What is a blended family?
A ‘blended’ family can take many different forms. Typically it might be where a testator (the will maker) has children to a first marriage or partnership, that relationship ends, and he or she enters into a relationship with a new partner, oftentimes still with younger children.
Sometimes, making the situation a little more complex, the testator has children with the new partner.
The testator in a blended family will often feel at least two sets of moral obligations: One to his or her children from the first marriage, and the second, to the partner of the new relationship and any children of that second relationship.
Not only a moral obligation, both groups of people, the children from the first, and the new family, are likely to be entitled to make a legal claim on the estate of the testator as eligible persons under NSW Family Provision law. And if the property assets of the first relationship is not properly dealt with under Australian family law, the first partner may also retain a claim!
The question is, how should a testator make adequate provision for each group of persons?
The situation is difficult because emotions can run deep, and family members can easily feel affronted and disappointed in the testator’s decisions. The death of the testator can see those emotions easily convert into a decision by a claimant to make an application for provision in the Supreme Court of NSW.
While it is virtually impossible to avoid the chance of a family provision application, testators can think sensibly, and seek to minimise that chance through a properly prepared will.
There are a number of options when making provision for each group of people in a testator’s life, and, generally speaking, the testator should look at the entirity of his or her asset base (including Superannuation and Life Insurance, which aren’t formally part of an estate) to ensure that adequate provision is made.
Each option should be considered carefully based on legal advice specific to the testator’s situation. As circumstances change adjustments will need to be made to ensure the whole of the ‘estate’ is properly divided.
- A simple division of the estate between, say, the children from the previous relationship, and the new partner.
Many factors are relevant to determining this division, including the length of the relationship, quality of the relationship, the character and conduct of the testator and the surviving spouse, and, of course, the size of the estate and any competing claims.
Subject to those factors, regard should be had in respect to the surviving spouse of the provision of a secure home, and income to support a comfortable lifestyle, and contingencies.
- A life interest in certain real property to the surviving spouse.
Complementary to the above could be the provision of a life interest (that is, an entitlement to live in, for example, the family home for the duration of his or her life) to the surviving spouse.
This approach naturally deals with, to an extent, the need for the surviving spouse to have a place to live. There are complications in life estates including the costs of maintaining and improving the home.
- Testamentary Discretionary Trusts
Testamentary Discretionary Trusts wills (TDT wills) can offer a number of benefits for beneficiaries. They have ongoing administration and accounting costs and can be an imposition on beneficiaries down the line, however, the tax benefits (under current trust tax law) can be significant, especially if wanting to make distributions to minors or if there are potential large capital gains taxes to be paid.
- Careful attention to Life Insurance and Superannuation benefit payments
Whilst Life Insurance policies and Superannuation are not estate assets, careful attention to the size and direction of any benefits payable by those will assist in ensuring persons needing provision are adequately provided for. Oftentimes a super or life insurance payout will be the greatest asset.
You should consider expressly giving your executor the power of adjustment to take into account these amounts.
There are many ways to deal with the estates of testators who are members of a blended family. You should obtain careful and detailed personal legal advice and ensure that as circumstances change, your will is updated to take those changes into account. Contact us for more information.