A blended family is a family in which one or both spouses or partners have children from a previous relationship. They may also have children from their current relationship. Wills for blended families can be both delicate and complex, as the testator (the person who is making the will) must consider their present spouse or partner (and children from that relationship), in addition to children from an earlier relationship when drafting the will. Often the testator will wish that all parties are benefited, while trust in their current spouse or partner is maintained.
The testator should consider that, in the event they predecease (die before) their current spouse or partner, the current spouse or partner might not make provision for the testator’s children in their will. Although it isn’t pleasant to think about, there a number of scenarios that could eventuate, such as:
- The surviving spouse or partner may remarry and have more children, reducing or removing any provision to the testator’s children
- The surviving spouse or partner may forget they have a moral obligation to provide for the testator’s children
- There may be a significant delay between the death of the testator and the surviving spouse or partner
There are a myriad of options available for blended family wills and the best result is dependent on the structure of the testator’s assets, the family structure and the personal preferences of the testator. It may be necessary to seek both financial and legal advice to arrive at the best result.
Asset Structure
The structure of the testator’s assets has a huge impact on how those assets can be distributed as part of the testator’s estate. The way assets are owned (jointly, solely, as tenants in common) will determine how and if those assets form part of the testator’s estate. For example, if the family home is owned by the testator and current partner or spouse as joint tenants, the home will automatically pass to the partner or spouse on the death of the testator and will not form part of the testator’s estate. Superannuation and life insurance, although not automatically part of the estate, are an essential part of any estate plan, especially in blended families.
What happens if I leave my whole estate to my surviving spouse/partner?
If the surviving spouse or partner is left the whole estate and little to no provision is made for your children from the earlier relationship, you are relying on your current spouse or partner to provide for your children once they (the current spouse or partner) passes away.
The testator should be careful to assume that their current spouse or partner will make provision for the children. In the event that the testator does not make provision for their children from the prior relationship, the children will have to decide whether they should make a family provision claim from the estate of their parent (the testator) on the testator’s death. This will likely have the effect of sabotaging the children’s relationship with the surviving spouse or partner. If the children are young, they will be relying on an advocate to make this claim on their behalf.
If the children wait for the death of the surviving spouse or partner to make a family provision claim they may face a dead-end road. Stepchildren are ineligible to make a claim on the deceased’s stepparent’s estate unless they had been partly or wholly dependent on the stepparent and had lived in the same household with them. In any event, there is a risk that the estate might be heavily reduced or that there are competing claims from the new family of the surviving spouse or partner.
How do I provide for my children and my current partner/spouse?
The answer to this question is dependent on the nature of your assets and the family structure. However, dividing the estate equally between the current spouse or partner and your children from the previous relationship is often the most equitable approach. Achieving equal distribution becomes difficult where assets are held jointly. This is where ownership of property becomes important and the distribution of super and life insurance instrumental in achieving the most equal distribution.
Life estate and Right of residency
If the family home is owned solely or partly by the testator (as a tenant in common) and the testator does not wish to leave the home to the current spouse or partner, the testator may grant the current partner or spouse a life tenancy or right of residence in the property. Difficulties arise where the spouse or partner does not have sufficient funds to maintain the property or does not manage the upkeep of the property. There may also be tax consequences of such an arrangement.
Testamentary Trust
A testamentary trust is a trust created under a will. A testamentary trust is useful where there is likely to be substantial tax due, as trustees are able to minimise tax payable by allocation of income and assets to beneficiaries. It is also useful in providing asset protection from family law and bankruptcy proceedings. There are ongoing administration and taxation costs that the testator will need to take into account when considering this option.
Inter Vivos Family Trust
An inter vivos trust, or living trust, has effect while the individual is still alive. The disadvantages of an inter vivos trust are that the threshold for income tax for minor beneficiaries is lower than it is for testamentary trusts and more tax will be paid when distributions of income are made to minors.
Family Provision Claims
The testator must be aware of the risk of family provision claims. A family provision claim is where an eligible person makes a claim to the Supreme Court for a share or a larger share of the estate of the deceased person. In a blended family, the most common applicants are children of the deceased, a current partner or spouse, a former spouse and stepchildren. Grandchildren who were wholly or partly dependent on the deceased person at any time, a member of the same household of the deceased who were wholly or partly dependent on the deceased person at any time and a person who was living in a close personal relationship with the deceased at the time of the death may also make a claim.
It is important to discuss your estate with your current partner or spouse- how you would like your partner or spouse to benefit and what provision you would like to make for your children. You might also like to discuss who you would like to have your personal legacy items, such as jewellery and family heirlooms.
Estate planning for blended families is very case-specific and should be carefully prepared and tailored to the unique requirements of the individual.
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