How Men Can Thrive Financially After Divorce | Expert Advice for Men 40+ || DPTSP #091 || David M. Webb

[00:00:00] Welcome back to the Dump, Pick the Scab Podcast, where we assist and teach men over 40 to heal and thrive after divorce. Today, we have special guest Steve Shepner, a seasoned financial planner with over 20 years of experience specializing in financial divorce transitions. Steve provides comprehensive strategies to help individuals navigate the complexities of divorce from legacy planning to managing investments and insurance. I wish you were around back when I got divorced. It was ugly.

[00:00:27] His goal is to empower you with the knowledge and tools needed to move forward confidently. Join us as we explore practical insights and advance to transform your financial future after divorce. Let's dive in. He also has a podcast, A Man's Journey Through Divorce.

[00:00:46] Welcome to the Don't Pick the Scab Podcast with the premise of connecting men over 40 with the tools and community to thrive in their divorce recovery either before, during, or after a divorce.

[00:01:13] Can you share some of your journey into financial planning and what inspired you to specialize in divorce transitions? Well, I've been in financial planning for over 20 years. And through that period of time, I learned that there is so much more to a successful financial plan than just instilling some sort of product.

[00:01:35] When I went through my divorce. When I went through my divorce back in 2017, I made a decision to reinvent the way that I was working financial planning because what occurred to me is that people tend to have these elevated states of financial psychology, if you will. Divorce brings us face-to-face with all of our financial fears.

[00:02:00] And the other unique thing about divorce and financial planning is you're operating under this set timeframe, often established by the courts. And you have to make a decision around every dollar flowing through your household, all the money you save, all the money you're earning, whether it's going to count towards support or helping you transition into your new living arrangement.

[00:02:24] And under that condensed window of time, when our financial psychology is elevated, it's a very challenging piece. But to me as a planner, it's the most interesting time. It allows me to bring my full body of skills to the table to help these individuals so they can make their decisions with clarity and confidence. A lot of times people say, why do you want to work on divorce?

[00:02:49] For me, it's the same reason why a doctor might pursue oncology as a career. Somebody has to run towards the problem. And I find that it helps me bring my full set of skills to the table to help them. What are some of the common financial mistakes people make during a divorce? I would say the number one thing, number one mistake people are making right now has to deal with their housing transition.

[00:03:19] Across the country, I work with people across the country and their housing, the housing transition is the biggest problem. We're talking about raising the cost of living to the divorcing household because we have to refinance and buy our, potentially buy our partner out at much higher interest rates. So that increases the overall cost to the family.

[00:03:44] But then they go through and they just make these settlement decisions around the house without making sure that somebody can get pre-approved for the mortgage, without making sure that their credit is in good shape, without making sure that they understand the full set of intricacies that exist around the housing transition. So I would say that's the number one problem. Other problems happen because they don't understand the rules behind retirement accounts, for example.

[00:04:14] One of the major things is splitting a employer-sponsored plan without understanding what the plan sponsor allows you to do in terms of having the next spouse kept on the retirement plan with the employer or forcing it to be moved into an IRA. Those are two completely advantages or disadvantages that could come with that. And so we just don't gather all the information. I think a lot of people just, they're focused on dividing the assets,

[00:04:42] but they forget that we have to follow certain rules that plan sponsors might have, or that mortgage underwriters might have, or what the IRS might require us to do. And oftentimes these things are just glossed over because they're just focusing on dividing accounts or dividing assets in a certain way. So when you're helping people, this is one of my biggest questions, because you're also a certified divorce coach.

[00:05:09] How do you wear two hats and how do you know when to separate the hats? You know what I mean? Yeah. When people come in and meet with me, oftentimes we're going to do an assessment up front and we're going to find out where they are. Sometimes people have, I would say when they fall down the scale of contentiousness to the point where they're more amicable,

[00:05:31] or they have specific points of contentiousness, such as we're having a hard time deciding who's going to stay in the house. Those individuals are ready to have me step in as a financial neutral and to work the case, to give them unbiased recommendations. So me as a financial neutral, I step in and have allegiance to my recommendations, not to one party over the other. But sometimes people come in, especially men.

[00:06:00] And I would say the majority of my men that I'm working with are the primary breadwinner. They're over 40 years old. Ding, ding, ding. Right. They have been the one who's received the news from their wife that she wants a divorce. And they sit there and they're asking themselves, why was my efforts not good? I was following the how to be a good father, how to be a good provider, how to be a good husband handbook.

