LISI.com – Practice Pointers on the Core Concern of Blended Family Estate Planning: Joint or Separate Representation

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“Statistics show that approximately 60% of second marriages end in divorce, and almost 75% of third marriages do as well. These figures loom large in the minds of couples with the “yours, mine and/or ours” scenarios in their step and blended families.

There are pluses and minuses to couples sharing everything regarding their estate planning together, and when it comes to couples with blended families, the minuses can outweigh the pluses substantially. While there is great value in working together in approaching estate planning, it is important to be aware of the cautions against representing both partners in estate planning, especially when it is the second or third marriage or partnership for one of the members of the couple.

When couples who have children from prior relationships contact you about possibly representing them, the first question that should go through your mind is: “Should I represent this couple together or should I only represent one of the partners in the couple?”

The pros and cons of joint representation of blended family couples is the subject of L. Paul Hood, Jr. and Emily Bouchard’s commentary. Paul and Emily have written a book on the subject titled Estate Planning for the Blended Family, (Self-Counsel Press 2012) that will be released at the end of April. Their book will be available on all of the major online bookstore, and order information can be obtained through the following link: http://blended-families.com/estateplanning/

LISI members should also look for their three-part series on blended family estate planning that they are presenting on May 8, 15 and 22 for Phil Kavesh’s The Ultimate Estate Planner, Inc. The information on how to register for their upcoming teleconference series can be obtained either by clicking the following link: Estate Planning for the Blended Family 3-Part Teleconference Series.

L. Paul Hood, Jr. received his J.D. from Louisiana State University Law Center in 1986 and Master of Laws in Taxation from Georgetown University Law Center in 1988. Paul is a frequent speaker, is widely quoted and his articles have appeared in a number of publications, including BNA Tax Management Memorandum, CCH Journal of Practical Estate Planning, Estate Planning, Valuation Strategies, Digest of Federal Tax Articles, Loyola Law Review, Louisiana Bar Journal, Tax Ideas and Charitable Gift Planning News. Presently, He has spoken at programs sponsored by a number of law schools, including Duke, Georgetown, NYU, Tulane, Loyola (N.O.) and LSU, as well as many other professional organizations, including AICPA and NACVA. From 1996-2004, Paul served on the Louisiana Board of Tax Appeals, a three member board that has jurisdiction over all Louisiana state tax matters. Paul Hood can be reached directly at [email protected].

Emily Bouchard is a family, wealth, and money coach, and the managing partner of Wealth Legacy Group (WLG), specializing in the emotional impact of wealth in people’s lives. She has been working with inheritors in high net worth families since 2004 with a specialty in step and blended family issues. She is also the director of www.Blended-Families.com and has appeared on the Today Show and NPR, and has been featured in publications such as New York Times and Newsweek. Along with coaching individuals, couples, and families, she consults with advisors in responding effectively to their client’s emotional needs related to estate planning. Her book, co-authored with Paul Hood, from Self Counsel Press on Estate Planning for the Blended Family is due out later this month. Emily can be reached at 360.991.9558 or by e-mail to [email protected].

Here is their commentary:

EXECUTIVE SUMMARY:

Statistics show that approximately 60% of second marriages end in divorce, and almost 75% of third marriages do as well. These figures loom large in the minds of couples with the “yours, mine and/or ours” scenarios in their step and blended families.

There are pluses and minuses to couples sharing everything regarding their estate planning together, and when it comes to couples with blended families, the minuses can outweigh the pluses substantially. While there is great value in working together in approaching estate planning, it is important to be aware of the cautions against representing both partners in estate planning, especially when it is the second or third marriage or partnership for one of the members of the couple.

When couples who have children from prior relationships contact you about possibly representing them, the first question that should go through your mind is: “Should I represent this couple together or should I only represent one of the partners in the couple?”

COMMENT:

Advantages of One Strategy versus the Other

Obviously, most professionals want what is in the client’s best interest. And there are advantages to both separate and joint representation.

Some advantages of joint representation for couples on blended families include:

  • It is a way to build greater trust and more open communication between the two of them, and possibly with all of the children in their lives.
  • It is more cost-effective, since they only have to pay one set of estate planners.
  • It can be more efficient for them, as they can work together and divvy up tasks as they prepare to meet with you.

Some pro’s of having separate representation for clients with blended families include:

  • Each may have more freedom to speak up about their specific concerns and desires without having to necessarily compromise with their partner.
  • The best interests of the individual you represent are the only interests guiding you, and this is an important consideration since there can often be competing agendas, and potential conflicts of interest, often between a step parent and their step children.
  • How suited the couple is for joint representation can be discovered in an introductory session with you, which we see also is advantageous for you, even if it is complimentary. No one wants a problem client, as they are more likely to sue you and less likely to pay you. Even in these uncertain economic times, sometimes the best decision that an estate planner can make is to not take on certain people as clients. Taking the time to determine the best route to go up front makes a lot of sense, even if you give a bit of your time away for free.

Without healthy communication between the couple, joint representation could be disastrous. Paul witnessed this first hand with a couple, he in his early sixties, and she in her early fifties. Outwardly, they looked like a routine couple coming in for estate planning, and Paul agreed to represent the couple together, despite lingering concerns about how much was left unsaid at their introductory session, particularly about the abilities of each of their children, who should serve as their successor trustees, and how much to leave to all the children in their lives. However, shortly after the meeting, things quickly disintegrated between the partners, so much so that the couple ultimately divorced, in part over the significant differences in their estate planning goals and plans.

