What to Consider When Writing a Will For a Blended Family

Many lawyers talk about blended families as if they are all pretty much the same – if you’ve seen one, you’ve seen them all.

Nothing could be further from the truth.

A blended family could be comprised of any combination of modern relationships. There’s the classic blended family when two people come together, bringing with them one or more children each from a previous relationship. They may be widows or widowers or divorcees. It may be that only one has children from a previous relationship. They may then have children together, who will be younger than their other children. The new spouse may even be younger than the children of their new partner.

Fling in some other considerations like children being adopted, or not, by the step-parent, previous de facto relationships or multiple de facto relationships, possibly with children, children with special needs and LGBTQIA relationships.

Then add into the mix: animosity between children of different parents or stepparents; one partner having significantly more personal wealth than the other; and family trusts and self-managed superfunds. Now put all that against the background of the State or Territory in which the parties live and the types and locations of the assets in the estate of the Willmaker, which will determine which laws  will apply in the event of a challenge to the Will.

So, when someone is in a blended family their Will needs to reflect the complexity and fullness of their individual situation – especially when it comes to dividing up that person’s estate amongst their intended beneficiaries and working out what happens when certain persons pass.

In each case, the objectives and obligations of the Willmaker in relation to their spouse and the children may differ enormously. 

Asset Cascade

A key consideration is how the assets of the Willmaker will “cascade” down the generations. In a blended family situation, if someone who is expected to survive another person passes on before they do, assets (or a significant portion of them) can flow in different and unexpected directions.

A simple example of this would be to apply the standard Will approach to a classic blended family situation. Suppose each parent made a Will that simply said that "when I die, everything goes to my spouse, but if they do not survive me then everything goes to my children in equal shares".

If the father dies first, the wife takes all of his assets. Then when she dies all of her assets, which also includes her husband’s assets, will flow to her own children on her death -- none of the husband’s assets would flow to his own children. A similar and equally unfair result occurs if the wife dies first.

Clearly, a more sophisticated approach is needed here to bring a more equitable result for all the children once both parents have passed.

If the couple came together at a time when all their children were very young and each person in the couple considers all of their children to be their “joint” children, they could make it clear in their Wills that a reference to children means all of the children of the couple, to ensure that all the children are treated equally once both of the couple have passed away, irrespective of who dies first.

In this instance, it may be wise for the couple to also consider putting into place a “Mutual Wills” arrangement to ensure that the survivor of the couple is not persuaded (perhaps by a future new spouse) to change their Will so as to disinherit the children of their deceased former partner.

Alternatively, if the couple wishes to look after the survivor for life, but then ensure that their own assets are inherited by their own biological children after the survivor dies, they might decide to set up a special testamentary trust in their Will. That would provide the survivor with the income for life (or perhaps until they re-marry) but with no or limited access to the trust assets (or capital). After the survivor’s death (or re-marriage) the income and assets of the trust are held only for the benefit of the children of the deceased person.

Further, if the family home was held by the couple as “tenants in common” (so that each person has a discrete share of ownership in the home) they might grant each other a right of residence in the deceased’s interest in the home so that the survivor can continue to live there. The home can then continue to attract exemptions from land tax and capital gains tax as a principal place of residence. Later, when the survivor dies (or re-marries) the deceased person’s interest in the home can thereafter be held only for the benefit of his or her children.

Location, Location, Location

There are different legal implications arising from the different types of beneficiaries in the blended family which can vary greatly depending on the State or Territory in which the Willmaker is domiciled. In particular, the so-called “notional estate” rules under the NSW Succession Act 2006 can easily lay waste to many strategies that might work in other States and Territories to protect the Willmaker’s assets from a claim against their estate.

For instance, if the Willmaker and the family home are located in Queensland and the Willmaker wishes to ensure their surviving spouse receives the family home without it being exposed to a family provision claim by one of their children from a prior relationship, an effective strategy would be for the Willmaker to hold it as “joint tenants” with their spouse. On the death of the Willmaker, the family home will not form part of their estate but will instead pass by right of survivorship to the spouse and not be subject to any potential claim made against the deceased estate.

However, if the Willmaker and the family home are located in (or sufficiently connected to) New South Wales, it may be possible for the Court to utilise the “notional estate” provisions to “claw back” the interest of the deceased in the family home from the surviving joint tenant and into the estate so as to be able to satisfy a successful claim.

This is illustrated by a recent NSW case in which the deceased made a Will which left the whole of his estate to his second wife of 39 years and made no provision for his surviving children. His daughter made a claim against her father’s estate. There were very few assets in the estate because most of the assets passed to her stepmother by way of survivorship as the assets were held with her as joint tenants. The deceased’s jointly held assets that could be designated as notional estate were worth $4.5 million.

After considering the relationship between the daughter and her father over the years, the judge ruled that the stepmother had to pay the daughter the sum of $400,000.00 plus her legal costs of $123,000.00 from the notional estate of the deceased.

So, when considering estate planning for a blended family, just remember that each blended family situation is as individual as the Willmaker themselves, and that if you think you’ve seen one blended family, you’ve seen them all  – well, you aint seen nothing yet.