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Tyler (00:00):

It's funny, I was actually talking to a buddy of mine who's actually a divorce attorney, and I actually asked the question of him. I said, "How often are you engaging the insurance professional when you're splitting assets?" You wanna guess what the answer was?

Julie (00:13):

Zero.

Tyler (00:14):

Zero. Never, right?

Julie (00:23):

Hello, everyone. Welcome to the next episode of The Risk Rundown. Welcome to my work husband and my co-pilot, Tyler Banks.

Tyler (00:33):

Thanks, Julie. Thanks for keeping me in line, because I need to be told what I should be doing and what I should not be doing, most importantly, while in the office.

Julie (00:42):

We're gonna be talking today about something that can be pretty hairy. It can get difficult, and it can be very emotionally charged, and that is gonna be divorce and the separation of assets, right? We've come across this a lot with different clients and, you know, how to navigate that. So I think today will be really interesting of just the different things that we've learned throughout the years of being in this industry and maybe some exposures that we need to kind of discuss and tell our viewers about what to look out for.

Tyler (01:22):

Yeah. Divorce is complicated for everyone.

Julie (01:25):

And especially for high net worth families, right? Mm-hmm. The complex financial and emotional situations and transitions and the transfer of assets, and we'll get into all of that, but I figured we'd start out with a rapid fire.

Tyler (01:40):

Great. Let's go for it.

Julie (01:41):

All right. What's one misconception people have about insurance during the divorce?

Tyler (01:48):

I think people think insurance follows the assets, but it doesn't. Policies need to be actively restructured or you can end up with gaps, or the wrong person could be carrying the risk as well. A lot of times the risk follows the individual, not necessarily the assets. What risk do you see most often overlooked in high net worth separations?

Julie (02:16):

Honestly, I think liability. I think that, you know, the risk people, they get off from one policy onto their own policy, and they forget what kind of coverage that they need, or that they're dealing with so many different advisors that insurance happens to be kind of more of an administrative thing, and we're the last to know. One more for you. What's one coverage mistake that can create a long-term issue in post-divorce?

Tyler (02:45):

You know, forgetting to update your umbrella policies. That's obviously the biggest kind of long-term exposure, especially if you've got kids away at college. Who's picking up those children as they're away at school?

Also if you've got co-mingled assets, if you've got properties named under, you know, a family trust or co-owned under individuals, who picks up that risk is obviously a really big exposure for a lot of these individuals. Next question for you, what's something people assume is handled in a divorce but actually is not?

Julie (03:21):

I think honestly the thing that I have lots of conversations about with people is who's gonna insure the kids on the auto policy.

Tyler (03:31):

Yeah.

Julie (03:31):

Who's gonna take responsibility of placing their children on and taking on that rate increase? So I think honestly, that's one thing that people assume gets handled, like, "Oh yeah, they're covered underneath my, you know, ex." And both of them are saying that, and neither one of them are insuring the kids. So that's the one thing that I think that people assume was handled, but it's not.

Tyler (03:54):

Yeah.

Julie (03:55):

So divorce is never an easy subject, right? It's not easy for the people going through it. It's not easy for the advisors. It's not easy for us, like, trying to give them advice.

You know, what I think is really important, that the advisors really kind of all stay in touch because the things that are happening with maybe some trust and estate planning attorneys and the retitling of assets always affect us and there's all sorts of different moving parts and the people that are involved in it, they are in no head space to actually many times think of that kind of stuff, right?

Tyler (04:28):

It was funny, I was actually talking to a buddy of mine who's actually a divorce attorney. And I actually asked the question of them, I said, "How often are you engaging the insurance professional when you're splitting assets?" You wanna guess what the answer was?

Julie (04:41):

Zero.

Tyler (04:42):

Zero. Never, right? So I think when people think of divorce as legal first, but, you know, risk management should sit alongside it, right? Because every—

Julie (05:18):

Yeah.

Tyler (05:18):

—legal decision has an insurance and liability consequence. And so, you know, as you're making these, as you're untangling assets, as you're untangling ownership structures, who's responsible for what needs to be a part of that conversation. It's not just who gets what, it's who insures it, who is liable, and by the way, are the limits still appropriate for—

Julie (05:18):

Yeah.

Tyler (05:18):

—you know, divvying up assets? Do you still need the same liability limits now that you have two balance sheets? Or are the liability limits that you had previously still appropriate?

When you have a divorce and a separation of assets, there's also a desire in one of the parties that they also change their advisors as well.

Okay. So, you know, they may change their financial advisor. Obviously they've got different attorneys most of the cases. So I think it's important that all parties be at the table to have that conversation because, you know, if we're not part of that conversation, to your point, a child could be left uninsured on a car or maybe they fall off of an umbrella policy.