To make sure that he complied with the legal rules of ethics, Paul withdrew from representing both of them, and so they had to start over with two new attorneys. There were so many differences between the partners that they would have been better served by each having a separate set of estate planners from the start. The husband wanted their oldest son to serve as executor, while the wife was adamant that her younger daughter was the most capable. He felt strongly that her “baby” wasn’t ready or capable enough to handle her step-brothers and she wouldn’t command the boys’ respect or cooperation; his wife was just as adamant that his “baby” was neither incompetent nor unable to handle the enormity of the responsibilities. This couldn’t have been the reason for the divorce, but it was apparently just the straw that broke the camel’s back on a life-long tortured marriage, and it all came tumbling down.

Emily got to witness the other side of the equation, where joint representation created an opening for results beyond what anyone could have imagined. The advisory team at a well-known bank referred a client couple to Emily after then went two years without signing their estate planning documents. Their stand-off was a result of a blended family situation, where the husband had two children from a prior marriage and his second wife had two children with him. He wanted the estate equalized at the time of his death and to be assured that all four of his children received the same amounts.

She saw things very differently, since his children were not the same as theirs together, being able to benefit (or not as the case may be) from their bio-mother’s estate. As a result, she wanted her two children to receive the bulk of her estate, including that which she would be the beneficiary of if she were to outlive her husband (which was very likely since she was significantly younger than him). After four months of family dynamics coaching, they learned some communication strategies that allowed them to address over 30 years of long standing hurts and resentments. As a result of some in-depth, facilitated conversations, they not only came up with an innovative approach to their estate planning that honored both of their concerns, they also expressed feeling closer as a couple. They then worked effectively with their team at the bank and found an estate planning attorney who specialized in blended family issues who was able to easily incorporate their wishes into their documents.

Signposts for Joint or Separate Representation

In order to make the decision of joint or separate representation a bit more straightforward, there are some signposts that strongly indicate the need for considering separate representation:

  • If one partner is childless but the other has children. These people are not in similar circumstances if only one of them has descendants. Most people want to leave their estates to their children; it’s only natural. However, childless people don’t have such a tie. The risk here is where the stated goal of the parent partner is to leave everything to his or her children may be changed if the parent partner is the first to die.
  • There is a significant disparity in wealth or income in the couple. While not always definitive, an income or wealth disparity between the partners can signal an economic imbalance in the couple that could adversely affect the estate planning of the partner who has less.
  • One of them is economically dependent on the other. This signpost alone is usually not necessarily of the need to have separate representation. However, it together with the presence of other signposts discussed in this recording can be a strong signal of the need for separate representation.
  • One of them does all of the talking or appears to exert strong influence over the other. As an estate planner, you should take note of this sort of situation and take steps to delve into what appears to be a problem in communication between the two of them. The one who is being strongly influenced (or oppressed) will certainly know but may lack the self-will or the perceived freedom to point it out.
  • Length of the relationship. Generally speaking, the shorter the relationship, the stronger the suggestion of separate representation.
  • The number of past relationships one, or both of them, have had. Generally speaking, the greater the number of past relationships, the stronger the suggestion of separate representation.
  • The two of them were separately represented in a pre-nuptial agreement or property agreement. If it was important enough to have been separately represented in an earlier agreement, it is probably still important enough to maintain separate representation with respect to estate planning.
  • There is a significant age disparity between the couple. Generally speaking, the greater the age disparity between the couple, the greater is the need to consider separate representation.
  • If one of them has a significant secret from the other partner like another child, other assets or another lover. Secrets can have an insidious impact on relationships and can really put your estate planners in a difficult spot when the secret comes to light. Obviously, clients who are inclined to hold on to secrets aren’t going to be forthcoming, so you’ll have to ascertain this indirectly by reading between the lines and finding points of aggravation where you have violated the boundaries that the secret holding client has set around that secret information.

Ways to Address These Concerns with Potential Couple Clients

These are not easy points to consider and, the more uncomfortable they make the couple as you bring them forward, the stronger the indication that you all should slow things down. Give them sound legal reasons for why you think they need to seriously consider separate representation, if that’s what their particular circumstances call for at the time of your initial meeting. You can assure them that there are ways that they can stay in communication and connection around their planning even as they are represented separately.

Once they are clear about why you are recommending separate estate planners, you can then breakdown the different details to be determined together, such as medical/durable powers of attorney, and show them that they can still share with each other their thinking, and explore the pros and cons of their pending decisions. You can also note that when conflicts of interest arise, couples who can find places to align with each other, instead of needing 100% agreement, are able to feel more connected as they make their individual decisions.

With regards to alignment, in Emily’s earlier story about the couple with “yours and ours”, the husband was able to let go of needing 100% equality. They were able to come up with a strategy that honored the wife’s contribution to their marriage in a monetary fashion. They both agreed that her earning potential was about one sixth of his, and they calculated a percentage that seemed to fairly represent both of their views. This percentage was then taken into consideration in the difference that their two children together would receive over and above what his two would get. They were in alignment around the new approach and were able to get there by both letting go of their attachment to having their original views seen as right. In his estate, should he outlive his wife, all four children received the same amounts. She was able to be in alignment with that decision, even though it wasn’t her first choice.

Conclusion

If you determine that separate representation is the best option for a couple, communicate how you see it professionally and with a sense of truly taking care of both of their needs and concerns. Frame your assessment in ways that show them why this in their best interest and that it is not personal but is based on sound advice.

HOPE THIS HELPS YOU HELP OTHERS MAKE A POSITIVE DIFFERENCE!

CONTRIBUTORS: L. Paul Hood, Jr., J.D., & Emily Bouchard

CITE AS: LISI Estate Planning Newsletter #1954, (April 26, 2012) at http://www.leimbergservices.com/

© Copyright 2012 Paul Hood. Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.

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