Apr 04, 2024
Our insights
The traditional family unit of Mum, Dad and two kids is an ideal many of us don’t experience for long.
There are several different types of blended families. They include ones where:
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You, your partner or both of you bring a child from another relationship
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One of your parents re-partnered, either before or after you were born
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One of your own children begins a relationship that involves children from a previous relationship
When it comes to building, protecting and distributing the wealth of a deceased estate, blended families face all the same issues as traditional families.
However blended families, especially those with high net worth, face significantly more complexity in terms of the transfer and control of their family wealth.
Quite simply, it can get messy very fast – especially if you haven’t adequately prepared.
So it is important to get educated, and partner up with a highly experienced financial adviser, estate planning lawyer and accountant to ensure you follow the right processes and protect your interests.
Here are some general considerations, and as you read them, remember that you’ll need to get professional financial and legal advice specific to your circumstances.
New relationships need a new Will
Whenever you separate or divorce from your partner and begin a new relationship or remarry, it is important to draw up a new Will, revoking all previous Wills.
You may be surprised to learn that separation or divorce does not automatically revoke your Will.
Equally, divorce does not automatically revoke your power of attorney or the appointment of enduring guardian of your former spouse.
It will however most likely leave your spouse as trustee of any property left in trust to them and your children.
Failing to make a new Will where a new partner and potentially additional children enter the family structure can make things very complicated indeed in the event of your death.
Again, it is crucial to work with an experienced estate planning lawyer with the support of your financial adviser on these matters.
Strategies to consider
There are many financial strategies that can help you navigate the unique challenges that high net worth blended families encounter.
Estate planning
Don’t limit your plans to a basic Will. Engage a qualified estate planning lawyer to work with your financial adviser and construct a comprehensive estate plan that caters for all family members.
Consider your options with revocable and irrevocable trusts and ownership restructures to protect assets and control their distribution.
Trusts may be incentivised to encourage desired behaviours or achievements among heirs, such as graduating from university.
Open communication
Keep lines clear, open and honest, ensuring everyone knows exactly where they stand. Ensure you understand and appreciate everyone’s financial goals, concerns and expectations.
Pre-nuptial and post-nuptial agreements
Consider legally binding agreements drawn up by family law professionals that outline financial responsibilities, protect existing assets and provide clarity in the event of divorce or death.
Education funding
This is one of the savviest and most attractive ways to satisfy the needs and consider the future of all children, grandchildren and stepchildren in blended families.
Setting up education trusts, accounts or similar investment products gives all your descendants the best education your money can buy.
Insurance reviews
Review and update your life insurance policies to ensure they reflect your current family structure and adequately provide for all dependents.
Consider policies that can cover estate taxes and provide liquidity for the settlement of the estate.
Business planning
If there is a family business, consider succession planning and future ownership structures, making clear each individual’s roles and responsibilities.
This could include a family governance structure with a family council or advisory board as well as wealth education programs for heirs to improve their financial literacy.
Tax planning
Engage an experienced accountant to work alongside your financial adviser to implement strategies that minimise the tax on your estate.
These may include lifetime gifting strategies to transfer wealth to heirs tax efficiently.
Mutual Wills
This may be a useful mechanism to consider when dealing with blended families.
In short, a mutual Will is when spouses (or partners) make their Wills at the same time, including a contract that binds them to be unable to make changes without each other’s permission.
For example, this could mean that a surviving partner cannot change their Will after the death of the other without certain conditions being met.
For instance, it could dictate that an estate is equally divided among their children upon the death of the surviving partner, rather than exposed to a potential new partner.
Again, this is something that would require specific legal advice based on your circumstances.
Mistakes to avoid
Don’t think you have to die to bequeath - Give while you are alive. That’s why paying for your beneficiaries’ education is such a wonderful gift.
Don’t forget a back-up plan - You’ll want to appoint people to a range of roles to handle your estate. This includes an executor, trustees, guardians, lawyers etc. But it is wise to appoint substitutes in the event your initial choices don’t want to or are unable to perform their duties.
Don’t think your estate has to be divided equally - It’s okay to divide your estate unequally. Keep lines of communication open and talk to beneficiaries about your plans. You’ll only risk your will being challenged if you short change a family member who is in financial need.
Don’t assume your family will never become blended - You may not have one yet, but it only takes one separation or divorce among your children and you’ve got one. That’s why you should put provisions in place in your estate now.
Get advice today
Blended families might bring a whole lot more love to your doorstep.
But preparing your estate in a thoughtful but also clean and concise manner can prove very difficult.
It will almost certainly require the engagement and support of a range of professionals, including your estate planning lawyer and accountant alongside your financial adviser.
Understand too that legislation regarding wills and estates varies in each state around Australia.
If you are the head of a blended family and yet to make suitable provisions for your beneficiaries, Calder Wealth Management can help.
Calder are wealth management specialists who will work seamlessly with your estate lawyer to remain abreast of all the particular state laws regarding wills and estates and can advise you on the best vehicles to employ for your personal circumstances.
We’ll act as your fulcrum, coordinating all of the professionals within your team, helping you to prepare a watertight document so your wishes are honoured and your assets are distributed as desired when you pass.
Don’t gamble with your estate’s future.
Written by Anthony Hill.
Contact us today.
And remember to regularly review your documents to ensure they remain aligned with your wishes and appropriate regarding any changes to your family structure.
The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.
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