Wills for Blended Families: Our Complete Guide

Some people decide to give their children a specific gift on their death, to ensure their children will inherit from their Estate. This gift may be a cash amount, property and/or real estate, personal assets or other important personality (such as war medals, jewellery, or items of emotional significance). This is to ensure their children will receive a gift from their Estate with the intention that the residual of their Estate (containing all assets not otherwise specifically gifted) goes to their existing spouse.

It is important to consider which assets are included within the Estate. Any assets that are held as joint tenants or jointly held, such as bank accounts, will automatically pass to the survivor of the tenants or the account and will not form part of the Estate.

In the case where a client owns a property in their sole name. Consideration may be given to adding their spouse to the title to ensure that it passes via Joint Tenancy to the survivor.

Alternatively, in a situation where the client does not wish for that property to pass automatically on their death to the surviving spouse, we may consider severing the tenancy to ensure that their half of the property is included in their Estate assets under the Will.

Your lawyer at Amanda Little & Associates will discuss with you whether or not there needs to be any change to asset holdings to affect your desired outcome.

It is important to know that any action taken three (3) years prior to the death of a person, including transferring or changing tenancy on a property, can be considered part of the Estate under Notional Estate if the matter were to be contested in the Supreme Court (NSW only).

Your lawyer at Amanda Little & Associates will discuss this with you at length to determine whether or not this is a risk that needs to be appropriately dealt with.

If you are intending on gifting your property to your children from a previous relationship but wish to create security and stability of long-term housing for your current spouse, you may wish to consider a Life Estate or a right of occupancy.

A right of occupancy and a Life Estate creates an interest that allows your spouse to reside in a property for a set period of time or until a certain set of conditions are ceased to be met (for example death of your spouse, re-entering a new relationship etc).

You can create a portable right of occupancy and life interest, which allows an asset to be sold, the funds from which be used to purchase a new asset such as a placement in a residential or nursing home facility.

These arrangements are complicated and need to be discussed in full as they can also create additional taxation issues which need to be considered when deciding on the appropriateness of these steps.

Your team at Amanda Little & Associates will discuss this at length with you, to determine the best way to achieve your desired outcome and whether this needs to include a Life Estate and/or a right of occupancy.

When preparing Wills for blended families, there are Testamentary Trusts that can be created within the Will. Testamentary Trusts can be as simple as placing funds in trust via a specific gift or residual Estate to beneficiaries who are under the age of majority (18 years of age) until they reach majority. This is a standard form of Testamentary Trust contained in most Wills.

There are further types of Testamentary Trusts including Discretionary Testamentary Trusts, which can be drafted and contained within the Estate Planning documents for a blended family. The need for a Testamentary Trust needs to be considered carefully due to the significant costs associated with administering one.

The reasons for including a Testamentary Trust may be:

• that there are complicating factors for a beneficiary of the Estate,
• that an Estate is likely to be contested,
• that there are taxation consequences; and/or
• significant asset holdings.

These circumstances may make a Testamentary Trust the appropriate avenue for the future distribution of the Estate, which will come into effect upon the death of the Testator and depending on how it is drafted may provide flexibility as to the distribution of assets. Most Testamentary Trusts and Wills now contain provisions of apportionment, allowing the Executor and/or Trustee to be able to determine and apportion assets within the Estate between beneficiaries accordingly.

There may also be taxation benefits of a Testamentary Trust. In a situation where an Estate has significant value, it is recommended that there be an inter-disciplinary approach in relation to Estate Planning which includes consultation with an accountant and/or financial planner as well as the lawyer to determine the best way forward.

The team at Amanda Little & Associates is well versed in writing Wills for blended families, while assisting clients to prepare complex Testamentary Trust documents to protect the Estate from being contested, protecting assets within the Estate from Creditors and to protect beneficiaries within the Estate.

When both Will makers have children from previous relationships, a Mutual Will may be a good option as an Estate Planning tool. Although Amanda Little & Associates does not normally recommend a Mutual Will, Mutual Wills may in certain circumstances allow certainty for parties who are concerned regarding their future Estate Planning.

