One area of estate planning that is becoming more and more common is the making or updating of Wills by couples who have been married previously, so called “blended families”. Blended families are amongst the fastest growing family type in Australia, increasing by 50% over the past decade.
Unfortunately it is not always as sweet as the “The Brady Bunch”. From an estate planning point of view blended families can sometimes be complex, involving competing interests from spouses, children from the current relationship, children from prior relationships, step-children and ex-spouses. The parties involved are often at a loss as to how to balance the needs of their new spouse and children with their existing children.
It is recommended that you see a trusted legal adviser to understand your situation in detail and to discuss the applicability of the available options to you.
The traditional Will for a couple with children, whereby the entire estate is given to the surviving spouse and when the surviving spouse dies the estate is shared equally among the children, is typically not appropriate for blended families. There is the risk that the surviving spouse could change the distribution of the estate to favour their own children.
One option is for the spouse to provide a direct gift to his/her child from the prior relationship, while leaving the remainder of the estate to their current spouse and/or children. It is not uncommon to enable this through purchasing a life insurance policy which is made payable to the child immediately upon the parent’s death, avoiding the potential long wait until the death of their step-parent to benefit from the Estate.
Another option is to provide the surviving spouse with a right of residency for the marital home, with the deceased’s children ultimately receiving the estate.
Alternatively many couples in new blended families establish a “Testamentary Trust” within their Will appointing an impartial trustee to oversee the management of the Trust. The trustee may be authorised to pay income from the trust assets as well as distributing the assets.
We advise people entering into a second marriage or de-facto relationship to consider a Binding Financial Agreement. This can be done at the beginning of the relationship like pre-nuptial agreements, or at any time during the relationship. In the event of separation this allows the parties to determine their own distribution of property and provides certainty whilst avoiding the discretionary aspects of the Family Court.
Irrespective of which solution suits you, we strongly recommend you review your Will immediately. Your Estate Plan should be reviewed regularly, and especially when a significant life change occurs, such as the birth of a child, a marriage or de facto relationship, divorce or separation, the death of a named beneficiary or a significant change in assets.
Unfortunately many people in Australia still die without a Will. If this happens the law sets out in order a list which cannot be varied of the persons who are entitled to your property. In these circumstances the law has no regard for your wishes as to who should share in your estate and this may cause unnecessary financial and emotional burdens on your family and mean your assets end up with people who you don’t wish to benefit.