Woodhouse says advisors might consider having clients sign a letter that states that the spouses have differing interests, including their ability to tolerate risk, the investments they might choose, and their level of investment sophistication and that they recognize these differences.
If the less financially sophisticated spouse is delegating responsibility of money management to the more sophisticated spouse "you probably should sit down and have a conference with these people and put it in writing as well as the obligation of the investment advisor," Woodhouse says. "You might outline who is primarily going to be talking to the advisor, who is to be receiving directions to invest money. Find out where the prospectuses are going.
"If there's one person who's the decision maker, we get the spouse to sign that they have given the person special power of attorney to make investment decisions."
Advisors should also be aware that courts are distributing assets differently than they have in the past. For one thing, more types of assets are up for grabs in a divorce. It used to be that in a divorce the spouse who had title to a property-except in community property states-could receive that title, Gregory says.
Now, he says, virtually all states have laws providing for the equitable distribution of property in a divorce. "Years ago, executives did not have to be concerned about pension benefits," he says. "Now, if they're acquired during a marriage, they are clearly available. The same is true for corporate holdings-even what has now been defined as professional good will."
Susan V. Edwards, a family law attorney and mediator in Berwyn, Pa., says she has noticed changes in child support laws that make it much easier to collect. Bank accounts, driver's licenses and even business licenses are being seized to get deadbeat spouses to pay up. "A lot of times people will think they can open an account in another state, but they've gotten a lot more aggressive at finding this hidden money and much more aggressive about collecting child support than ever before." In fact, Edwards says lately in Chester County, Pa., courts she has seen judges in the middle of divorce cases actually pick up the phone and call the IRS when they spot improperly filed federal tax returns.
It's not just the laws surrounding divorce that have changed in recent years. Many areas surrounding marriage have undergone a revolution. It's getting harder to avoid the "elective share," which is the portion of an estate that state laws generally permit a spouse to elect in the event of a spouse's death, experts say. In Florida, for example, if your male client preferred his mistress to inherit his estate rather than his spouse, it once was quite easy to get around Florida's law that requires a spouse to get at least 30% of the probated estate. Assets could be sheltered in a revocable living trust; the elective share also could be avoided by setting up certain joint accounts, buying cash value life insurance or setting up an IRA or 401(k) plan. That changed for persons who died after October 1, 2001, when virtually all assets were permitted to be up for grabs for spouses seeking their minimum 30% share. Estate plans needed to be rewritten.
Things are changing for persons who aren't married, too. Although gay marriages are not legal anywhere in the United States, Vermont in 2000 legalized "civil unions." These provide gay and lesbian couples with virtually all the rights and responsibilities of marriage established by the state. "Domestic partner benefits are more common than they ever were," says Dorian Solot, author of "Unmarried To Each Other" and executive director of the Alternatives to Marriage Project in New York. One in four Americans now works for an employer that offers domestic partner health benefits, she says. But if you add a domestic partner to a health plan, you still pay federal income tax on those benefits. You don't if you're married.
"It's getting easier for unmarried couples to do many things together-buy houses, get loans, get credit cards," according to Solot. "The biggest difference is that unmarried couples are still considered legal strangers, so they have to be very careful when they become financially intertwined. The stakes are higher if they don't have a will or durable power of attorney for finances."
Prenuptial agreements, which formerly were used largely in second marriages, are more widespread and being used more in first marriages. They are appropriate in cases in which there is an imbalance of assets, says Harvard law Professor David Westfall, and in situations where there is an imbalance of claims-such as if one spouse has several grandchildren and the other has none. About half the states, he says, now have a uniform premarital agreement act, which makes it more difficult to resist enforcement of a prenup. In fact, Edwards said she was shocked at one recent Pennsylvania Supreme Court decision that upheld a prenuptial agreement-despite the fact that the young bride-to-be was provided with a ring represented as a diamond but which turned out to be cubic zirconium. The court ruled it should have been appraised before she married him.