As business leaders and executives, you manage a myriad of responsibilities daily, and while you might recognise the importance of estate planning, it often ends up a lower priority.
In this article, we will navigate through the intricacies of estate planning specifically tailored for blended families, ensuring your loved ones are cared for and your legacy is managed according to your wishes.
Blended families, where at least one parent has children from a previous relationship, are increasingly common. These families often face unique estate planning challenges, particularly when both partners have children from past relationships or they have children together.
Managing such complex family dynamics alongside professional responsibilities can mean estate planning might not always be top of mind. However, it’s crucial not just for ensuring your financial affairs are in order but also for safeguarding the interests of all family members involved. The intricacies of relationships from previous and current unions can significantly complicate your family’s future without a clear and well-structured estate plan in place.
When you have re-partnered and there are children from various relationships, not having a clear or documented estate plan can lead to significant complications and family conflicts. Here’s how to navigate estate planning effectively within a blended family context.
Understanding the Unique Challenges
Blended families face unique estate planning challenges which are specific to them as a family. Considerations for those in these circumstances include:
- Is there a desire of you to have assets passed to your spouse in the first instance?
- Do you or your spouse wish to make an allowance to your biological children before estate assets are passed to your spouse?
- Are all biological children considered in your estate plan?
- How do you create a success estate plan where there your prior spouse is estranged from their biological child?
Significant family discord and legal disputes can arise when estate planning for a blended family has not been well considered with professional assistance.
Real-Life Examples
Consider the scenario of an executive, “Bill,” a leader in the tech industry, with children from a previous marriage. When Bill re-partnered with “Jane,” they had more children together. To address the complex dynamics, Bill set up his estate plan to allocate specific assets to his children from his first marriage, while ensuring Jane and their shared children were also adequately provided for.
Bill directed funds from his personal risk insurance to his children from his first marriage, while designating his superannuation and other entitlements to Jane. This strategy not only safeguarded his intent but also ensured Jane could maintain her lifestyle and continue providing for their mutual children.
In our practice, we often deal with complex family dynamics that require customised estate planning. A recent case involved a client who needed to ensure their estate was structured to protect their interests and those of their children from different relationships. This included involving an adult child in the estate planning process to establish a Will that specifically prevents their estranged biological mother from inheriting any part of their estate in the event of their demise. Without such an approach, the intestacy provisions will have applied, resulting in some of the assets of the adult child being passed to their mother, without the ability for this to be disputed.
This proactive approach not only secured the child’s future inheritance but also provided peace of mind to the family, ensuring that their estate would be distributed exactly as intended without interference from unwanted claims.
This scenario highlights the critical need for detailed estate planning in blended families, where every relationship can significantly impact how plans should be structured.
Five Key Considerations for Your Estate Plan
- Asset Ownership: Clearly understand which assets are yours alone and which are jointly held. Assets owned jointly typically pass directly to the co-owner, not through your Will.
- Superannuation and Life Insurance: These are not automatically part of your estate and therefore are not automatically distributed in line with your Will. Specify in your superannuation and life insurance plans who you want as beneficiaries to avoid potential discretionary decisions by super fund trustees or insurers.
- Provisions for Your Partner: It’s critical to ensure that if you pass away first, your partner has the necessary means to remain financially stable, including the possibility of staying in the family home and managing future expenses.
- Inheritance for Your Children: Mechanisms should be in place to guarantee that your children from previous relationships will inherit regardless of any changes a surviving spouse might make.
- Family Provision Claims: Spouses, children, stepchildren, and dependents can claim against your estate if they believe they were inadequately provided for. Plan these provisions carefully to minimise potential disputes and legal challenges.
The Importance of Having a Will and Estate Plan
Without a Will, managing and protecting wealth becomes a challenging task fraught with potential tax issues and creditor claims. It’s essential for executives, especially those with significant assets and complex family structures, to have a well-thought-out estate plan.
Not only does this help in minimising family conflicts, but it also ensures that your wealth is distributed according to your wishes efficiently and effectively.
Getting Started with Your Estate Plan
No one solution fits all, especially with the complexities inherent in blended family situations. Starting 2025 with a review or establishment of your estate plan can ensure that your family is protected and your wishes are respected.
For personalised guidance on estate planning for blended families, contact Executive Strategies. We specialise in helping executives navigate the intricacies of estate planning to safeguard their legacy and ensure peace of mind.
To discuss your estate planning needs and begin the process of protecting your family’s future, contact James Marshall at Executive Strategies at +61 (0) 7 3007 2080 or email contact@executivestrategies.com.au.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation or needs. You should not act on it without first obtaining professional financial advice specific to your circumstances.
This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.
