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Key for stepfamilies: keeping the lines of communication open

(Page 2 of 2)

Suppose a tennis instructor is getting divorced from a neurosurgeon whom he put through school and from whom he expects alimony: $150,000 over 10 years, to be exact. Since the neurosurgeon is in a 50 percent tax bracket, it costs her only $75,000 in after-tax dollars to provide $150,000. Alimony is deductible for the one paying it and taxable income for the one receiving it. Since the tennis instructor is in a 20 percent tax bracket, he can get $150,000 in alimony with a tax bite of only $30,000.

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''And so you end up with Uncle Sam chipping into the deal to the tune of $45, 000,'' says Mr. Confair.

This technique is useful when one divorcing spouse is in a significantly higher tax bracket than the other. If both are in high brackets, presumably no alimony is necessary. If both are on the humbler end of the scale, the recipient will want to have money from the former spouse characterized as child support, since that is not taxable. Child support is not deductible, either, however; so the contributing ex-spouse will prefer to have the money characterized as alimony.

All this explains why people hire lawyers.

Confair stresses another important point: If you already have a Clifford trust for your children's education in place, don't spell out in the divorce settlement either parent's responsibility for educating the children. Why? If a Clifford trust is used to satisfy a parent's specific legal obligation - as sending the children to college would be if specified in a divorce settlement - the tax advantages of the trust disappear. Clifford trust money going to send the kids to Yale would become ''imputed income,'' and taxable, for the parent designated to foot the tuition bills, and would be taxable.

Better just to leave the Clifford trust quietly in place, unmentioned during the divorce settlement.

Many planners recommend prenuptial agreements for second marriages, to specify responsibilities for the children and, in case of divorce, division of assets.

Christopher Croft, vice-president and manager of the financial advisory division of Bailard, Biehl & Kaiser, in San Mateo, Calif., recommends that remarriers with annual salaries in the $50,000 range consider such a step. The documentation costs about $200 to $1,000, but it's ''extremely critical'' to define who owns what assets - not only to make things easier in case of divorce, but for estate planning as well. ''There's no point in paying estate taxes on assets that aren't yours.''

Of course, preplanning a divorce settlement hardly sounds like a step on the path to marital bliss. But Mr. Confair argues that a premarital agreement gets people to think issues through - to ''coalesce their feelings.''

''It's better to confront the issues up front - in a more mature, responsible way,'' Mr. Croft argues. And if the relationship can't sustain that scrutiny, well. . . He suggests it's probably not on a strong basis.

Affluent parents who have remarried and want to provide for their widows but leave most of their estate to their children can set up a QTIP trust - a qualified terminable income property trust. Trust income can support a widow during her lifetime, with the principal reverting to the children after her death.