Blended Families

Estate planning for blended families can be complex, particularly when you want to ensure that the assets you have brought into your new relationship go to your own children rather than to your new partner’s children. 

Here are some strategies that can help achieve this goal but none of these strategies are necessarily successful on their own. Careful combinations may need to be considered.

A “Binding Financial Agreement” can outline how assets will be divided in the event of separation, divorce, or death. It can “quarantine” assets you bring into the relationship so that they are available to your children should you pass away. The idea is to “quarantine” the assets from a family law property division in the event your new relationship ends in separation. In addition, the agreement seeks to prevent your new partner making a claim against your deceased estate.

If you own property with your partner, be aware that if you are shown on the title as “joint tenant”, your partner receives the whole property upon your death regardless of what may be contained in your Will. To avoid this, you can change the ownership to “tenants-in-common”, which means that your share in the real Estate passes on death to your deceased estate and is dealt with in accordance with what is in your Will. You will also need a Binding Financial Agreement (see above) so that your share in the property is “quarantined”.

In your Will, you specify how you want your assets distributed after your death. It’s essential to be explicit in your will about which assets should go to your children. You can leave particular assets or a percentage of your estate directly to your children. Given that you may dispose of a particular asset during your lifetime, specify in your Will what alternative benefit will be made for the child(ren) in that event.

Upon death, superannuation benefits are not necessarily paid to your deceased estate. If you make a binding nomination to your superfund (and remember to keep renewing by the due dates for renewal) you may be able to have benefits available to your children. Superannuation is not necessarily immune from family law property settlement so the addition of a binding financial agreement (see above) would help.

Similar to superannuation, life insurance proceeds are not necessarily paid to your deceased estate. You may be able to nominate your children as beneficiaries on your life insurance policy to ensure they receive those funds directly.

Assets held in a family trust are not part of your personal estate and thus are not governed by your Will. You may wish to set up a family trust with your children as the beneficiaries. A family trust is not necessarily immune from family law property settlement so the addition of a binding financial agreement (see above) would help.

Mutual wills are an agreement between partners to leave assets in a particular way and an agreement that neither will change their Will (or that relevant part of their Will) without the other’s consent. This can be useful in ensuring that after one partner dies, the surviving partner does not change their will to disadvantage your children.

Please note: The foregoing text is a generalised guide only and may not cover the requirements for your particular situation.