compute what the future cost of that's going to be, right? Because if it's $20,000 a year now and 10 years, that 20,000 is going to be 45,000. So you have to see what the future costs will be at that point. And what I do, I go year by year because alimony ends probably often before child support ends. And then if you have several children depending on what their age is, child support will end differently for each child. So I do it year by year and then basically take a present value of that to come up with, okay, what are we talking about in today's dollars? Then you could cushion it a little bit, maybe add five or 10% because there might be other expenses associated with it and that would be the coverage amount and that's really the right way to determine. (21:48): Otherwise, you often see even in settlement agreements, spouse say will purchase some life insurance or will purchase $300,000. Many times it's a made up number or it's like, okay, it's $2,000 a month for 10 years so that's 120 months, so that's 240,000. It's not that simple. Katherine Miller (22:11): Talk a little bit about present value, Jeff, and don't get too complicated because I don't want to have our listeners freaking out about the numbers, but you just sort of use that word and I think it's valuable for people to understand what that is. Jeff Landers (22:23): If you think about inflation, okay a dollar is worth a lot less 10 years from now than it is today because of inflation. What dollar today, depending what the inflation rate might be worth 80 cents. So basically you want to look what the value of all those future obligations are today taking into account inflation. It's sort of working backwards. We assume inflation's going to be this much. Okay, you're going to have to spend $50,000 on college five years from now, but that 50,005 years from now is maybe worth only 35,000 today because of inflation. Katherine Miller (23:04): And the idea is that if you had $35,000 today and you invested it at a conservative rate of return, you'd have the 50 you needed at the time. Jeff Landers (23:12): Exactly right. Exactly right. Katherine Miller (23:14): What's one thing that you wish that more people understood about financial security while they're going through the divorce so that they don't have to learn it the hard way? Jeff Landers (23:23): Well, I think a lot of people just don't plan ahead. They're looking at their current situation and not really understanding what's happening down the road. And I'm sure you come across this more often in my experience, women than men want to keep the marital home, especially if they still have minor children. Okay, that's fine and good, but what happens if you have to replace the roof for $30,000? How are you going to do that? And even if you have a lot of equity in the house, okay the equity in the house doesn't necessarily pay your grocery bills, right? You can't go into the supermarket. No, I don't have any money, but I got a lot of equity in my house so don't worry, I'm good for ... It doesn't work. So yeah, you need to, especially things like that, or people will give up their share of retirement accounts in order to keep the home or something like that. (24:17): Now in some instances that might be okay, depends on the age. I mean, actually I was working with someone going through a divorce of women just yesterday or the day before they were in their 30s and she was fine. With little children, she says, "No, I want to keep the house for the kids." And she's got another 30 some odd years to build up her retirement accounts. So she wasn't that concerned about it right now. And for her, it made sense. If you're in your 60s, that's probably not a great idea. Katherine Miller (24:49): Yeah. All right, Jeff, we only have a couple more minutes left and I always like to ask this question at the end of the show and I call it the reframe. So the question for you is, how has your perspective shifted on what financial protection is in divorce and really just beyond just money? Jeff Landers (25:06): I think peace of mind, just knowing in all aspects, not just financially that you're going to be okay after this. Put it behind you, life will go on, things will get good. And I've had clients that have emailed me or called me, they're engaged, they're getting remarried. It's not the end of the world. And if you do a good negotiation and you come out okay with your settlement, so financially you're okay, your kids are okay, I think it's that peace of mind and not looking back and having regrets, which is why you want to do it right the first time because as I often say in most instances, there's no do- overs. People get emotional and it's like, I had enough, I can't take it anymore, just whatever, let's just sign and get it. Katherine Miller (25:56): Yeah. People always regret that. Jeff Landers (25:58): Yeah. And it's like, "Well, I told you not to do it. You just wanted to get it over with. " I mean, there's something said for that because people do want to have that inner peace like, "I don't want any more fightings. I don't want to go to court. I don't want to keep going back and forth." Katherine Miller (26:14): And I don't want to keep paying legal fees. With all due respect, Katherine, I don't want to pay you anymore. Jeff Landers (26:19): I always tell people, you got to think financially, not emotionally. And it is emotional and it is traumatic, but you got to think about your future. And again, as I said earlier, people don't realize people are living to a hundred. My mom's going to be 94 next month. My ex- mother-in-law's going to be 102 in two weeks. An amazing thing that hits the newspapers. Oh, Mary just turned a hundred. No, it happens every day. So people have to plan their lives assuming that they're going to hopefully live to a hundred in brain and body intact. Katherine Miller (26:55): Well, Jeff Landers, thank you so much for being my guest on divorce dialogues. Jeff Landers (26:58): Always a pleasure. Katherine Miller (26:59): Take care. I interviewed Jeff Landers again today and I've interviewed him several times, I think, in the past. And we've been thinking about and talking about securing the deal that you come to. And oftentimes I said during the show that it's interesting if people come into the negotiation too worried about the what ifs, because then it's really, really hard to focus on the main terms that we're working on. What is the division of assets going to look like? What about debt? What about future expenses and cash flow between you in terms of in the form of child support or in the form of alimony or in the form of responsibility for expenses like college or private school or summer camp or babysitting or doctor's bills and medical insurance, anything like that. So it is really important to focus on what the main deal is going to be. (27:57): I always think of it as building a house. You're going to start with the foundation, you're going to build the first floor, you're going to build the second floor, you're going to build the third floor, then you're going to put on the balconies, the shutters, whatever decoration you're going to have. And along the way there, some of those decorations or maybe the third floor is about what if? What if something happens that changes this situation? And it could be something that we might expect. Like what if somebody remarries? What if someone has another child? But it could also be something not expected and certainly not welcomed. What if somebody is disabled? What if somebody dies? What if somebody's industry, work industry is completely wiped in and they can't do it anymore? How are we going to manage that situation? And some of that might mean we need some life insurance or we need some disability insurance. (28:49): And some of it might be some other out of the box creative thinking about what the what if is that could affect your situation. And so my advice to you is that if you're in the middle of a divorce before you're done, before you sign, take some time to talk with your attorney or each other about the what ifs and figure out what you're going to do to resolve them and to plan for them and prepare for them so that they don't really destroy your lives. Thanks for listening. (29:24): If this conversation was helpful, share it with someone who might need it. And if you're navigating divorce yourself, you'll find more resources and episodes at miller-law.com. Make sure to subscribe wherever you get your podcasts.