Wills and Blended Families Our core purpose is ‘HELPING CLIENTS ACHIEVE FINANCIAL SECURITY’ MULCAHY & CO | P 03 5330 7200 | INFO@MULCAHY.COM.AU | 300B GILLIES ST NTH, BALLARAT
Wills involving a husband and a wife with one or more children of their marriage generally make wills of a fairly standard nature – they leave their assets to each other, or failing that they leave their mutual assets to their children. Blended families occur when two partners come together with one or both partners having children from a previous relationship. However, a standard will may not suit their situation at all particularly for the following reasons: a) Some children within the family may be going to inherit substantial sums from their natural mother or father, whilst their half-siblings may not be in such a fortunate position. Trying to bring equity to the situation requires a lot more thought; b) If one partner is to pass away, there is nothing stopping the surviving partner changing their will to exclude the children of their deceased spouse, given they may not feel the same obligation to care for them financially if they are not their birth children. This is often further aggravated if the surviving spouse should enter into a new relationship where the new partner wishes to be included in a will and does not empathise with the former deceased spouses children; c) Depending on the relationship between siblings from different relationships, leaving
jointly owned assets may not be preferable given they may not agree on keeping versus selling assets, or how to manage them; d) If any of the above occur, it would not be unusual for an aggrieved party to bring a challenge against the Estate of their parent or step-parent, which is always a very expensive exercise and severely drains the asset pool available for distribution. Accordingly, it is important for blended families to ensure that their wills are well thought out and address some of these issues. There is no ‘standard will’ for blended families, as the circumstances are very different in each case, however the following tactics can be employed to assist: e) It is possible for parties to make “mutual wills” where they choose to leave their assets equally between their own respective children and step-children (and any children they might have together) and as such, providing each child (regardless of their parent) with an equal share. The issue with this as mentioned above is that it is possible that a surviving partner may change their will in future thereby removing step-children and the deceased’s children missing out on ever sharing in the assets of their parent’s Estate. Contracts for mutual wills (i.e. a binding agreement not to change the wills) can be done, but these lack flexibility and accordingly are risky
for different reasons. Namely, they do not allow any variation despite life dictating the needs for change (i.e. a child becoming an addict where a sizeable sum of money would be the last thing they should be receiving, or alternatively if a child receives their inheritance early for a valid reason and then can’t be removed from the will to take this into account). Regardless of these negatives, quite often partners choose to trust their spouse not to change their will and leave one side of the family out. Unfortunately, trust is often misplaced. f) Instead, where possible, we often provide that should one partner pass away, they leave their birth children with an amount of money (either from their assets or via life insurance taken out specifically for this purpose) firstly under a will with the remainder of their assets left to their surviving spouse to do with what they please. This ensures that regardless of any will alterations made by the survivor, the deceased’s children have received something that cannot be taken away. Whether this might be a possible solution depends on the financial circumstances of the parties.
IMPORTANT DISCLAIMER: This document does not constitute advice. Clients should not act solely on the basis of the material contained in this document. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly and we therefore recommend that our formal advice be sought before acting in any of these areas. This document is issued as a helpful guide to clients and for their private information.
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MULCAHY & CO | P 03 5330 7200 | INFO@MULCAHY.COM.AU | 300B GILLIES ST NTH, BALLARAT
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At Mulcahy & Co we are in a unique position to provide the expert advice and solutions of accounting, financial planning, lending, legal and information technology all under the one roof. This makes a normally complicated process seamless to help you on your way to becoming financially secure. g) Depending on the age and the needs of the surviving partner, life interests in assets can be provided with the remainder interest going jointly between all children (birth and step) of a relationship. This gives the surviving partner the right to enjoy the income of assets for their life, but does not usually give them the power to sell or deal with the assets in any other way. h) A testamentary trust can be instead employed with the trustee of that trust being a family member or friend who can oversee that your assets are used by your surviving spouse in a reasonable way, but also ensures that once also passing on, that they find their way as directed. i) If a child is set to inherit a substantial sum from their other birth parent, then you might choose to leave your assets to those less likely to be financially fortunate. If this is considered, it is important to state that this inheritance is your expectation and your will was made taking that into account. Being silent to the matter does not provide your Solicitor or the Court with any guidance if challenged as to the reason for their lesser amount or their omission. Stating clearly that you considered their needs and because of their expectance of an inheritance you chose to leave your estate in a different way gives your will a far better chance of being upheld in Court should it come to that.
These are purely examples of some techniques we adopt to work through a situation. The combinations of the above and other means are nearly endless, but it is a balancing act between protecting your interests without creating a financial noose for your spouse. If your family involves children from different relationships, please make an appointment with one of our Solicitors to talk through the best solution to your family’s needs in making a will.
We offer a free no obligation meeting to review your situation. Call us today on 03 5330 7200 and take advantage of this valuable offer.
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