Careful Planning Needed for Blended Families
If you’re a member of a blended family you may be thinking about how to provide financially for your new spouse or partner, and your adult children from a previous relationship. You may be quite happy to provide for your spouse or partner in the event of your death. You may not be so keen, however, for your assets to then pass to your partner’s children on your partner’s death.
With blended families becoming increasingly common, this issue frequently arises – not only when dealing with relationship property matters but also when drafting Wills, establishing trusts and buying a home or other property.
The bad news
It’s no longer a case of ‘what is yours is yours, and what is mine is mine’. There are a number of ways in which your property or your family trust’s property can be lost.
The common strategy of maintaining separation of income and assets is far from a complete answer. In some circumstances, that arrangement will be disregarded when a triggering event occurs such as a separation, death, or one partner going into residential care.
Nor is your Will always going to allow you to choose how to provide for both your partner and your children. On your death, your surviving partner may choose to claim their entitlement under relationship property law regardless of the terms of your Will.
Increasingly often, family trusts are also being challenged. Property transferred to a family trust, even before the start of a relationship, can be left exposed to claims by a partner.
A significant but easily dealt with risk arises from the way couples own their property. If you own property jointly with your partner rather than in shares, on your death your interest passes directly to your partner. If you intended under your Will to give your interest in that particular property to your children from an earlier relationship, that option will not be available.
Entering into retirement village occupation right agreements can also create this trap as joint ownership of occupation right agreements is almost always required.
The positive side
The good news is that steps taken at the right time can achieve your asset planning objectives. Carefully considered and formally recorded relationship property agreements can provide predictable outcomes in the event of separation or when you die.
Life interest wills can protect a partner from being forced to leave the relationship home during their lifetime while, at the same time, can protect an interest in the property for your children.
Trusts can also be a very useful tool for preserving assets. Arrangements made a short period before a relationship or marriage begins are at risk, however, without a relationship property agreement.
Doing nothing is unwise. Whether through fear of rocking the boat or complacency, inaction can result in family disputes and disappointment. The cost and upset caused by a family dispute arising on separation or death can often be avoided or minimised by taking advice at the right time – sooner rather than later.