Blended families, where one or both spouses have children from previous relationships, are becoming increasingly common in Australia. According to the Australian Bureau of Statistics, in 2021 approximately one quarter of all marriages in 2021 involved at least one partner who had been married before. With such a significant percentage of families being blended, estate planning can become quite complex. The challenge lies in ensuring that everyone—spouses, biological children, stepchildren—is adequately provided for without igniting family conflicts or unintentionally excluding someone. We’ll explore the estate planning strategies you can use to protect your loved ones and minimise the risk of disputes.

What makes estate planning for blended families different?

Estate planning in blended families usually involves addressing the needs of multiple parties, often with competing interests. Children from prior relationships, stepchildren, and your current spouse need to all be considered. The goal is to ensure fair distribution while minimising potential conflicts, especially when children from a previous relationship are involved.

In blended families issues can arise if proper steps haven’t been taken to sort out a proper Will and estate plan. For example, a surviving spouse may unintentionally disinherit stepchildren, or the relationship between stepchildren and the surviving spouse may deteriorate, leading to disputes over assets. Proper estate planning can help avoid these pitfalls and ensure that everyone is treated fairly and your goals in distributing your estate are achieved.

Key considerations for estate planning in blended families

Blended families involve particular considerations that should be taken into account to properly tailor estate planning strategies. These considerations include:

1. Balancing your loved ones’ competing interests

One of the primary challenges in estate planning for blended families is balancing the needs and interests of different loved ones. Your surviving spouse may have different financial needs or priorities than your children from your previous relationship. Do you share children with your current spouse, or are there stepchildren involved? Do you have adult children or are your children still minors?

It’s crucial to structure the estate plan in a way that ensures all parties are and feel adequately provided for.

2. The impact of remarriage on estate planning

Remarriage can have a significant impact on estate planning. When a person marries, their new marriage automatically revokes any previous will. This can create complications, especially if you have children from a prior relationship who you wanted to provide for and these children could unintentionally be excluded from the estate due to your Will being revoked.

If you’re in a de facto relationship and there’s the possibility of marriage in future, you may want to consider a contemplation of marriage clause to ensure your estate plan covers potential future circumstances as your Will make otherwise be inadvertently revoked if circumstances change.

3. Ownership of assets in estate planning

Jointly owned assets automatically pass to the surviving joint owner upon death. So it’s important to understand who owns which assets—whether it’s real estate, bank accounts, or business interests. In addition, superannuation and life insurance don’t automatically form part of your estate so ensuring you have an updated and valid binding death benefit nomination is essential​.

4. Setting clear goals and priorities in estate planning

What do you want to achieve with your estate plan? Some people prioritise ensuring their second spouse receives most or all assets, while others want to preserve wealth for children from a previous relationship. You’ll need to think about balancing these needs and consider how specific assets, like the family home, should be managed.

5. Potential for Family Provision claims in blended families

In Australia, family provision laws allow certain family members to contest a will if they believe they have not been adequately provided for. This is particularly relevant in blended families where a surviving spouse or children from a previous relationship might feel that they were overlooked or unfairly treated, leading to costly and emotionally draining legal battles. Proper estate planning can help mitigate this risk by ensuring that everyone’s needs are addressed upfront.

Estate Planning strategies for blended families

Given the complexities involved, it’s essential for those in blended families to approach estate planning with care. These are some estate planning strategies for blended families:

1. Mirror Wills for blended families

Mirror wills are a fairly common estate planning strategy often used by couples. Both spouses create wills with similar terms, typically leaving everything to the surviving spouse with the understanding that assets will be divided among all children after the second spouse dies. The downside of mirror wills is that the surviving spouse may change their will in their later years, potentially excluding children from their deceased spouse’s first relationship.

Mirror wills work well if there is a high level of trust and a long-standing relationship. Mirror wills are less suitable for families with concerns about potential changes in the surviving spouse’s wishes.