And maybe even talk about, Julie, some of these umbrella policies and how it's structured for people living in the household, and how maybe from a legal perspective, how that can be confused if, you know, one parent decides to not have an umbrella policy.

Julie (06:18):

Right. Well, and also, like, to your point, as a couple, they were worth, let's say, 30 million, but now depending if they're separating equally or not equally, it could be different limits of coverage that are gonna be affected and that need to be required, right?

So you know, to your point, they might think that especially since they have had an umbrella before, and now the assets that they're getting in the divorce, they might not necessarily be the larger assets, so they just don't think that they have the liability any longer, and they don't need it any longer. And so many times people just forgo the umbrella policy completely.

Tyler (06:57):

I think there's a couple of trigger points that are helpful when you are engaging your insurance advisor. You know, I think a couple trigger points, obviously multiple properties.  A lot of times you see complex ownerships, you know, LLCs, trusts, and the breaking up of those LLCs or trusts, or maybe they maintain the same LLCs and trusts.

High value assets as well, and the divvying up of those assets. If you've got paintings, if you've got jewelry, who keeps those? You also want to make sure that you're not over-insuring it as well, right? You don't want two insurance policies unnecessarily because then they're overpaying. And then the last one, Julie, are domestic staff and drivers.

Julie (07:38):

Well, and then also the other thing is a lot of discrepancy in the actual titling of it, right? Yeah. And who is taking that on. Because many times LLCs are closely held LLCs between a husband and wife or two spouses. And so I think that to divide up those LLCs, or to your point, are they going to keep them in an LLC?

And then if they are going to, if it is amicable and they do keep the LLC that they're closely held owning together, then who pays the premium? Who's responsible for actually paying the premium?

And then that's the other thing is that the finger-pointing goes on. Unless it's actually documented in the papers of whose responsibility it is, many times that premium can go unpaid, then there's a cancellation of a policy that they absolutely need. What's that one game that we used to call when we were little?

Tyler (08:31):

Oh, telephone between the cans? Yeah. Yes. And see if you can hear the other person on the other end.

Julie (08:36):

Yes. That's what I feel like divorce is sometimes, is that, you know you say one thing and then it goes to another person, then it goes to another person, and then by the end, if nothing is technically documented, then it's all out of skew.

Tyler (08:47):

Oh, that's a good one. Yeah.

Julie (08:49):

You know, if they get a vehicle, but it's titled in their soon-to-be ex, or ex-spouse, and now they're driving around this vehicle that they don't own, it's technically the liability of the ex-spouse that still has that liability, and the one spouse cannot insure it until it's actually retitled.

And that goes for houses, it goes for vehicles, it goes for any kind of asset. But that's, I think, people jump the gun so much that all of a sudden they just want to, they either insure things that they can't because they don't own them, or they go completely uninsured because they don't think that they need to carry the insurance on them.

Tyler (09:27):

You know, to my previous example, so you've got now two separate households, and you've got new partners entering into that picture. At some point, the trust also needs to be updated, right? Beneficiaries obvious, often get overlooked in these types of situations. And, you know, legacy intentions can have unintentionally change when you bring in new people into the household. So, you know, divorce doesn't just divide the wealth. It can rewrite kind of long-term intentions as well, if not reviewed carefully.

Julie (10:05):

So you bring up a good point with the new relationships because let's say you and I are getting a divorce, all right? To each other. You know, —

Tyler (10:17):

Never.

Julie (10:17):

—you're my work husband.

Tyler (10:17):

Never, Julie. You'll be my work wife forever.

Julie (10:24):

So you're my work husband, and heaven forbid we're actually going through a divorce, right?

I have a new spouse, but I'm living in a home that is titled to me. I own it, but now I have a new relationship that's actually coming in. We're not married. That person is living in a home that they do not own, and they do not have contents coverage for.

So but this is now their home, so it's one of those things that I think that people actually assume that there's going to be coverage when there's a new partner involved, and there isn't.

There isn't an assumption of coverage. And so I think that that's one of the things that there has to be another additional conversation when... and this is, you know, for someone that's been divorced or not been divorced that's just in a new relationship. If that person is actually living in a house that they do not own, they need a renter's insurance policy, and they need their own liability policy.

Tyler (11:20):

Because, Julie, they're bringing stuff with them into that relationship, right? They may have some jewelry. They may have some, you know, let's say art or some other high-valued items, and are those being separately insured? Are they, to your point, you know, and if there's a theft in the home, or maybe they lose something while they're out on a trip, that could be an exposure that maybe they're not realizing that they're taking on.

Julie (11:42):

Right. It's just a very complex situation.

