How to plan your estate with a blended family
A few generations ago, marriage was generally ‘permanent’ and something that you stuck with regardless of whether or not it was working and you were happy. A failed marriage was something to be ashamed of, and blended families were unheard of.
But these days, one in five Australian families are living as a ‘blended’ family, and one in three first marriages now end in divorce. And, these figures are rising.
Blended families can become quite complex when you have children from your first and subsequent marriage, and so does your spouse – current and former!
If your blended family is starting to make the Brady Bunch look like a simple scenario, planning your Will and estate can become rather complicated. It’s easy to leave it in the too hard basket, however this is an important issue that needs to be dealt with before it’s too late.
There are many things to consider when you’re planning your estate for a blended family.
Your biological children
Without an estate plan, your biological children could miss out on their rightful inheritance. If you die without an estate plan, it’s up to your spouse to decide who gets what. They could favour their own children at the financial expense of yours, or could change their Will so that their children receive everything.
If your surviving spouse enters a new relationship, the matter becomes even more complicated again. Having an estate plan in place ensures your biological children don’t miss out.
It’s not uncommon for stepchildren to challenge an estate if they feel they have been unfairly left out. When you have biological children from a former marriage, stepchildren from a current marriage and combined children from your new relationship, disputes can easily arise. It can give a new meaning to sibling rivalry!
A proper estate plan, outlining the distribution of all your assets, can eliminate most of these disputes.
Mutual Wills include an agreement that if the remaining spouse enters a new relationship after the death of their spouse, their Will won’t change. This ensures the children from that relationship will not be financially neglected by the surviving spouse, or be left out if a new Will is made.
This is something to consider even if you have only been married once and have children with only one partner. In the event of your death, your spouse could remarry and have more children, leaving your children to contend with asset allocation.
Superannuation doesn’t form part of an estate’s asset pool unless it’s paid to a legal representative. This allows a spouse in a new relationship to use their existing superannuation balance to provide for children from a previous relationship.
It’s important to complete a binding death benefit nomination form with your superannuation fund, so you can control how your super is used if you’re not around to enjoy it.
Whilst life insurance can form part of your estate plan, it can also be kept separate. You can nominate significant assets to be distributed to your intended beneficiaries, including your children from a previous relationship.
Many people neglect to make a Will or an estate plan, thinking it will never happen to them. They trust that their remaining spouse will make the right decisions that are fair for everyone involved.
However, it doesn’t always happen that way. Estate planning is a very important part of your overall financial plan and is something that shouldn’t be left to the last minute. After all, you never know when the last minute will be.
If you’d like some advice regarding estate planning or making a Will, please call us on 02 9241 2575.