WealthManagement Magazine

Helping Heirs Get Theirs

Buried within many of the boilerplate financial planning questionnaires used by advisors is an innocuous little line that says something like, Any expected inheritances? There's a reason the question is not featured more prominently. Taxes, health care expenses and charitable intentions of a benefactor render most inheritance predictions dicey at best. But these threats to a would-be windfall pale

Buried within many of the boilerplate financial planning questionnaires used by advisors is an innocuous little line that says something like, “Any expected inheritances?”

There's a reason the question is not featured more prominently. Taxes, health care expenses and charitable intentions of a benefactor render most inheritance predictions dicey at best. But these threats to a would-be windfall pale in comparison to another, increasingly common one: a new marriage partner stepping in and claiming some or all of a benefactor's hand-me-down largesse.

“This is becoming incredibly common, and is likely to be even more prevalent in the future,” says Ann Perry, author of The Wise Inheritor (Broadway, 2003). Longer life spans and skyrocketing divorce rates are two major contributing factors to the trend.

Typically, financial advisors are focused on estate planning on behalf of the older generation rather than for those on the receiving end. But since younger family members are likely to live (and be clients) longer, and get the money instead of bequeathing it, serving as an advocate for imminent inheritors can be quite rewarding. Here's how to gracefully ensure that your clients get what they have coming, instead of watching the money going to Jason the pool boy (a.k.a. their “new dad”).

Walk the Walk

Perhaps the best way for a potential beneficiary to protect his financial future is to live life as if there were no chance of inheritance. Demonstrating fiscal responsibility will not only earn the esteem of his biological parent, it will also reduce the emotional stress caused by waiting for a ship that may never come in.

Here's where an advisor can help: Run a financial planning scenario for your client that excludes any future gifts. If a shortfall develops, the client needs to cut spending and increase saving to make up the difference.

Often a well-off parent will practice pre-death benevolence by making an annual gift worth up to the $11,000, which is exempt from gift tax. What your client does with this dough can determine not only if he receives an inheritance, but how likely it is that the gifts will continue on a “same time, next year” basis.

After your client pretties up his own financial picture, it's time to work on his attitude toward the family's assets. First, he must accept that no matter what he thinks is fair, right and/or just, the wishes of the donor parent will win out and must be respected. Second, your client is much more likely to be smiled upon now and from the hereafter if he adopts a position as a “steward” of the family's legacy, attempting to grow and preserve the wealth for future generations.

Finally, tell your client that grabbing his father's new wife by her fur-lined lapels and screaming “YOU'RE NOT MY MOTHER AND YOU NEVER WILL BE!” is unlikely to promote a smooth transfer of assets down the bloodlines. Instead, Perry says, the client should find ways to appreciate the stepparent.

“Having a spouse will keep mom or dad happy and active,” she says. “Plus, the stepparent may be the caregiver of first resort — a job the children might be unable or unwilling to do.”

Talk the Talk

Now comes the hard part — coaching your client through a meeting to discuss the wishes of the elder generation. Talking about sex and drugs is hard enough for most parents and children. In many families bringing up the subject of money can be like placing a live hand grenade on the Thanksgiving dinner table. It's doubtful that a stepparent's presence will make it any easier.

“This topic is so emotionally loaded for so many people,” says Emily Bouchard, author of the e-book Conquering Conflict: An Effective Technique for Resolving Blended Family Conflicts.

The stakes are high for you and your client. The confrontation could solidify or nullify his inheritance, and alter emotional ties to the rest of his family. You could lose his account. Or you could become his lifelong financial advisor, developing lucrative relationships with his siblings, parent and stepparent to boot. The following tactful actions performed by the two of you will produce meetings that end in hugs and handshakes, instead of slammed doors and squealing tires:

Check your ego at the door

Advisors by nature are proactive leaders, and your temptation will be to orchestrate everything down to the seating placement. But if the parent already has a trusted advisor, attorney or CPA, decorum dictates that you will have to settle for a place at the table, instead of grabbing the gavel. Even if the elder generation doesn't have a proactive advisor, don't think that you should become the de facto director. Bringing in a neutral third party is a better idea, says Thayer Willis, an expert in dealing with the psychological implications of money and wealth, and author of Navigating the Dark Side of Wealth — A Life Guide for Inheritors (New Concord Press, 2003). “A facilitator — not a financial professional or attorney — can be brought in to create a safe environment and make sure everyone is heard.”