[00:06:29] And I know I'm not that perfect, but damn, I'm a pretty good man in this relationship. And they find themselves in this situation where they feel completely vulnerable financially. And they're unsure how the divorce process works. They don't want to cause more damage, but they also have these heightened levels of fear about their future.

[00:06:49] So these individuals can benefit from general financial knowledge, but that financial knowledge isn't going to help them overcome these internal emotions that they have. So in these cases, they tend to work with me through some coaching first where we work. So the coaching is a little bit different than therapy. Coaching is going to set you on the framework of where you are today.

[00:07:15] It's going to give you tools and strategies to move forward day by day, moment by moment. Where therapy is going to break you down into your past and help you understand something. But in divorce, we're not broken as men in divorce. We're just having a hard time dealing with a transition. And we need to have the awareness, the tools, the strategies to help us get ready to make these important decisions about our transition.

[00:07:40] And those individuals, primarily the man who was being left, and that's the breadwinner, has all this internal storm working within them. And they need help getting their feet on the ground so then they can make their financial decisions with clarity and confidence. So we have an open discussion at the beginning to find out truly where they are. And they may have a financial need that needs to be answered, but they're not ready to do it.

[00:08:05] So I'll invite them to come into coaching to see if we can calm that storm a little bit to move forward with their financial decisions. Can you discuss the importance of understanding men for understanding their assets and liabilities during a divorce? Because a lot of guys have no clue. The best way to look at this is we have, every time you have an asset, it could be a house. It could be a stock account that you've invested in that's not designated as a retirement account.

[00:08:35] It could be your employer's retirement account. It could be a savings account. Every time you have an asset, you have an automatic agreement with the IRS for taxes. The IRS is going to say, given the asset that you have, you either have to pay taxes now or you have to pay taxes in the future for some sort of arrangement. Okay, like a retirement plan is going to be a tax in the future.

[00:09:05] Dividend earned off a stock account is going to be a tax this year. So there's always those types of nuances. So we always have a tax relationship to every asset we own. The thing is the tax relationship varies drastically based on the type of asset. The other thing that we have is we have some sort of protection component that goes with every asset, right?

[00:09:31] So a house, the way it's titled, there's protection in the way it's titled. So most houses across the country are titled tenants in it by entirety, which means each person owns the house 100%. You go out and cause a car accident. You get sued. Somebody comes in and says, I'm going to take the equity in your house. Your spouse can step up and say, no, this house is mine. I own it in entirety.

[00:09:58] But when you go through divorce and you own it individually, now the liability exposure has been changed. The same thing happens with any other types of asset you have. So there's different liability and different protection components to all these assets that needs to be understood. So in general, just understand that if you have an asset, that asset is going to have some sort of liability in the form of a tax.

[00:10:26] Could have a liability that you put on the asset such as a mortgage. It's going to have a protection aspect to it. And then the asset's going to have some sort of ability to produce cash flow, whether the cash flow is happening within the asset, such as dividends being reinvested inside a retirement plan, or it's money that's going in to pay for your home.

[00:10:48] So when you look at an asset, you have to look around the ring of it and understand all these different nuances that exist with that so you can have better clarity on how to make decisions with that asset. Wow. What role does legacy planning play in the divorce process and how can it impact one's financial future? The legacy planning right now, when you're married, okay, most people will have a will.

[00:11:18] That's put in place. And the will's going to govern assets that would be going through probate. Probate is the legal process that the court follows for us to retitle assets. But a married couple will have assets that don't necessarily qualify for probate. For example, if you own your house jointly or you own a bank account with your spouse jointly and you were to die,

[00:11:49] those assets don't go through probate. They just go to your spouse. If you have a retirement account, that also bypasses probate because it has a beneficiary designation to it. If you have a life insurance policy, that bypasses probate because there's a beneficiary designation to it. So, when you are going through divorce, right?

[00:12:16] We're going to separate these assets and we're going to say, okay, your retirement account now becomes yours. For example, I went through my divorce. I had an IRA. My wife was listed as the primary beneficiary. But I'm going to remove her and I'm going to list my children, let's say, as the primary beneficiary. That becomes a change that you would want to do. You would also want to revisit your will to make sure you're leaving it to the right person.