2. Mutual Wills for blended families

Mutual wills take the concept of mirror wills a step further. These are wills that both spouses agree to create, with the understanding that neither will change their will without the other’s consent. This legally binding contract prevents a surviving spouse from changing their will after the first spouse’s death to help ensure that the children from a previous relationship will eventually inherit assets.

There are significant downsides to mutual wills however, which can make them inadvisable. Mutual wills can be inflexible, and if circumstances change where there’s been a remarriage or a change in financial circumstances, it can be challenging to make necessary amendments to Wills​. Once a party becomes incapable or passes away you can be locked into the contract and stuck with an outdated Will.

Additionally, mutual wills may be difficult to enforce, especially if a surviving spouse spends or mismanages assets.

3. Life interests for blended families

A life interest allows a surviving spouse to live in the family home (or use certain assets) for the remainder of their life, or for a certain period of time or until a particular event happens, while ensuring that the property ultimately passes to the main beneficiaries, usually children of a previous relationship. This can be a useful strategy if the family home is the major asset or if a surviving spouse has a special attachment to the property or has financial need.

While this arrangement can provide a good solution for both the surviving spouse and the children, you need to make sure an experienced estate planning solicitor prepares your Will to ensure there is clarity around matters that often end up on dispute such as who is responsible for maintaining the property, paying for insurance and rates and what events are the deal breakers to the life interest.

4. Specific gifts and division of assets in blended families

Another strategy is to make specific bequests or gifts to children from a previous relationship. For instance, a parent might leave a portion of their estate directly to their biological children while leaving the remainder to their spouse. This can help ensure that the children receive an inheritance while still providing for the surviving spouse.

Structuring death nominations on superannuation and life insurance to directly benefit certain beneficiaries may also be a worthwhile strategy.

However, this approach may not be suitable if the estate’s value and/or assets are limited, or if assets are mostly owned jointly with a spouse.

5. No estate strategy (ACT) for blended families

Some people choose to leave no or minimal estate, effectively rendering family provision claims unviable. Assets are structured to pass outside of the estate through joint ownership, superannuation nominations, or life insurance, or are gifted during their lifetime. While this approach provides certainty, it can be risky if assets are needed during a surviving spouse’s lifetime​. This may also not be an advisable solution if you are based in NSW as NSW has notional estate which gives the Court the power to claw assets back into the estate if there is a Family Provision claim.

Additional estate planning considerations for blended families

1. Open communication in blended families

Open and honest communication with family members can help manage expectations and reduce the likelihood of disputes. Discuss your estate planning intentions with your spouse and children to ensure everyone understands your wishes and to give an opportunity to voice any misgivings.

2. Appointing an independent executor

   in blended families

In blended families, it may be wise to appoint an executor who is not an involved family member to administer the estate. This can help ensure that everyone feels the estate is being dealt with in an impartial and fair manner and reduce the potential for conflict between family members.

3. Regularly updating your Will in blended families

Regularly reviewing and updating your will is essential, especially after significant life events such as remarriage or the birth of a new child. This helps ensure that your estate plan remains aligned with your current wishes and circumstances and makes sure that your Will remains legally valid.

4. Enduring Powers of Attorney and Enduring Guardianships for blended families

In addition to planning for what happens after death, it’s important to consider what happens if you become incapacitated. Appointing an enduring power of attorney and enduring guardian ensures that someone you trust will manage your financial, legal and medical affairs.

Estate planning for a harmonious future

Blended families face unique estate planning challenges, but with careful planning, you can protect your spouse, children, and stepchildren while minimising the risk of conflict. By using strategies such as mirror wills, life interests, and binding superannuation nominations, you can create a fair and balanced plan that ensures your loved ones are taken care of.

Estate planning for blended families is undoubtedly complex, but with the right strategies and right advice, it’s possible to create a plan that protects your loved ones and your legacy.

Send us an email at [email protected], give us a call on 1300 034 487 or book in a free 10 minute chat here. 

We’ll look after you.