October 11, 2023

Estate planning for blended families

Estate planning and making a Will are often put on the back burner by mining and resources executives, professionals and business owners. Time poor and working in pressurised circumstances, it’s understandable, but nevertheless unacceptable, particularly when dependants are involved.

Leaving your personal affairs in disarray, especially if you’ve re-partnered and have a blended family, can add additional layers of complication to already complex financial and legal matters.

If you or your partner have previously experienced a family separation and there are children from different relationships (including your new relationship) and you then pass away, family conflict is a strong possibility as family members could compete for a slice of your estate.

When making their Wills, it’s common for married couples to leave their assets wholly to each other and then upon their deaths, their estate is shared equally between their children. When it comes to blended families, as there are additional issues at play, the approach is often different.

For example, if a member of a couple leaves all their assets to their new partner, the children from a previous relationship will have to wait until the passing of their stepparent before they potentially receive any benefit from their deceased parent.

Then, if the new spouse decides to change their Will, it could exclude the Will-maker’s children from a previous relationship, meaning they could end up missing out on their inheritance completely. This is particularly common when the relationship between your partner and your children breaks down.

Alternatively, when the majority of the re-partnered couples’ assets are accumulated jointly, the Will-maker may decide to only share those assets between the children of that relationship.

While this is the Will-maker’s prerogative, children from a previous relationship may feel less inclined to agree. Even with the best of intentions by the surviving spouse, life can get in the way and legal obligations to stepchildren, children or new partners can alter what legally can happen to the estate and that can create ill-feeling and increase the possibility of a legal challenge on the estate.

I recently worked collaboratively with James Marshall at Stratus Financial Group to provide a blended family solution that overcame these issues.

Bill is a business owner in the mining and resources sector. He has children from a prior marriage, and when he re-partnered with Jane, they also had children. For Bill, the solution was to set up his Will and estate plan with instructions for funds from his personal risk insurance to be paid to his children from his first marriage, while Jane would benefit from his superannuation and entitlements from other insurance policies which she would receive directly, rather than passing through his estate. This allowed Bill to nominate a trustee for managing the funds received on his death for his children from his prior marriage, which included Bill setting an age whereby the children would take control of these funds. Additionally, Jane would receive control of the family’s structures, and sufficient proceeds from insurance, superannuation and assets to live a comfortable life while providing for the children they had together.

While there are many matters to consider, these following five points may get you thinking about any shortfalls you may have in your current Will and estate planning approach.

1: Assets – what are yours alone and what are jointly held

Through your Will, you are only able to gift assets that are owned by you in your personal name. If assets are held with another or others as ‘joint tenants’, those assets will automatically pass to the survivor, regardless of whether your Will says otherwise.  Often the family home will be held as joint tenants meaning the surviving partner automatically “gets the house”.

2: Superannuation and life insurance

Many people are surprised to learn superannuation and life insurance does not automatically form part of assets that can be gifted through a Will. Unless steps are taken with your superannuation fund and/or life insurance provider, your superfund trustee or life insurance provider has discretion on determining how your superannuation or life insurance proceeds are paid on your passing.  While there are strict legal parameters in this regard, there could be valid reasons why these benefits are paid, or not paid to your estate.

3: Providing for your partner

Consideration should be given to provisions for your partner should you predecease them. Matters such as arrangements for remaining in the family home, funds for covering living expenses and managing future health concerns need to be considered as part of your estate plan.

4: Preserving an inheritance for your children

As mentioned earlier, leaving all your assets to your partner, presents a risk that children from a previous relationship may never benefit from what were once your assets. Consideration should be given to mechanisms that can be put in place to ensure your children will benefit from your assets regardless of intended or unintended future actions.

5: Family provision claims

Spouses, children, stepchildren and anyone who is financially dependent on you at the time of your passing are eligible to make a claim on your estate if no provision or an inadequate provision was made for them. It will be better to consider and plan for all such possibilities, rather than leave unfinished business that has the potential to cause unnecessary hardship to your surviving family and expense to the estate.

Family conflicts aside, without a Will and estate plan, structures such as discretionary and super proceeds trusts will also be absent, making it difficult to manage and protect wealth and assets from unnecessary tax implications, possible claims from creditors as a result of business or other disputes in which you may have been involved or for your executor to make decisions on how, when and to whom, your estate is distributed.

For mining and resources leaders, financial complications associated with very high individual wealth, valuable remuneration packages that can include employee share schemes and accumulated assets such as shares and properties (sometimes in other countries) and complex tax implications, can and usually does, add an enormous burden of responsibility and significant cost for family members to sort out, often while they are grieving.  Not having a Will or estate plan can exponentially increase the stress and cost.

There is no “one size fits all” solution for the various complexities, however planning your estate is key in ensuring those nearest and dearest to you are looked after and the potential for conflict within the family is minimised.

While this article focuses on the importance of estate planning matters specific to blended families, I’ve previously written about matters that need attention when re-partnering following a divorce, you can read it here.

For more information or to arrange a time to meet with Robert Lamb please call 61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au

To learn more about Robert, visit this link.

Resources Unearthed is a solutions hub that provides integrated financial, legal, property, accounting and business advisory services for executives, professionals and business owners in the mining and resources sectors.

The information in this article is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate, we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.


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