* Clients who remarry need a prenuptial and estate plan
* They do not have to divide assets equally to be fair
* Important to choose a neutral power of attorney
By Helen Kearney
NEW YORK, June 30 The complexities of modern
families, which can often include children, stepchildren and an
array of ex-husbands and ex-wives, can make financial advisers
feel more like therapists.
Still, it is essential that they are equipped to handle --
and ready to discuss -- sensitive issues dealing with money and
inheritance, and the passions that they can provoke.
"It's not exactly a shrink session, but (couples) are often
talking about issues they've never discussed before," said Jane
King, a Wellesley, Massachusetts-based adviser. "I have to play
Clients often struggle with how to treat each child or
stepchild fairly, which does not necessarily mean dividing
assets equally. They must take into account money each child
might receive from an ex-husband, wife or grandparents.
King said she helps clients by discussing her own situation
as a stepmother to her husband's two children. She said she
feels more money should be set aside for the child that she and
her husband have together than for his other children as their
mother also gives them money and much of their education has
already been paid.
"It can be a shock for people to hear, but being fair does
not always mean splitting everything equally," said King.
The two most important documents for an adviser to
recommend for clients planning to remarry are a prenuptial
agreement and an estate plan, say advisers.
Each spouse's assets earned before the marriage should be
kept in separate accounts, while any income earned after the
marriage can be put into another account.
In the case of investment accounts established before the
marriage, any interest or dividends should be pulled out of the
account so principal and income are not mixed, said Martin
Shenkman, an estate planning attorney in Paramus, New Jersey.
In terms of dividing an estate, advisers often recommend
that a client set up a trust that will support a surviving
spouse while he or she is alive and then the money will pass to
the children when the spouse dies.
However, this can cause problems if there is a big age gap
between the client and new spouse, who may be only a few years
older than the children from the first marriage, said David
Handler, a Chicago-based attorney with Kirkland & Ellis.
"She might die when she's 90, which means the kids won't
inherit anything until they're 80," said Handler.
In most situations, it is better to separate the
inheritances, said Handler. The client can take out a life
insurance policy and name his children from his first marriage
as beneficiaries. It is best to put the policy in an
Irrevocable Life Insurance Trust to ensure it is protected from
creditors or the children's spouses if they get divorced, said
Another issue that clients face is deciding whom to name
as holding power of attorney, said Robert Rabkin, an accountant
based in Teaneck, New Jersey. This person can influence how
assets are divided.
Even if the client trusts his spouse, he should consider
giving an old college buddy or family friend power of attorney
to avoid potential conflicts.
A friend may also have more sensitivity to the different
parties than a fully independent person, such as an attorney.
"An independent person is more likely to say, 'this is
what it says in black and white, we can't move an inch,'" said
Advising clients with complex family lives takes
sensitivity and the usual priorities of estate planning can
shift, said Handler.
"One issue is trying to reduce taxes, but the bigger issue
is trying to keep the peace. No one cares about taxes when
they're battling over money," Handler said.
(Reporting by Helen Kearney, editing by Matthew Lewis)