[00:12:45] There's lots of instances where wills aren't updated, somebody dies, and an ex-spouse gets to have some assets. But more importantly, you want to also revisit your medical directive, which is giving somebody authority to make medical decisions on your behalf. If you didn't have the cognitive ability to do that, oftentimes that could be your wife. But if you're divorced, you don't want your ex-wife to make those life decisions.

[00:13:14] And also like a financial power of attorney. That's if you lose the cognitive ability to make your financial decisions, who's going to step in. So as part of the divorce process, you don't necessarily go through and change all of your legacy pieces that are tied to your marriage until after the divorce process is complete.

[00:13:38] But then after it's complete, it's very important to sit down with a professional, whether it be a financial planner or an estate attorney, to actually understand how these things now that you own would flow to those people you care about in the unfortunate event that you passed away. So generally, and I know each state is different. And you're going to ask answers generally.

[00:14:06] How can individuals, oh no, what are some of the key financial considerations determining child support and alimony? That's some of the biggest questions men have on your divorce. Yeah, you're right. Every state's different. And what I would recommend that you do is use the courts for your favor, right?

[00:14:27] You can go to your local superior court or circuit court, wherever your divorce is being filed, and work with those professionals that are in that administration building. They will tell you a lot. They could tell you the forms you need to fill out. They can point you to places on the website where there's the child support calculator. They could do a lot of those things. From my experience, most jurisdictions or most states will have access to some child support calculator.

[00:14:54] And then you could use that calculator and look at the instructions for completing that calculator and get a good estimate of what child support would be. Child support seems to be very black and white in my experience around things. And let's say if you're carrying the medical insurance for the children, you would put that in. You would put in your income and all these other things. And all that stuff gets factored into the final number.

[00:15:22] And then that's the ability that you have. Alimony tends to be more gray. It's more subjective. And each state is different. And I haven't really seen calculators be used. So alimony, a negotiable side. And you could look at alimony that's paid directly to your spouse. You could front load alimony in your settlement agreement.

[00:15:45] You could argue to have temporary alimony to help a spouse that was, let's say, more of a stay-at-home parent to build up their skills. You could do a lot of things. The thing that I think is very unique with child support and alimony and the thing that often goes undiscussed is in 2017, this tax act called the Tax Cut Jobs Act was put into place.

[00:16:11] And what it did as part of that is it said that alimony is not deductible to the payer after a certain date. Before 2017, it would still be deductible. But since 2017, it's not deductible to the payer and not taxable to the recipient. So oftentimes, people don't realize that I'm paying child support and alimony with after-tax dollars.

[00:16:38] And the person who's receiving it is receiving those things without paying taxes. Now, I personally feel that the person who's the payer has the advantage because they have some constraints. They know that they have to be greater stewards of their money and they can be more responsible with their decisions.

[00:17:00] The person who receives it oftentimes misuses the time frame for alimony and child support. They don't look at enhancing their skills. So when it ends, they not only have to earn income to replace what they were receiving, but they have to earn the taxes from their work. So in essence, they would have to earn 125% to pay taxes to end up with 100% that they were receiving.

[00:17:30] And I think this is a major issue and a major challenge for people because they don't see the purposes of this child support and alimony and what it's really intended for. And when those things end, they often get caught shorthanded. So how often should someone revisit their financial plan after their divorce is finalized? It depends on what stage you're in.

[00:17:54] If you're closer, if you're more in the accumulation phase, I think an annual review is fine, a comprehensive review. I think that would be the general rule of thumb. However, if you completed your divorce and your runway towards retirement is about five years from now and you want to work to make sure that you're doing everything right, more frequent reviews could be warranted for you to make sure that you're ready to approach that new transition point the right way.

[00:18:25] I also feel that if when we make this decisions about all of our finances, when we're going through the divorce process, sometimes your financial transition requires more attention. So let's say your divorce was completed in January of this year, and now you have money. You're trying to figure out your budget, your living situation, how to save for retirement, all these things that you're getting adapted to on your own, possibly paying support.

[00:18:54] It might be more prudent to have a financial person working with you through the first two or three months and then the next quarter and the quarter after that. You put more attention on it initially, so you're getting the right support and you're not making the mistakes. And then as you get your feet on the ground financially, then you have more of an annual review, let's say.

