Blended families are becoming increasingly more prevalent across Australia. With spouses, children, stepchildren, and even former partners to consider, estate planning requires careful planning and consideration to ensure that family members are protected and satisfied. Estate planning for blended families poses unique challenges and considerations:
1. Navigating “Sideways Inheritance”
Sideways Inheritance can occur when a parent dies and leaves their entire estate to their new spouse. Though the assumption may be that this inheritance will make its way to the deceased’s biological children, this is not always the case.
Without proper safeguards in place, the step-parent may:
a. Change their will
b. Remarry
c. Deplete the assets
All of which put the deceased’s children at risk of losing their inheritance and may move the wealth sideways into a different bloodline.
2. Leaving Shares of a Home
To ensure that a share of a home is left to the deceased children, the home should be bought as tenants in common, rather than as joint tenants. As joint tenants, the entire home will be left to the deceased’s partner. However, as tenants in common, each partner owns a share in the home, and the deceased partner’s share can be left to their children, while the surviving spouse can be granted a life interest. A life interest can also be granted if the deceased partner is the sole owner of the home.
This route provides for both children and spouses, as the spouse can remain in the home for the remainder of their life without being forced to vacate, and the children will still be able to benefit from their share. The home will be left to the biological children and will not fall into the step-parent’s estate.
3. The Rights of Step-Children
Under Succession Act 2006 (NSW), biological children of the deceased are the only children who have automatic standing to claim. Step-children can become eligible to make a claim on an estate by proving:
a. They were wholly or partially dependent on the deceased
b. They were, or were at one point in time, members of the same household as the deceased
c. There are valid factors warranting a claim
To protect step-children steps such as careful will construction and the establishment of trusts can mitigate litigation risks and ensure all family members are provided for.
4. Superannuation Death Benefits
Superannuation is a major asset for most Australians, but unlike other assets, it does not automatically pass under a will unless directed by the estate. Complications related to the Superannuation include:
a. Invalid Binding Death Benefit Nominations (BDBNs)
b. Disputes between the spouse and children
c. Tax consequences
Maintaining an up-to-date BDBN, considering directing the Super to the estate, and establishing a trust to distribute the funds are all among the ways to mitigate the risk of complications and protect the interests of all family members.
Our Services
At OpenLegal, we are equipped to provide our clients and their families with all the necessary resources to build a comprehensive and strategic estate plan that addresses the interests of all parties. Navigating the different complications that arise when planning for blended families requires expertise and a trusted advisor who can understand the intricacies of Succession Act 2006.
To learn more about how to protect your family and your assets, contact OpenLegal at enquiries@openlegal.com.au or 1300 937 574 for a confidential consultation to discuss your circumstances and the best path forward.
By Intern Hope Jordan at OpenLegal