Involve the siblings

To avoid discord, recommend that your client invite his brothers and sisters to attend the meetings via conference call at a minimum, and ideally in person. “That way you don't seem to be cutting a ‘side deal’ with the parent,” says Perry.

Tell your client to defer

Your client should also be prepared to defer to his mother or father, demonstrating gratitude for past emotional and material support, and listening to what his parent has to say — even if the news isn't what he wished.

Be prepared for an emotional meeting

This may be the first time the family has ever tried to discuss their past, present and future, and issues of death, divorce and perceived betrayal can create a powder keg of emotions for all involved. It also might require more than an hour in front of the fireplace to clear everything up. “This process typically will take several sessions,” says Willis.

Gentle Persuasion

Getting together won't do any good unless words are exchanged. Whether asked by you, your client or the meeting facilitator, these exact phrases are nonconfrontational ways to get the ball rolling.

  1. “Have you put your ‘final’ wishes in writing?” This simple question is one of the best estate-planning conversation starters. It's not about “who” or “how much,” just what the parent wants to happen. Anyone who has managed to accumulate a decent-sized nest egg will be smart enough to realize the ramifications of answering “no” to this question. At best, the survivors will be left trying to decide what the dearly departed would have wanted. The worst-case (and, if a stepparent is the survivor, the more likely) scenario will be an extended legal battle, the cost of which will be exceeded only by the animosity that could last for generations.

  2. “What health care measures do you want performed, and who should make decisions when you can't?” A positive upshot of the hoopla surrounding the Terri Schiavo case was that many Americans started thinking harder about what they would want if struck by a similar tragedy. Asking this question is necessary, timely and allows an estate-planning discussion to begin without “the money” being the primary topic. Stepfamilies should pay special attention to this issue, as a lack of written direction could lead to fisticuffs in a hospital waiting room.

  3. “What steps would you like to take to make sure your spouse is cared for after you're gone?” This tricky judo-like maneuver changes the conversation from “What am I gonna get?” to “I'm concerned about your partner's well-being.” If the heir-apparent really wants to provoke a parent to take action, he can ask what should be left to the new spouse's biological kids.

  4. “What would you like to have happen to the (insert illiquid asset here)?” Whether it's a family business, farm or a cabin in the woods, remarried parents will generally prefer that the latest spouse get cash and securities, while property with a higher sentimental value is handed down along bloodlines. And that goes double for the priceless possessions, says Perry. “Talking about family heirlooms, rather than money, is a much better conversation starter.”

Don't discount the idea of obtaining an expertise in helping stepfamilies transfer money with as little friction as possible. Allegedly, $41 trillion is going to be bequeathed in the coming decades, and 100 percent of marriages end in death or divorce. That's the kind of math you can build a career out of.

Marshall, Marshall, Marshall!

How bad can post-mortem stepfamily battles get? It will be hard to top the legal war waged after the death of J. Howard Marshal II, one of the richest men in Texas. At the tender age of 89, Marshall married a 26-year-old dancer named Vickie. It was the second marriage for both husband and wife, and it ended sadly when J. Howard passed away a year later.

“Awkward” doesn't do justice to describe how J. Howard's son E. Pierce Marshall felt when first saddled with a buxom blond stepmother 30 years his junior. But when Vickie laid claim to a big part of the 10-figure estate left by the elder Marshall, E. Pierce wasn't going to take it lying down.

During the ensuing nine years of legal wrangling Vickie was first awarded a half-billion dollars. That amount was later vacated, plus it was ruled that she owed her stepson a million bucks for legal expenses. A subsequent verdict gave her $88 million, but the decision was overturned late last year. Now it appears she'll have to get by on her beauty, charm and wit.

And who is Vickie Marshall? You might know her better as Anna Nicole Smith, described by Forbes magazine as the “erstwhile stripper-cum-reality-TV-star.”
Kevin McKinley

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