[00:19:19] Can you share a success story generally from your work that illustrates the impact of financial planning during divorce? I have one of my favorite stories is I was hired by a financial planner. He is in partnership with three other financial planners. He was the primary breadwinner, worth about $16 million.

[00:19:43] And his wife was a very, hired a very aggressive attorney locally. I've seen this attorney work. This attorney is very good at pulling together her resources. She's very smart and wise. And my client had worked with me to design, help him get a feel of what the settlement would look like. And when it got into the legal framework, he and his attorney were just working by themselves.

[00:20:14] And I hadn't spoken to him in about six months. And he called me up and he said, my attorney's helping me with a settlement proposal. We're getting ready to send the settlement proposal off to my wife and her attorney. But I don't feel that everything's right. And I want you to come in and look it over. And what they had done is they had made a double counting error in his business.

[00:20:38] So his business that he owned with his partners, they had this reserve fund inside the business where each partner owned $800,000. And then they had the business valued. What they did is they took this reserve fund as an investment account, listed it as a marital asset, and then put the business as a marital asset. So in essence, what they did is they double counted $800,000.

[00:21:06] And the financial guy, when I pointed this out to him, he was like, oh, no, duh. I can't believe I missed that. They were ready to submit this to the other side as part of the settlement agreement. And that would have raised his assets by $800,000. So we were, in essence, able to save that double counting. Double counting happens in multiple ways. And it's very easy to fall in those mistakes of double counting.

[00:21:33] And you can't rely on the other side to bail you out and say, you know what, you made an error here. They're not going to tell you. No. Yeah. What are some of the ways to develop a positive mindset about finances post-divorce? Oh, that's a really good question. Post-divorce? Post-divorce, yeah. When the shit show is over. I have my unique way of doing this. So when I got my divorce, I was over, I was 40, 47, right?

[00:22:03] I had been the main breadwinner. My wife was a stay-at-home mom. And I'm a financial planner. And every day I'm going through and I'm helping my clients. And I could work cases and I could say, geez, these people have these goals. And they're not going to be able to meet their retirement goals. I can work those things in my head. Then I'm the one going through divorce and the way we had our situation established. I had a low mortgage on my house.

[00:22:32] I had a lot of equity in my house. I wanted to keep my house. And in order for me to keep my house without refinancing, I had to give up almost all of my retirement to her. And so here I am at 47 making this decision. Do I choose stability for my family or do I focus on my retirement? And I chose the stability. And I sat back and it was uncomfortable because I'm like, how the hell am I ever going to retire now?

[00:23:00] And it's actually an ideal time to be talking about this because we're talking about politically people having their social security loss. And I used to tell myself like, what happens if I lose this stuff? But what I found is when I lost the things I was attached to, such as my retirement, it pushed me into diving into my resources of what it is I truly own.

[00:23:26] My creativity, my virtues, my character. And I started asking myself, what can I do? How can I view things? And I started looking at it and saying, if I have to work well into my seventies, let's say, then I might as well just do what the hell I want to do. I was trying to run at it. And this is the same thing I tell my clients today that are fearful of losing social security. Right. They took social security away. And just imagine this.

[00:23:53] If they took social security away from you today and all of a sudden you didn't have that backstop and you were ill prepared to enter retirement, then you would say, if I'm going to have to keep working, I'm just going to do what I want to do. And in essence, that then becomes the feeling of retirement. Right. So I view things that way. I also call it the paradox of transcending. It's a concept that I develop.

[00:24:19] And if you think about it, especially if you're a listener, if you're in your forties, you know this to a point, to a T, you have worked really hard to build wealth for your family. You have sacrificed time with your kids for your career. You've sacrificed your energy. You might've even sacrificed your health and your ability to provide self care for your health, health along the way. Correct.

[00:24:44] And then, but as you're raising, as you're building this wealth for your family, right? The money side is propped up. You have cost yourself time, energy, and health, right? You've cost yourself other forms of prosperity. And what divorce does in the paradox of divorce says is you have to, I'm asking you to give up your money.

[00:25:10] And when you give up your money, you will start to reclaim your money because you're moving from a relationship that's toxic or not working for you. And you're going to use your time, your energy, and your health. That's going to be replenished. And as it does, you'll be able to accumulate more money. So we don't understand how much our energy, our health, and our time when it's wasted deviates

[00:25:39] from our ability to go out and be creative in our ability to produce value for the world. So I just see it as a paradox. I believe that divorce is asking you to give up a form of prosperity so you can reclaim other forms of prosperity. Oh, that's an interesting way to let it. When you do that, you will become more prosperous. I had a patient tell me the other day, and it was just like a slam. We were talking about life, and she's a little bit younger than me.

