Family: Remarried...with Children
The thin veil of harmony that shrouded the union between the Kennedy and Onassis clans was stripped away during the 1975 funeral of Aristotle. The acrimony that had been simmering since shortly after Jackie and Ari exchanged vows became front-page tabloid fodder when the funeral procession’s lead car came to a halt, and Onassis’ daughter, Christina, who was riding with her stepmother and Jacqueline’s former brother-in-law, Ted Kennedy, got out and ran to another car in the procession. It has been said that Christina’s action was prompted by a question from the senator, who allegedly leaned forward in his seat and asked, “And now, what about the money?”
Money—specifically, the questions concerning who would receive how much at the time of the patriarch’s death—was only one of many problems that plagued the marriage and the relationships between the Onassis children and their stepmother. Still, the family’s plight dramatically underscores just how incendiary the issue of finances can be when a second or third marriage involves more than the bride and groom.
Although the financial plans for a blended family can be essential to a harmonious union, they are often overlooked. It may be unwise and irresponsible to ignore these issues, but it is also human nature. “The whole area of money is fraught with emotions—talking about money and negotiating about money,” says Lee Hausner, a psychologist near Los Angeles who specializes in counseling affluent families.
Recognizing this reluctance to discuss money, wealth managers will advise anyone on the verge of remarrying to establish a plan that outlines how the children of each spouse-to-be will fit into the couple’s overall financial picture. Will all of them be the beneficiaries of trust funds and inheritances, and if so, will the distribution of wealth be equal? Will all of the children be afforded the same luxuries and the same schooling, or will some be saddled with thirdhand cars and student loans? “We encourage our clients to work out issues—before the marriage—of how to deal with marital assets and supporting stepchildren,” says Bob Phelps, managing director and wealth adviser at J.P. Morgan Private Bank. “They will have fewer incidents for family members to be surprised or angry down the road.”
When couples discuss how a spouse’s child will be supported financially, says Hausner, they should consider three primary points: the child’s age, with whom he or she will live, and the financial means of his or her other biological parent.
As for age, the younger the children are at the time of the remarriage, the more common it is for them to be included in the new parent’s estate plan, especially if the couple also has children together. Teens and young adults, however, are less likely to benefit from a stepparent’s will. “There is not one standard rule,” Hausner says. Usually, she adds, “day to day, they’d be treated equally; they get to enjoy family vacations, family toys, the plane, an education—and maybe a small inheritance. But usually the stepchildren will not be treated the same as the biological children [in terms of an inheritance]. This happens frequently.”
Allen Falke, the director of estate planning at the accounting firm Carlin, Charron & Rosen in Worcester, Mass., agrees, but he does have one client who plans to leave his now-grown stepson a portion of his estate, which includes land, cash, art, and securities. “It’s not an insignificant percentage that he will receive, and he’s definitely in the minority,” Falke says, adding that only about 5 percent of stepchildren—of any age—are beneficiaries of a stepparent’s estate. Additionally, he notes, the law generally does not consider non-blood relatives as rightful heirs. However, Hausner says, a moneyed spouse may have a greater inclination to be generous with younger stepchildren if his or her own children are already grown and established.
When a stepchild lives in the family home rather than with his or her other parent, providing the same lifestyle and privileges to both the biological children and stepchildren is considerably easier, says Falke. Hausner, though, notes that the divorced spouse may become resentful if there is a wide gap between the lifestyle he or she is able to offer the child and the one that exists in the child’s new home. “This does become a problem, and you can’t pretend that it doesn’t,” she says. The remarried parent, she advises, should explain to the children, “Dad is feeling badly, and he’s afraid he may lose you.” She adds that cousins of the child could share Dad’s resentment toward the new lifestyle. “Parents need to say, ‘It is going to be hard for your cousins who can’t do these things, and they’re going to feel bad, so we don’t talk a lot about these things to them.’ ”
Stepchildren who are adjusting to a more affluent lifestyle may wonder early on about their potential inheritances. The responsibility of addressing those questions rests with the biological family member, says Hausner. “Say John and Sue get married,” she says. “Sue will have an inheritance, but her kids will not. Sue needs to have the conversation: ‘You’re seeing a lot of expensive toys, but in terms of an inheritance, John’s children will be treated differently than you.’ ” To compensate for not including children by marriage in an estate, some benefactors give them cash and assets during their lifetime. Either way, J.P. Morgan’s Phelps notes, the sooner the children know what to expect, the more they can plan for their own futures. “Our advice to clients is to inform their children and stepchildren what their intentions are instead of springing it on them as a surprise,” he says.
While Hausner believes that parents need to be honest and forthcoming in discussions with children, she does not suggest that all information should be shared. “You do not explain how much money is coming to them at all—no matter whether they will receive $10,000 or $10,000,000. What you say is, ‘How do we make sure everyone is going to be financially competent?’ ” Thus, she says, the dollar figure becomes irrelevant.
Falke agrees that some information should remain private. The estate plan of one of his clients, he says, stipulates that the stepchildren—there are no biological children—will not receive inheritances. “I’m typically a believer in full disclosure,” Falke says, “but in this case, it’s not appropriate. It would bring up issues that no one is ready to deal with at this point.” It is, however, essential in such a situation that the husband and wife share the same opinion about the inheritances.
Such issues can be accentuated by the presence of a family business, unless it is explained that the stepchildren will not automatically be added to the company’s payroll or given seats in the boardroom. “You need to make it clear that hiring is based on competency, not genetic ties,” Hausner says. “The family business is not the family welfare state; there need to be rules on who gets hired. Be equally open to [employing] biological children and stepchildren based on a meritocracy.”
Children of the moneyed spouse can feel even more threatened when the remarriage involves an age gap, points out Kathy Stepp, a partner at Stepp & Rothwell, a wealth management group in Overland Park, Kan. “A problem arises when the second spouse is significantly younger. What you are doing is essentially disinheriting the children,” she says. By the time the second spouse dies, the children themselves may be deceased or too old to reap the full benefits of their inheritance. “In this situation, it would be wise to leave some assets to children of a prior marriage at the time of your death, so they don’t have to wait for the stepparent to die.” Such a plan, says Stepp, could prevent the children from feeling any undue resentment toward a remaining stepparent.
Estate plans, which, financial experts say, are typically updated every five years, should be revised each time a person remarries. Advisers often recommend prenuptial agreements, but these documents are usually applicable for only a few years and are seldom as inclusive as estate plans.
“The estate plan of the older, moneyed spouse is very specific when there is a significant age gap or children from multiple marriages,” says Falke. In such an instance, the estate plan will usually specify that the surviving spouse forfeit assets if she remarries, and it prohibits her from bequeathing assets to her children. When the second spouse dies, any remaining assets pass to the moneyed spouse’s children and grandchildren. The same arrangement—the surviving spouse enjoying the financial benefits of the marriage but relinquishing assets to surviving children at the time of death—is often employed when a family business and shares of stock ownership are at stake.
Although there are guidelines for addressing issues of remarriage, children, and the distribution of wealth, Hausner emphasizes that few definitive rules exist because every couple’s lives involve so many variables. Still, experts do agree on one point. “Communication before marriage,” says Stepp, “is always better than resolution after.”