Blended family estate planning seem simple doesn’t it? You have 2 kids, he has 2 kids so just give everything to each other and then when the second person dies they will give it all equally to the 4 children (his 2 and your 2). But is it that simple? What happens if he re partners after you die? What happens if he has a falling out with your children after you die? What stops him making a new will and giving everything to the new partner or just his 2 kids?
You wouldn’t be alone if you hadn’t turned your mind to some of these questions. Blended family estate planning is a very specific field of Estate Planning and one of our focus areas at SA Estate and Succession Lawyers.
So what is the bulletproof estate plan for a blended family?
My preferred approach to the blended family, says Ben Siegmann, Managing Director of SA Estate and Succession Lawyers, is to look to how the assets of the couple are held and have a cards on the table discussion about the risks and fears that a blended family poses so that a collaborative approach between both parties can be achieved. Sometimes this feels a bit like after death family law – and there is a certain amount of that in blended family estate planning.
Ideally, if the intention of the parties is to have separate assets in order to pass those assets to their own children then the asset holding structures need to be reviewed. For instance, holding the matrimonial home as tenants in common versus joint tenants allows the deceased partner to pass their half of the house to their own children through their will and stops it falling into the hands of his new partner after you have died. Careful consideration needs to be given to ensuring your partner isn’t homeless after you have died though – he will still need somewhere to live! This often leads to a solution called a life interest which has the effect of keeping you half of the house in your own estate for your own children’s benefit but letting your partner have the use of the house until he dies. A comprehensive life interest clause in a Will can even allow for the house (your half and his) to be sold to downsize for him after you have died and even to ensure that his aged care needs are able to be met – all whilst keeping your half of everything safely inside your estate for your children. Life interests are a tricky exercise though, so specialist estate and succession lawyers should be used. This is especially the case when dealing with the possible future aged care needs of your partner as refundable accommodation bonds can, if the Will is not carefully prepared, potentially fall into your partner’s estate after he dies – which undermines the whole plan.
Additionally, a mutual wills contract can be used to provide certainty in the blended family estate plan. A mutual wills contract is an agreement between two will makers to enter into particular wills and to not change those Wills after the death of the first of them without satisfying certain conditions. For instance, you might use your own children as your executor and only allow your spouse to change their Will after you die if your own children agree. A mutual wills contract can also be used to deal with things like possible challenges to your Will by your partner after you die and even to look at how future assets are acquired by your partner after you die and how your partner will approach their superannuation after you have died. A mutual wills contract and its mutual Wills can, in some circumstances allow the outcome of giving everything to the survivor on the promise that when they die the estate is divided equally between all children.
In the blended family, often a proper estate plan will involve a bit of all of these options: ownership restructures, life interests or bespoke trusts and a mutual wills contract. For these reasons the cost and difficulty in blended family estate planning is greater than non blended family estate planning. The risks are so much greater than in a non blended family so it is always worth ensuring proper estate planning is undertaken rather than basic Will drafting which fails to take into account the specific risks applicable to the blended family.