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Making a Will is important, particularly for blended families
Making a Will is important, particularly if you are part of a blended family (i.e a family in which one or both partners have a child or children from a previous relationship). Careful estate planning now should ensure that all of your intended beneficiaries are provided for when you die, and that the potential for conflict within the family unit is minimised.
There is no ‘one size fits all’ solution when it comes to estate planning for a blended family.
The dynamics and needs within families evolve and personal assets may fluctuate from year to year. However, by identifying the potential issues that might arise within each family unit, and considering some options to address these, an effective estate plan can be achieved.
The important thing is to discuss your circumstances and objectives with your legal advisor so that your wishes can be properly set out in your Will and other estate planning documents. These documents should be reviewed regularly to take account of changing circumstances.
Competing interests –common issues
The most typical issues faced by a Will-maker within a blended family are the competing interests of past and present partners, biological children and step-children.
The Will-maker is likely to want to provide for the current partner and also their children from any previous relationship. There may also be children of the present relationship and children from the partner’s prior relationship to consider.
Traditionally, a Will for a married couple generally provides for the estate to go to the surviving partner in the first instance and then upon their death, to the children.
This is not likely to be appropriate for blended families – if this is what the will provides not only must the children of the deceased wait until the step-parent dies before inheriting, but there is a risk that the surviving partner may change their Will so that the deceased’s own children miss out. A further risk is that the assets may over time diminish, leaving little for the deceased’s children.
Immediate gifts and interests in real estate
When making your Will, you may choose to provide an immediate gift to your children upon your death rather than your children waiting to inherit after the death of your partner. A life insurance policy or insurance bond nominating the children as beneficiaries might be appropriate in this instance.
If the estate is significant, the Will could provide for an immediate gift of real estate, money or other valuable assets to the children. This will safeguard against the possibility of your children missing out on an inheritance should your partner later change their Will or your estate assets diminish.
If you and your partner hold real estate as joint tenants, you might consider changing this to a tenancy in common. A joint tenancy means that the share of property held by a deceased tenant automatically goes to the surviving tenant. This cannot be altered by Will. However, if the property is held as tenants in common, your share may be left to your children, subject to leaving your partner a life interest or right of occupation in respect of a property.
A life interest will provide your partner a continued right to reside in and use the property until he/she dies at which stage your share will revert to your children. Note however, that life interests can be complex due to circumstances such as health and aging of the surviving partner who may need to downsize or move to an aged care facility, and may involve GST and sometimes stamp duty issues. These issues should be carefully considered and discussed with your legal advisor.
Mutual wills
It is often appropriate for partners in blended families to agree to make a will in a particular form subject to the other spouse also making a will in a particular form, and agreeing in writing not to change such will after the death of the first to die, but particular caution needs to be taken and legal advice sought on the effects and possible risks of such arrangements.
Testamentary trust
A testamentary trust is a trust contained in a Will that comes into effect upon the testator’s death. A testamentary trust provides flexibility and control in asset distribution amongst beneficiaries and assists in protecting your assets from third parties and creditors. Assets can be preserved so that they can pass through future generations and such a trust can be very flexible in providing for different scenarios.
Testamentary trusts are generally tax effective and may be worthwhile considering in your estate planning if the value of your likely assets warrants the establishment and administrative costs.
Choosing your executor
Your executor is your personal legal representative when you die. He or she has the role of ensuring that the wishes set out in your Will are followed. Your executor will deal with your estate lawyers, accountants, financial advisors and real estate agents. He or she will maintain estate accounts, pay bills and generally oversee the administration of your estate.
Generally, a person’s spouse or child will be nominated for this role. However, because of the dynamics involved in blended families it may be preferable to appoint one or more neutral friends or professionals so that the role may be carried out with impartiality.
Conclusion
Important points worth remember when considering estate planning for the blended family include:
- Talk to your partner and family members about your estate planning objectives.
- List all assets including those held separately and jointly.
- Consider everybody from the family including spouses, previous spouses, biological and step-children, and identify those whom you wish to benefit – preparing a family tree may be helpful.
- Contemplate if your choice of beneficiaries might leave open the potential for a family provision claim. You may need to discuss this with your legal advisor.
- Choose impartial executors.
- Discuss your objectives with your lawyer so the relevant documents can be prepared.
- Ensure that you have binding death benefit nominations in place for your superannuation and life insurance policies.
- Review your Will and plans regularly, and immediately if your personal, health or financial circumstances significantly change.
We have particular experience and expertise in this area.
If you have any queries or someone you know wants more information or needs help or advice, please contact us on 5443 4866 or email kwaddington@gwlaw.com.au.
Ken Waddington
Partner
(07) 5443 4866
Nicole Downs
Solicitor
(07) 5443 4866