If communicating about such delicate matters seems complicated, the primary reason for doing so is simple: clarity. "What you really want is to avoid surprises," says Myra Salzer, founder of the Wealth Conservancy, an independent financial planning firm in Boulder, Colo. Salzer has developed software that lets families exchange vital, personal information online. (For more information, go to executorsresource.com and click on Estate Logic. Annual subscriptions run from $49.95 to $189.95.)
Tim Belber, a principal at the Madison Group, an independent wealth-management firm in Greenwood Village, Colo., goes so far as to recommend a "welcoming ceremony" for new spouses-a family dinner or some other gathering to greet them with smiles and handshakes before venturing into weightier matters. "It's about trying to create a balance between the financial and the personal," he says. "Then, when you talk about the inheritance concerns, it takes the sting out of it."
Yet many insist what's most important is honoring your client's wishes, not what the kids or other stakeholders want. "It's always easier to deal with these issues without the children involved," argues Philip Erickson, an attorney at O'Kelley & Sorohan, in Duluth, Ga. "The parent's wishes are all that really matter here."
Granted, zeroing in on what those wishes are can be a challenge. "The advisor must get to know each client's situation," says Samuel Shapiro, an estate planning attorney at Mitchell Silberberg & Knupp, in Los Angeles. "Some attorneys focus on estate-tax savings, but to me, truly understanding your client's needs and values is equally or even more important."
Of course, this might mean donning the emotional counselor hat. "Advisors must be adept at pointing out the issues without becoming judgmental," urges attorney Janet Bandera, a consultant for the Moneta Group, in Clayton, Mo. "You have to be sensitive in how you approach these issues, and know when to back off."
Sometimes that takes a magic touch. "Clearly, members of our profession should be not just wizards of tax and estate law, but careful listeners as well," says Russell Montgomerie, a CFP at Lawless, Edwards & Warren, in Boca Raton, Fla.
Prenup Pitfalls And Negotiating Tips
Prenups, says David Howard, an attorney at Hoge, Fenton, Jones & Appel, in San Jose, Calif., are "hard to negotiate and hard to make enforceable."
But others say that this is just the contract's bad reputation. "People are put off by the idea that their new family is trying to cut them off," says New York attorney Brian Raftery. "A prenup is actually just a tool to make sure they do get something." It is not, he stresses, "a ceiling but a floor." It guarantees a minimum obligation, much like the elective share itself. If the family situation changes later-for example, if one partner's stock portfolio appreciates dramatically, or if the wealth-owner decides to completely disinherit the ungrateful kids after all-the prenup can always be amended, as long as both parties agree.
Another option is a sunset clause that stipulates, "after 15 years of happy marriage, say, the agreement no longer applies," says Raftery.
As prenups become more common, the newly betrothed-especially those entering wealthy families-are less likely to balk. They might even expect them. "Most people just want to know what's in it, and if it's good or bad for them," says Raftery.
Yet Ivan Illan, director of financial planning at Los Angeles-based Michel Financial Group, discourages these contracts. "They can always be fought [in court]," he insists. "They exist only because attorneys love to market them, but there's no such thing as an ironclad prenup."
In truth, prenups must meet certain requirements to have any chance of standing up in court. First, each party should employ separate counsel. Otherwise, a judge may rule the agreement invalid. "This tends to invite drawn-out, contentious negotiations and delays," concedes Theodore "Ted" Kurlowicz, an attorney and professor of taxation and estate planning at the American College in Bryn Mawr, Pa. "But I haven't had any parties ultimately refuse to sign or get married."
Second, both sides must disclose all of their assets at the outset. "Many people are reluctant to do this," says Kurlowicz. "It can get adversarial and messy." Without it, however, the prenup may not last.
Whatever their pros and cons, one thing is clear. "Prenups need to be drafted so they don't cause more problems than they solve," observes attorney Jason Smolen, of Smolen-Plevy, a Washington, D.C.-based estate planner.
Dino Tozzi, a certified estate planner and financial consultant with AXA Advisors, in Harrisburg, Pa., says it's important to remember and remind your client that prenups "can actually preserve family ties rather than strain them."
And it's best to get them out of the way as far ahead of the wedding as possible. "Get it done and hope you never have to look at it again," says Raftery.
Still, it's never too late. Postnuptial agreements can be just as effective.