3 tips to consider when planning for Blended Family Wills
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. In these situations, the objectives of planning an estate include providing for the surviving spouse in the second marriage, providing for children of the second marriage and ensuring that assets flow to children of the first marriage. There are three useful estate planning tools to use when planning a blended family will.
Discretionary Testamentary Trust
A discretionary testamentary trust is a good option for blended family wills as it provides some flexibility as to how to deal with assets to provide for your current partner and children from a previous marriage. This trust is administered by the trustees for the benefit of the named beneficiaries. A common use of this in a blended family is for the will maker’s children to be the only primary beneficiaries and the surviving spouse being named a general beneficiary. It is also possible to limit other general beneficiaries to the will maker’s children, to exclude children from the second marriage from receiving income from the trust.
This trust is created by will, with all the terms including the identity of appointors, trustees and beneficiaries clearly set out. Due to the significant responsibilities of appointors and trustees, in a blended family situation it is suggested that an independent person is appointed for this position. This is particularly important in ensuring that a client’s will is protected where a disagreement between family members is expected.
Commonly, a client in a blended family can make more than one discretionary testamentary trust. This allows the will-maker to allocate different assets to different family members, for example capital for the surviving spouse and another capital for children of the first relationship.
Binding Family Agreements
A binding family agreement can be made before, during or after a relationship that sets out how your assets should be divided if your relationship breaks down. This is particularly useful for blended families to provide for provisions they want for children of former relationships. This agreement is legally binding and should mirror the wills of the spouses’.
Mutual Will Agreement
A mutual will agreement allows both parties to the relationship the ability to create wills with terms that are known to the other partner. This agreement gives rise to obligations on the part of the surviving partner, with the surviving partner becoming the trustee of the estate for the beneficiaries named in the wills. Notably, remarriage automatically terminates the existing will but does not change the obligations under the agreement. It is therefore important that the survivor see a solicitor to obtain advice if they wish to remarry.
Other Issues to Consider when creating a blended family will:
- Allocating specific gifts such as family heirlooms to avoid family arguments.
- Identifying a guardian of minor children from prior relationships.
- Providing details of what is to occur in the event of incapacity of the will-maker, including a review of power of attorney documents.
- Including any reasons why a beneficiary has been excluded, possibly in the form of a statutory declaration that is kept with the will.