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Sunday, September 22, 2013
Telling clients the truth even if it drives a wedge
I am not a divorce lawyer, financial adviser or couples
counselor, but a reader who is an investment adviser sought my counsel about an
issue that likely could use the wisdom of someone engaged in all three
The reader sought advice about "pre-divorce"
counseling, an interesting term since most married couples would likely refer
to themselves as "married" rather than "pre-divorced."
Since a couple's assets are split in a divorce under specific rules, the reader
wanted to know if he should discuss divorce rules when advising a client about
As he explains it, inherited assets remain "separate
property," if the inheriting client keeps the assets in her own name. So
if Ms. Smith receives an inheritance and puts it into the "Ms. Smith
living trust," she keeps it all in the case of divorce. If she puts the
money into the Ms. and Mr. Smith joint checking account, it has now been
co-mingled. If the couple should divorce, the funds are subject to a 50/50
split because of the co-mingling.
"If I bring the subject up, it can drive a wedge
into an otherwise happy marriage," my reader writes. ("Gee dear, you
don't think we'll have a future together?") His concern is that if he
doesn't bring it up and the client co-mingles the assets and loses half of her
inheritance in a divorce, then the losing spouse will sue him. On the other
hand, if he advises the inheritor to create a separate trust and the couple
divorces, then that losing spouse sues him.
"Or," he writes," I drive that wedge into
a happy marriage and divorce ensues. I get sued."
Either way, he figures, "I've created a
problem." He doesn't care what they do, only that he protect himself from
liability for "home wrecking."
"Should I bring it up at all?" he asks.
I can't tell my reader how to protect himself from such a
liability any more than I can tell him how to protect himself should he give
his clients investment advice that turns sour.
It's not up to the financial adviser to make the decision
about what to do with a couple's inherited money. But it does seem to be his
responsibility to lay out the couple's options and to be explicit about the
positives and negatives of various options. Presumably, such advice is what the
couple is going to the financial adviser for in the first place.
Couples may not want to discuss the possibility of death
either, but that doesn't let estate lawyers off the hook from explaining how to
best protect their assets should they die. To not do so would simply be
irresponsible. Similarly, when a couple goes to a financial adviser for
financial advice, he should give them the best advice he can give them and lay
out all the options from which they can choose.
Because his clients are going to him for financial
advice, then the right thing for the reader to do is to give them the best
advice he can give them, even if that means bringing up issues that might be
uncomfortable. If that drives a wedge in the relationship, then it's their
responsibility to decide how to navigate that wedge.