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 professions.

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 an inheritance.

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. 

Jeffrey L. Seglin, author of  The Right Thing: Conscience, Profit and Personal Responsibility in Today's Business and The Good, the Bad, and Your Business: Choosing Right When Ethical Dilemmas Pull You Apart, is a lecturer in public policy and director of the communications program at Harvard's Kennedy School. 

Follow him on Twitter: @jseglin 

Do you have ethical questions that you need answered? Send them to rightthing@comcast.net. 

(c) 2013 JEFFREY L. SEGLIN. Distributed by TRIBUNECONTENT AGENCY, LLC.