Mutual Wills create a contractual obligation between both Will makers to keep the Mutual Wills in place post death. This is usually done by way of the parties preparing reciprocal Wills that reflect that they shall gift their Estate to each other and then they shall divide the Estate between each of their children from their previous relationships.

The contract for Mutual Wills is then executed separately which binds both parties to not changing their Will after the death of the other party.

There are significant issues in relation to Mutual Wills. The binding nature of Mutual Wills and issues it may create in the future need to be offset against the certainty that Mutual Wills can provide.

If this is something you wish to consider for your blended family, please speak to one of the experts at Amanda Little & Associates to discuss whether or not Mutual Wills may be an appropriate avenue or if there are other, more appropriate Estate Planning options for your circumstances.

People often assume incorrectly that Superannuation forms part of their Estate. However, it does not form part of your Estate unless you choose for it to do so. You can do this by preparing a Binding Nomination for your Superannuation Fund to pay to your personal legal representative. This is also the case for any life insurance policies you hold.

It is important to know that unless you make a Binding Nomination, the Trustee of the Superannuation fund can choose how and who your super is paid to, despite your standard nomination. They hold full power of secretion for payment. This may in fact lead to someone that you did not wish, receiving your Super.

It is also important to consider the taxation consequences of your Superannuation and life insurance policies when preparing your Estate Plan, as the tax that is paid by your Estate for that Superannuation interest will vary greatly. For example, if you leave your Superannuation to your spouse, no additional tax is payable, but if you leave your Superannuation to your nondependent adult children, they will pay a significant amount of tax.

As part of the Estate Planning process with Amanda Little & Associates, it is extremely important to consider the taxation consequences of any gifts made that constitute or form part of a Superannuation or life insurance payout accumulated.

A Binding Death Nomination is a nomination made by you to your Superannuation fund that determines where your Superannuation shall be paid and to whom. This means that the Trustee cannot choose where your super is paid.

This is separate from a standard nomination which still gives the Trustee the discretion to determine where the funds shall be paid.

In the case of blended families, it is extremely important that a binding death nomination is made to determine the payment of Superannuation otherwise the Trustee can determine to pay the Superannuation in accordance with their discretion as opposed to your nomination.

As part of the Estate Planning process the team at Amanda Little & Associates will explain Superannuation policies and life insurance components to you in depth and discuss with you the best options for your future Estate Planning needs.

An eligible person under the Succession Act includes children. It also includes spouses and previous financial dependants. An exhaustive list can be found pursuant to section 57 of the Succession Act 2006.

The grounds on which an adult child can contest an Estate include:

• if they were dependent upon the deceased if the share is not adequate for their maintenance and support;
• if the Will fails to make provision for the child;
• if the eligible person believes that the Will is grossly unfair;
• if the deceased was not in a sound mind when the Will was made and if it can be proven that the deceased was unduly influenced by one or more parties at the time the Will was made.

In the case of estranged adult children, it is a misnomer that if a gift is made this precludes an action being made under the Succession Act. Whether or not a gift is made does not affect the likely outcome of any application under the Succession Act, i.e., making a gift of a $1.00 does not preclude an application being made against the Estate.

When determining whether an application for an estranged adult child would be successful the Supreme Court considers many things, which includes their age, dependency, financial resources, and any additional needs that they have. To be able to claim against your Estate not only do they need to be an eligible person under the Act but they need to show financial need and be able to particularise out that need.

It is on this basis that often an additional Statutory Declaration will be prepared by your team at Amanda Little & Associates outlining the reasons why you made no provision for an estranged child so that should an application the Estate after the date of your death such Statutory Declaration can be used to provide details to the Court as to why that decision was made by you.

It is generally the Court’s position that they do not wish to change the Testators intention at the date of making the Will and they shall attempt to maintain the Estate as per your wishes.

