Blended Families Succession
In order to best provide for those children, or to protect the entitlement of biological children from new partners, or to provide for your spouse or partner in a new relationship, it is important that your Will and other estate planning documents consider the various layers of your family makeup to reduce the potential of a dispute following your death between your loved ones.
Did you know that one in three marriages ends in divorce? It’s really no surprise then, that the number of blended families in Australia is rising. A blended family (or a step family) is simply a family where one, or both, parents have children from a previous marriage. If you, or someone you know, are in this situation, what does it mean for your finances?
As families chop and change what happens to the family fortune?
As you can imagine, a blended family can have a huge impact on your finances – whether it’s a new home or ongoing child support just as a start. While your financial adviser can help you develop a strategy to ensure that your finances continue to be managed effectively, what about your estate plan?
Perhaps one of the most important areas that is often overlooked, is the impact of these changes on your estate plan, the consequences of which can be far-reaching in the generations to come. With advice from a specialist estate planner, however, you can be sure that both the needs of your surviving spouse and all your children have been considered.
Blended families and Estate Planning.
Estate Planning for most people is about having peace of mind about what will happen when they die or if they become incapacitated.
You want to make sure that your estate goes to those that you want it to go. Unfortunately very few of us ever think through the things that could vastly affect the distribution of your estate, via your will. Many who are in blended families with their second or third spouse are often go to great lengths to ensure that children of a first marriage are provided for and even more so, they are determined to ensure their previous spouse is not able to get any more money from your estate. It is most important to ensure that the inheritance you leave to your children is not open to attack. On the flipside, however, happily married couples often don’t consider what might happen if their widowed spouse were to remarry and start a second family.
Similarly, many people in blended families are unaware of the potential for their step children, or a dependent former spouse, to make a claim against their estate if not properly provided for. Further, clients who are in de-facto relationships or same sex relationships often have little idea of what claims their de-facto spouse or partner or the children of that partner might have on their assets.
Gone are the days where mum, dad and 2.5 kids made up the average Australian family. A review of available statistics show just how much things have changed even over recent years
• 87% of people were living as a family in 2003 with 5.5 million families in Australia.
• There has been a steady decline in marriages over the past decade, with only 5.5 marriages per thousand people by 2004 (compared to 7.0 marriages in 1984) although the past 4 years has seen an increase on 2001 figures. Queensland has the highest crude rate of marriages with 6.3 marriages per thousand people in 2004.
• There has been a steady increase in de facto marriages, which accounted for 12% of all persons living as a socially married couple in 2001, an increase of 28% since the 1996 Census.
• Most couples cohabit prior to marriage, with 73% living together before marriage
• Same sex de facto couples have only been counted on Census data in 1996 and 2001. In that time couples reporting as de facto same-sex couples increased to 37,800. Of those same-sex couples who have children almost all of them are from a previous opposite-sex relationship where separation or divorce has occurred and children are present in 11% of same-sex married households.
• In 2005 52,399 divorces were granted in Australia, which was actually the fifth year that saw a decrease in divorces since 2001. However, since 1985 divorces have still increased by 31.6% in Australia.
• 49.8% of divorces in 2005 involved children under the age of 18 years, with Queensland the second highest proportion with 52.2%.
• Of the grooms and brides remarrying in 2004, 30% had children under 16 years from a previous marriage
Many lawyers invariably deal with clients who are affected by divorce, separation and most significantly for estate planning purposes, children of various relationships – the aptly termed ‘blended family’. The estate planning advice given to clients provide solutions for these more complex life circumstances. Estate planning for Blended Families Estate Planning for most people is about having peace of mind about what will happen when they die or if they become incapacitated.
Most people want to make sure that their estate goes the way they say they want it to go, however few of us ever think through the things that might occur in the future to affect our estate plan. Many who are in blended families with their second or third spouse are often at pains to ensure that children of a first marriage are provided and even more determined to ensure that the prior spouse can’t get their hands on any more money than they got the first time around. Often we have concerns to ensure that the inheritance we leave to our children is not open to attack if those children go through a relationship breakdown or divorce. On the flipside, however, happily married couples often don’t consider what might happen if their widowed spouse were to remarry and start a second family.
In reviewing an estate plan, it is important not only to consider the circumstances of the current family members (such as current spouse, and children of the current relationship) but consideration should also be given to other family members or dependants who are not at the forefront of the will maker’s mind (such as children of the will maker’s former relationship or children of the spouse’s former relationship).
Often you will need to be educated about the competing rights that all of these people might have on your estate or other assets. For example, you will need to be advised that while their adult children of a former marriage may very well be financially independent, failure to provide for them in an estate plan may result in a claim being made against the estate. Much of what will be involved in preparing an estate plan for blended families will be to ensure a distribution of the assets with a view to minimising or avoiding potential family provision or other claims being made by people who might have an expectation of benefiting from the will maker. In order to receive proper advice, it is absolutely essential to ensure that your lawyer have a comprehensive understanding of the family dynamics and a detailed knowledge of all relationships that might impinge upon the overall succession plan. This is why it is imperative that the lawyer asks the awkward questions, to obtain the information needed and to independently verify the information given by the clients. Once the instructions are obtained to cover these potential scenarios, your appointed lawyer will prepare the best strategy to help achieve your objectives.