Blended Family Wills – Common Questions
Estate planning for blended family wills can be a difficult task for clients entering their second or third marriage, particularly when both parties bring children from a prior marriage. This situation is becoming increasingly common, with a high percentage of marriages in Australia ending in divorce. We have put together answers to a few common questions that we often hear about planning blended family wills.
1. How can I ensure that my assets go to my children and not my step children?
A typical problem that arises in blended family wills is ensuring that any assets that you leave to your new partner, on their death, are distributed to your children and not your stepchildren. One option is to rely on your spouse to make a will which leaves your assets to your children. However, this is risky as your spouse is free to change their will at any time, including after your death. A better alternative would be to create a discretionary testamentary trust within your will. This type of trust involves a trustee (or trustees), a range of discretionary beneficiaries (for example, spouse, children, grandchildren), a settlor and an appointor. The discretionary trust allows the trustee to distribute income generated by the assets in the trust to any beneficiaries.
The primary disadvantage to including a discretionary testamentary trust in your will is the compliance costs associated with the trust after your death. These costs include the cost of a separate tax return which the trust will need to file each year, along with the cost of seeking advice upon and documenting the decisions of the trustee as to the distribution of income. For more information on this estate planning tool, read our previous blog.
2. Am I required to leave assets to a former partner?
The obligation for a deceased to leave part of their estate to an ex-spouse diminishes after a family law property settlement has been finalised, however an ex-spouse is still eligible to make a claim to challenge a will. This means that a former spouse or de facto partner may be able to make an inheritance dispute if they believe they have not been treated fairly, regardless of whether they have remarried. It is important to note that this right is lost if there is an enforceable agreement for the former spouse to release their rights against the estate. The main factors that the court will take into consideration in determining the success of the claim includes whether the former partner was being maintained, wholly or partly, by the deceased before the deceased person’s death and whether any other person is legally obligated to support the ex-partner.
3. Can my will be contested?
You have the freedom to leave your estate to whomever you wish. However, your will can be contested under a number of circumstances. People who are able to bring a claim include:
- The spouse of the deceased;
- A de facto partner of the deceased;
- A child of the deceased (regardless of the age of the child);
- A former spouse of the deceased;
- A grandchild of the deceased who was at any time wholly or partly dependent on the deceased person;
- A person who was (a) a member of the same household of the deceased at any time and (b) wholly or partly dependent on the deceased person at any time; or
- A person who was living in a “close personal relationship” with the deceased person at the time of their death.
The courts will consider various factors when determining whether a claim will be successful. Factors that the court will take into consideration include:
- The relationship between the deceased and the applicant, including nature and duration;
- The nature and extent of any obligations or responsibilities owed by the deceased to the applicant as well as to any other person who has made an application or to any beneficiary of the estate;
- Any physical, intellectual or mental disabilities of the applicant;
- The financial resources and needs of the applicant; and
- If the applicant is co-habitating with another person then the financial circumstances of the other person;
- Any contribution to the estate or welfare of the deceased;
- The age of the applicant i.e young children are highly dependent and so will be favoured.
Certain categories of people have to establish dependency in order to make a claim. While this usually requires some form of financial support. Case law tells us that financial dependency is a question of whether there was actual ‘maintenance and support’. In Malek v Federal Commissioner of Taxation 42 ATR 1203, a mother was found to be financially dependent on her deceased son and was able to assert rights to his superannuation benefits. Dependency was found to be determined by whether the person relied on the deceased to maintain them to a particular standard of living. It is also important to note that in certain circumstances the court will also consider purely emotional dependency.
If you feel that it is possible that your will may be contested after your death, it is recommended that you leave a written statement with your will setting out the reasons for excluding someone’s entitlement. However, it is important to note that this statement is not binding.
4. Who should I appoint as my executor?
The role of the executor includes everything from arranging the funeral to managing the assets of the estate during the period before probate is granted and the assets are distributed. For blended families, this may be a difficult decision if there is conflict between family and friends. In these circumstances, it may be necessary to appoint an independent executor, such as a solicitor or private trustee company.
5. What happens if I die without a will?
If you die without a will, you will be said to have died ‘intestate’. In this situation, your assets will be distributed according to the relevant state law. This will be outside of your control and may mean that your assets will not be distributed in the way that you would have liked. The Succession Act 2006 (NSW) sets out the order in which your eligible relatives will inherit your estate. In the case of blended families, this will involve:
- If the intestate dies leaving a spouse or partner and children from a prior relationship, the estate is shared between the spouse or partner and the deceased’s children from the prior relationship. This means that any children from the relationship that the deceased was in when he or she died do not receive anything;
- When an intestate dies leaving a spouse or partner and children from a previous relationship, the surviving spouse or partner will no longer be automatically entitled to the deceased’s house or their interest in the house. This has been replaced by a right to acquire property from the estate as its market value at the date of death. This procedure is likely to be difficult to administer and lead to disputes in many cases.
Due to the complexities involved in planning a blended family will, it is highly recommended that you consult with a solicitor to ensure that your wishes are satisfied.