Does your will blend in with your family?

Of Australia’s more than 6 million families, just over 10 per cent are a blended or step unit1 and along with the wonders and challenges these family types bring, they may add to the complexity of your estate planning – in particular, your Will. With an increased divorce rate,  it is becoming more common for people to enter into relationships with spouses who already have children, the importance of getting estate planning advice cannot be underestimated.

It's normal to have strong emotions about estate planning but starting a conversation is a huge step in the right direction. Many people make arrangements for their estate out of necessity rather than foresight – but changes that a blended or step family bring can have quite significant impacts. For example, if you have a limited pool of assets but a dependent spouse or children, how will you divide your assets between these beneficiaries in a manner that ensures these beneficiaries are looked after and the risk of disputes are minimised? Likewise, there may be a beneficiary that you intend to leave out of your estate. Depending on the jurisdiction you live in and the structure of your assets, there may be ways to protect the passing of certain assets to your nominated beneficiaries.

Who can contest your estate?

When completing a Will with a blended family, it may be the case that you are intending to exclude a beneficiary or given the limited pool of assets and the split of dispositions, there may be the potential for your Will to be disputed if a beneficiary believes inadequate provision for them has been made. Each State and Territory has particular legislation dealing with who can contest your estate when you pass away.  This legislation allows eligible applicants to contest your estate regardless of whether you had a Will in place.

Only certain people are eligible to contest your Will. Whilst the class of eligible applicants varies amongst each jurisdiction, generally speaking, these can potentially include:

  • a spouse (including a former spouse)
  • children
  • grandchildren in certain circumstances
  • persons that were dependent on the deceased.

The court considers a number of factors in determining whether adequate provision has been made for an applicant including but not limited to:

  • the size of the estate
  • the nature of the relationship between the deceased and the applicant
  • the financial circumstances of the applicant and of the other beneficiaries
  • the character and conduct of the applicant
  • the liability of any person to support the applicant
  • any other factors which the court considers appropriate.

What you consider to be adequate provision for a particular beneficiary is not necessarily what the court considers to be fair and reasonable in all of the circumstances.

What if you die without a Will?

It is estimated that nearly half of all Australians die intestate – that is, without a Will2 – and in this instance or if your Will is invalid, an administrator is generally appointed by the court to pay your bills and taxes from your assets. They will then distribute the remainder, based on a pre-determined formula set out in intestacy legislation. This may be in line with your wishes but in most cases could result in an unintended distribution of assets. For example, it may have been your intention that your children receive the whole or a majority of the estate rather than your new spouse, however under intestacy law, a substantial portion of your estate may pass to your spouse under intestacy. 

What if I have a pre-nuptial agreement or binding financial agreement?

In most cases a pre-nuptial agreement or binding financial agreement dictates the split of assets between spouses should the relationship breakdown. Such an agreement may therefore not appropriately deal with what happens when one person passes away and even though such an agreement and the intentions of the parties will be relevant, such an agreement may not necessarily prevent a spouse from contesting your estate.

Keep your Will valid and up-to-date as your circumstances change

This is especially important if you marry, divorce or separate; have children or grandchildren; if your spouse or beneficiaries die; or if you have a significant change in financial circumstances.3 With 47 per cent of all divorces in Australia involving couples with children under 18 years,4 implementing an estate plan is more important than ever.

If you marry after you have made a Will, it is generally revoked, unless made in anticipation of your marriage. If you divorce after you make your Will, it only revokes or cancels any gift to a former spouse and cancels their appointment to certain roles such as executor and trustee.

If you’re in a de facto relationship, your partner will have the same rights as a married partner with respect to family law settlements and will also entitle them to contest your estate when you pass away.

The importance of an estate plan

Estate planning is important for all people, however is all the more important for blended family arrangements. Blended family arrangements may raise significant estate planning issues that, if unaddressed, can create disputes between beneficiaries and reduce the available pool of assets for beneficiaries.

An effective estate plan can assist a Will maker with a blended family to:

  • provide certainty for the Will maker and their beneficiaries
  • minimise disputes between beneficiaries
  • ensure that your intended beneficiaries receive their intended distributions
  • potentially increase the size of your estate through the use of insurance
  • implement estate planning strategies to provide usage of an asset for example to a spouse, whilst preserving capital for other beneficiaries such as children (such strategies are commonly referred to as life interests and capital protected trusts)
  • restructure ownership of assets to achieve intended outcomes
  • implement defensive strategies to protect the passing of certain assets.

Estate planning does not have to be daunting. Start a conversation with us by contacting our team to book an appointment with one of our private wealth lawyers. We can support you in achieving your estate planning objectives by providing you with a tailored estate plan.

Evans Dixon Law is headed by Vik Sundar, Managing Director of Law. Vik is the co-author of two leading text books on advanced estate planning strategies and is a certified trusts and estates practitioner with the International Society for Trust and Estate Practitioners (STEP).

This insight may contain general financial advice and was prepared without taking into account your objectives, financial situation or needs. Before acting on any advice, you should consider whether the advice is appropriate to you. Seeking professional personal advice is always highly recommended. Any forward-looking statements are based on current expectations at the time of writing. No assurance can be given that such expectations will prove to be correct.

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Vik Sundar

Managing Director, Evans Dixon Law

With extensive experience in tax, estate planning, SMSFs and private business, Vik was one of the founding members of Evans Dixon Law (formerly Dixon Advisory Law) and now manages the private wealth legal team for Evans Dixon, supervising a national team of specialist lawyers.

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