[00:26:07] We're talking about how much time you have left. And she says that she looks at stuff now through a different lens. And her lens is called QTR. No, QTL. Quality Time Left. Right. Because we are on the downslide of our lives. Right. And that rang huge with me. Quality Time Left. There's a spiritual component to what we're talking about here, and it's formulated in

[00:26:37] several books. The two books that I read, I have read several times. One is called The Second Mountain by David Brooks, and one is called Falling Upward by Richard Rohr. And in these books, they talk about this season through life where especially men. Men, they come out into the workforce. They're filling this archetype. They want to be successful.

[00:27:02] They want to be all those things that we were trying to be before she told us she wanted to leave. We want to be the good father. We want to be the good provider. We want to be the good partner. And we're working and working so hard with our career, and we're giving up so much to do all those things. We're putting all these other people ahead of us. And then divorce comes, and you're like, what was it all for? And this is the analogy of the second mountain.

[00:27:30] Now you're being asked to climb the mountain again, but are you going to do it in the same way that you had done the first time? And more often than not, you're not going to do it the same way. And when you get to the top of the second mountain, you're going to have a different viewpoint of life, such as the lady saying QTR. You're going to have this different viewpoint of life, and you're going to understand some of the nonsense that you were attaching to things during your first mountain climb. Does that make sense?

[00:28:00] Yep, definitely. So finally, what message do you want listeners to take away from our conversation today regarding financial recovery after divorce? Sure. Financial recovery after divorce. I would say that it's important to really take inventory of what it is that you own. I mean, we're seeing multiple instances in today's world where we lose things that we

[00:28:27] think we own, but we don't own them. Divorce teaches us that we don't own the things that we thought we owned. The fires in California teaches us that we don't own things we thought we owned. The floods in Asheville teaches us we don't own things we thought we owned. So life is going to present you all these challenges.

[00:28:52] And when you're faced with these challenges, it's very important to double down on what it is that you own. And you own your knowledge. You own your character. You own your virtues. You own your joy. You own how you can show up and deliver value in the world. And the miracle, I think, that hides behind divorce is that it peels away all this nonsense

[00:29:21] of things that we thought we owned. And when we're left there picking up the pieces, we discover that what it is we really own is much different. And if you focus on building what it is that you truly own, you will have a feeling of prosperity that's different and more real than these shadow type of feeling of prosperity because we have so much in a retirement account. That's not really true.

[00:29:52] All right, Steve. That was interesting. You, I wish my video was on so I could drop my mic right in front of you. But hey, we appreciate you being on the podcast. Let the listeners out there where to find you. I'll have your contact information in the show notes. Sure. Sure. Oh, no. Let me. I'm sorry. I mean, the best way to find me is through my website, utreecoaching.com. That's Y-O-U-T-R-E-E-E coaching.com.

[00:30:21] And if you want to tune into the podcast after you listen to this podcast, you're welcome to do it. It's at A Man's Journey Through Divorce. It's on all the major podcast platforms. What's the significance of U-Tree? That's a long story. But I developed U-Tree back in 2010 before I started the business. And there's a tree actually called a U-Tree, Y-E-W. And the U-Tree is one of the most resilient organisms on the planet.

[00:30:51] They have some of the U-Trees can be over 1,500 years old. And the idea is what they used to do is the British, back in medieval times, British bow makers would use the U-Wood for their bow and arrows because it's extremely strong and extremely flexible. But the reason the U-Tree lives so long is that it produces its own pesticides. If it falls over, it reroutes itself in the ground and starts to grow again.

[00:31:19] If as it grows, it will hollow out its core and develop a root system down inside the core of the tree to live off its own nutrients. So when I look at this type of thing, this is what we should be doing as we're approaching our lives. We should become resilient. We should become flexible. We should build our own structures to help support us the right way. So that's the U-Tree. That was very interesting.

[00:31:47] All right, Steve, we appreciate your time. This was well worth the effort of not having video. But next time I do that, we'll have to have you back because I probably got through about five of my questions of 25. But that's okay. But we appreciate your knowledge and your thoughts.