Tyler (11:45):

Yeah, you know, I think, obviously a key takeaway, Julie, is that divorce doesn't eliminate risk, it just redistributes it, right?

Julie (11:57):

That's good, Tyler. Look at you. That's good.

Tyler (11:59):

Right? But you're taking one balance sheet and you're creating two balance sheets, and both need to stand on their own. Both balance sheets need to stand on their own.

And it's important, you know, and here's another question, Julie. When is the insurance advisor a part of the conversation?

Julie (12:19):

We have to be a part of the conversation from, like I said, every stage, from the beginning to the end, right And if both insurance advisors are not qualified to be able to give that advice of a high net worth individual creating their own insurance program, if one is doing that and the other one is not, then there's gonna be a discrepancy of coverage as well, right?

And there, you don't want one insurance saying we need to make sure that the kids are covered, and then the other insurance agent saying no, we don't need them covered, or yeah, we should cover them. There could be either duplicate coverage or no coverage at all.

Tyler (13:01):

Yeah, I think, I do think that it's important that those conversations are had up front on who takes on what risk. You know, if you have a car, then it's to be retitled under the new individual so that they can procure their own insurance.

I've personally witnessed this, as I'm sure you have as well, Julie, that a lot of times post-divorce, one spouse may be refusing to pay for the insurance premium on an asset that they say it's no longer them.

I no longer have ownership. But they still are entitled on that asset, and if they're still entitled, then the insurance needs to follow where it's being titled while those things are being worked on behind the scenes.

Julie (13:40):

The thing is, is that if it's not at the very beginning, like if we're not having those conversations when this is kind of fresh, it can go years and years and years without, or with a gap in coverage or with the wrong structure, right?

So it's one of those things that I've had certain scenarios that, you know, something has been titled differently for four or five years, and I've come and I've taken on the account, and I'm the one that's starting to ask how a home is titled or who owns what. And all of a sudden they realize that their previous insurance program didn't reflect anything that had been done during the divorce situation.

Yeah. So, I think that it's really important not only to have those as an existing broker, to have those conversations from the very onset of the relationship separating, all the way to the end of the retitling of the assets.

But if we're a new broker, it's really important for us to be able to look at those assets and have those questions and ask those questions about how things are titled, because they may have assumed that their previous agent had done something, but they hadn't. So I think that's really important for us to do that as a new broker and for us to continue to do that on an annual basis on our renewal reviews, because you never know how things may have switched up as well.

Tyler (15:08):

Yeah. Assuming that everything's covered in a divorce could be a very dangerous habit. So get out in front of it early with the insurance advisor, making sure that they're part of the conversation.

And then most importantly, make sure that both parties are equally covered under their insurance policy for liability under the right asset structure. And I think if you do that, with this, a lot of these pitfalls that we're talking about, Julie, can be avoided. Just get us involved early and we can make sure.

Julie (15:39):

Yeah. Because at the end of the day, what's important is to make sure that the clients are made whole at the end if something were to happen. So that includes both parties, right? We just don't want there to be anything bad that would happen to either party.

So this has been a very difficult, kind of complex conversation, just basically because of the nature of it, but I think it's something that unfortunately happens very frequently, and that is a conversation that we probably are having with our clients more often than not.

Julie (16:12):

All right. Well, thank you, Tyler. Thank you so much for helping me address this complex conversation. And as always, stay safe and stay protected.

01:25 — Navigating insurance considerations during divorce
Divorce can involve much more than the division of assets. Changes in ownership, liability responsibilities, and financial structures often create opportunities to review and align insurance programs with each individual's evolving circumstances.

04:28 — The value of coordinating insurance, legal, and financial decisions during divorce
Divorce often requires coordination among attorneys, financial advisors, estate planning professionals, and insurance advisors. Keeping these conversations connected can help ensure important decisions remain aligned as assets, ownership structures, and responsibilities evolve.

06:57 — Asset ownership, titling, and insurance responsibilities after divorce
Luxury homes, collector vehicles, trusts, LLCs, and other valuable assets often require careful review during a divorce. Understanding ownership structures, policy responsibilities, and documentation can help support a smooth transition and provide greater clarity for both parties.

09:27 — What coverages should be reviewed after a separation
New households, revised ownership arrangements, and changing family dynamics often create opportunities to revisit insurance programs. Regular reviews can help ensure coverage remains aligned with each person's current needs and long-term plans.

11:45 — Building two independent insurance programs
A key theme throughout the discussion is that divorce creates two separate financial lives that must each stand on their own. Liability limits, umbrella policies, asset ownership structures, and insurance programs should be reviewed regularly to ensure both parties remain properly protected after separation.