Blended families are increasingly common. Second marriages, de facto relationships, children from previous relationships, stepchildren, and shared assets accumulated over different lifetimes can add complexity to inheritance. Estate planning for blended families balances the need to provide for a surviving partner with the protection of your biological children's inheritance. A carefully considered plan can help to minimise stress for loved ones when you’re gone.
After a divorce or the death of a previous partner, people often rebuild their financial lives independently. They may have their own property, their own superannuation, their own investment accounts. When they enter a new relationship, there's often a conscious or unconscious reluctance to fully merge things.
This isn't inherently a problem. Keeping some financial independence in a blended family is perfectly reasonable and, in many cases, advisable. The problem arises when that separation isn't accompanied by deliberate, documented estate planning. When someone dies, assets flow according to legal structures. Wills, ownership titles, and superannuation nominations matter.
The results can be devastating. A surviving partner may be left without access to the family home, adult children from a first marriage disputing an estate, stepchildren receiving nothing, or superannuation bypassing the surviving spouse entirely and passing to an ex-partner or adult children instead.
Wills
A will is the most fundamental estate planning document. Having a current will that reflects your changed circumstances is essential.
A will made before a second marriage may be revoked by that marriage under Australian law (depending on the state), meaning if you haven’t updated your will since remarrying, you may have no will at all. Conversely, some clients have wills that still name an ex-spouse as beneficiary or executor, which can lead to unintended outcomes.
Addressing competing interests
In a blended family, there are often genuine and legitimate competing interests. You may want to provide for your current partner while also ensuring your children from a prior relationship eventually receive their inheritance. This is where careful will drafting becomes essential.
Strategies such as testamentary trusts can be powerful tools here. A testamentary trust established in a will can allow the surviving partner to benefit from the estate during their lifetime (for example, by living in the family home or receiving income from investments), while preserving the underlying capital for children from a prior relationship after the surviving partner's death.
Property ownership: Joint tenants vs tenants in common
The legal ownership structure of a property has consequences for what happens when one owner dies. This is one of the most important areas in blended-family estate planning.
Under joint tenancy, when one owner dies, their share automatically passes to the surviving owner, regardless of what their will says. This is called the right of survivorship. In a blended family context, it can be problematic. If a client holds the family home as a joint tenant with their current partner and dies first, the entire property passes to the surviving partner, even if the client's will specifically directs that their share of the property should go to their children from a prior relationship. The will is simply overridden.
A solution to this problem is to set up a tenancy in common ownership structure. For many blended families, converting property ownership from joint tenancy to tenancy in common is a critical step. It allows each partner to retain control over what happens to their share of the property, and to direct it, via their will, in whatever way reflects their wishes. This may mean allowing the surviving partner to live in the property until they die and then passing this asset on to children and stepchildren.
Superannuation
Super is not automatically part of a person's estate, and it does not pass according to a will unless specific steps are taken to make that happen.
If you want to ensure your children from a prior relationship receive a portion of your super, you need to nominate them explicitly. A nomination in favour of your current spouse or de facto partner will generally exclude those children unless the nomination specifically provides for them.
Talk to your estate planner about a binding death benefit nomination for your super. It provides much greater certainty and legally directs the trustee to pay the death benefit to the nominated person(s).
No one wants to leave a mess for their family when they die. Without tailored documents, assets may unintentionally pass entirely to a new spouse, or children from a previous relationship may be left out. The planning in blended or stepfamilies requires careful consideration. Every circumstance is unique. If you would like advice on how to plan for your family, get in touch.
General Advice Warning: The information provided in this article is general in nature and does not consider your particular investment objectives, financial situation, or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.
Dobbrick Financial Services (Gympie) Pty Ltd ABN 48 931 205 109 and Dobbrick Financial Services (Ipswich) ABN 86 100 184 521 & DFS Oakland ABN 64 340 527 395 and their advisers are authorised representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