It is often the case that other Estate Planning tools can be used to limit the size of the Estate and/or the likelihood of an application being made by an estranged adult child. The team at Amanda Little & Associates can discuss your needs with you and determine the best way to proceed to minimise the likely outcome of your matter being contested and if it were to be contested, minimising the likely financial gain from the estranged adult child.

The death of a parent is the terminating point for child support. This includes whether a standard assessment has been made pursuant to the provisions or whether or not a Binding Child Support Agreement has been entered into between the parties.

If there are outstanding or arrears child support at the date of your death this will become a debt of the Estate which must be paid, however, additional child support will not accumulate post death.

If you are concerned about providing for a minor child of a previous relationship or an existing relationship, thought should be given to making a specific gift or other provision within your Estate Plan to ensure that there are finances available for that child.

Talk to the team at Amanda Little & Associates to discuss the need of your minor child and we can prepare an Estate Plan that will provide for their future including placing funds in trust for their ongoing education, benefit and maintenance.

With blended families it is often complicated to ensure that your wishes are maintained post death. This is especially the case in situations where there are children from a previous relationship and also a current spouse.

It is often the case where we will discuss with you the option of leaving specific gifts to your children from a previous relationship prior to giving the residual of your assets to your spouse. This will ensure that even if after your death your spouse does not include your children within their Will, that your children have received a gift from your Estate.

Upon your death, your Superannuation Fund will crystalise. If you have made a Binding Death Nomination, then your Superannuation shall be paid to the person you nominated under that Binding Death Nomination. Most Trustees require a Binding Death Nomination to be executed every three (3) years (although some Trustees now allow a once-off declaration) and often require independent legal advice.

A standard nomination is not a binding nomination and will allow the Trustee of the Superannuation Fund to determine who your Superannuation should be paid to.

In making the decision as to who shall receive your Superannuation, the Trustee will invite all parties who claim an interest against your Superannuation Fund (including children and non-biological financially dependent stepchildren) to make an application for provision from the Superannuation interest. They will then use this information to determine how the Superannuation shall be paid and shall make that decision at their own discretion.

It is our strong advice to all clients at Amanda Little & Associates that a Binding Death Nomination be put in place immediately as part of your Estate Plan to ensure that your wishes are followed in relation to your Superannuation and life insurance components.

Upon separation from your partner and prior to divorce, if you pass away without a Will your partner will inherit your Estate. Once you are divorced your Estate will then pass via intestacy provisions to the next eligible beneficiary.

If you have a Will in place and are divorced it shall invalidate any part of the Will that relates to any gifts given to your previous partner.

It is important that upon separation you immediately change your Will to reflect your new wishes and arrangements which would include changing any gifts to an existing spouse.

In the case where you would like to leave your Estate to your previous spouse, this can be done by either including a clause in contemplation of divorce and stating that you wish for it to continue to be valid despite a divorce being granted or, alternatively, after a divorce is granted executing a Will thereafter which includes provisions of gifts to a previous spouse.

It is also extremely important to understand that if you have separated from your previous spouse but not yet divorced and entered a new relationship with a defacto partner, that if you die intestate then there will be significant issues in relation to administering the Estate.

It is likely that in circumstances such as the above, that the Estate will end up being contested (if there is a Will in place). You must also carefully consider if you have not yet undertaken a property settlement, the holding of assets including whether or not severing of tenancy is required to protect your Estate from your previous spouse, otherwise such assets will automatically pass on your death to the joint tenant despite your wishes.

They are eligible to contest your Will, but they may not be successful. According to Section 57 of the Succession Act, they must be an ‘eligible person’ to contest, which includes former partners as well as children including stepchildren (if they lived with you or were dependent on you for any length of time). Any eligible person who believes they haven’t been adequately provided for has grounds to contest the Will.

Nevertheless, the court will consider the history of the relationship as well as any statements you may have made about how you would like your Estate to be divided. They will look at the financial positions of all parties but unfortunately you cannot guarantee that they won’t receive anything.