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Adviser Workshop: How to advise clients with second families
by Jun Merrett on Nov 29, 2012 at 14:08
Paul Beasley (pictured), Elaine Gwinnett and Anna Sofat share their insights on advising clients with two families.
Managing director, Richmond House Group
I have a couple of clients who are hitting retirement and have two families, so we need to work out how to deal with their affairs.
There are particular issues with how to structure a will. Sometimes it’s a case of identifying who has brought the most into the second relationship and finding out if that needs to go to their original children or should be split equally with their second family.
Providing for stepchildren
Clients with a second family tend to bring out diplomatic problems rather than financial ones. Advisers have to tread carefully. I have dealt with cases in which one partner is taking on a stepchild in the new relationship and you have to be diplomatic about school or university fees, as one party may not want to take on the other party’s children financially.
We use a lot of cashflow modelling, which can help explain situations and demonstrate to them that they have more than sufficient income and assets to support the two families and do the same for their stepchildren as they do with their children. I think cashflow modelling is becoming more prevalent in these scenarios.
We encourage clients with older children to be open about their financial affairs because this can help to avoid challenges to their wills and conflicts when they die.
We’ve had situations in which some children are involved in the family business but stepchildren are not. The challenge is how to square that so you leave the bulk of the business to the children running it and decide whether to compensate the stepchildren with other assets. It can open a real can of worms.
DIrector, Forty One Consulting
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