Associate, Emma Catterall in our Wills & Estates Team and Lawyer, Jordan Schweitzer in our Family Law team explore how the complex dynamics of blended families can affect estate planning processes.
Blended families may reasonably wonder how their family structure of children, parents, stepchildren, stepparents, current partners, and estranged spouses can impact on their estate planning.
A blended family faces the same estate planning considerations as any other family. Simply put, merely because a family is blended does not mean that their estate planning must necessarily become more complex. Rather, there are some additional considerations that a blended family may wish to consider, namely:
- Divorce and marriage.
- Stepchildren as beneficiaries.
- Mutual Will Agreement.
- Right to reside in real property.
Preliminary issues – marriage and divorce
Under the Wills Act 1970 (WA), a Will is automatically revoked upon a will maker entering a marriage or being granted a divorce unless an intention to the contrary is expressly contained in their Will. A blended couple will likely need to consider the following:
First, if the blended couple have left prior marital relationships but have not yet divorced their estranged spouse, any Will made during their marriage would still be in effect. That Will likely leaves their estate to their now estranged spouse.
Second, the blended couple may commence a relationship or decide to get married sometime after their initial divorce. Any new Will made may not contemplate remarriage and would unintentionally be revoked upon that marriage.
Stepchildren
A blended family often involves stepparents, stepchildren, or other non-blood relations. The blended couple will have to decide who is to receive their estates upon their deaths; that is, who will be their beneficiaries:
First, the blended couple could leave their respective estates directly to their children and leave nothing to their partner or stepchildren. Doing so could lead to a challenge being brought against their estates (known as a Family Provision Claim) by their spouse or stepchildren.
Second, the blended couple may decide to leave their estate to each other initially, and then to their children and stepchildren equally. While noble, issues may arise where one partner passes away and the survivor, after receiving the deceased partner's estate, then alters their Will to exclude their stepchildren (the deceased partner's children).
Mutual Will Agreements
A Mutual Will Agreement (MWA) (or Mutual Wills Contract) is an agreement that can provide two key benefits to a blended family:
First, the blended couple agrees that they will not make a new Will (or Codicil) to change their beneficiaries without their partner's consent. In doing so, surviving partners are prevented from re-writing their Will to exclude their stepchildren.
Second, the blended couple agrees not to deal with their property in a manner that deliberately defeats a beneficiaries' expected entitlements. Following the death of one of the blended couples, the surviving partner can deal with their property, including any property they received from their deceased partner's estate, as they see fit. During the surviving partner's lifetime, they could give their property only to their children leaving little or nothing in their estate for their stepchildren. In making the MWA, the surviving partner is prevented from disposing of their property in such a manner that would defeat the entitlement of their beneficiaries, including any children or stepchildren.
Mutual Will Agreements may be viewed negatively in the same manner as a Binding Financial Agreement (BFA) (more commonly known as a Prenup or Prenuptial Agreement). While a BFA can be perceived as undermining the lifelong commitment of a marriage, a MWA can be seen as undermining a stepparent's commitment to their stepchildren. However, despite its perception, an MWA should be seen as a tool available to a blended couple to protect the interests of children and stepchildren as the beneficiaries under a Will.
Right of occupation
It is not uncommon for the home of a blended family to be held solely by one partner or by both partners as tenants in common. Either partner may wish to pass their estate directly to their children, without making their surviving partner (and possibly their stepchildren) homeless.
If the home is owned solely by one partner, that partner may grant their surviving partner a right to reside in the home. In doing so, the surviving partner can reside in the home for their lifetime, or a specified period, and on certain specified conditions, before the home passes to the children.
In circumstances where the home is held as tenants in common, the situation can be far more complex, and a lawyer should be consulted to receive specific tailored advice.
Conclusion
While the above is not an exhaustive list of the matters a family, blended or otherwise, should consider when estate planning, they are matters that may need due consideration based taking into account a families' unique circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
