Estate Planning for a Blended Family: A Case Study

In a blended family, a Will alone often cannot protect your children’s inheritance. When the first spouse dies, the survivor can usually change their Will and deal with the assets freely. Protection comes from planning the whole structure together: how property is owned, who controls any trusts, and written agreements between spouses about what happens after the first death.

Some details of this matter have been left out or generalised to protect our clients’ privacy.

The situation

A couple came to Direct Lawyers to plan their estate. They had a child together, and children from an earlier relationship. One of them had been estranged from one of those children for many years.

They had significant assets, including real property. They had three goals:

• Set up separate Testamentary Trusts for two of the children.
• Keep certain properties in the family for one child who would need long-term financial support.
• Leave the estranged child a small share of what remained.

Their biggest concern was simple. Would their plan survive after the first of them died?

What made it complicated

Unequal inheritance and the risk of a Family Provision Claim

A Family Provision Claim is an application to the court by a family member who says they were not left adequate provision from an estate. In Queensland, children can make these claims, including adult children. Leaving one child much less than the others raises that risk. (See who can claim and how.)

Testamentary Trusts with different beneficiaries

A Testamentary Trust is a trust created by your Will. It takes effect after your death and holds an inheritance for a beneficiary. Depending on circumstances, it can offer asset protection and potential tax benefits.

Each child’s needs were different. That meant thinking carefully about who would be trustee and who would be appointor (the person with power to replace the trustee) for each trust.

Property that might pass outside the Will

When two people own property as Joint Tenants, the survivor takes it automatically when one dies. It does not pass under the Will. To get certain properties into a child’s Testamentary Trust, we had to look at how each property was held, and whether the Joint Tenancy needed to be severed.

Keeping property rather than selling it

The couple wanted certain properties kept, not sold, unless there was a compelling reason. The trustees still needed enough discretion to run the trusts properly. The question was how to record those wishes without tying the trustees’ hands.

Protecting the plan after the first death

Without an agreement, a surviving spouse can usually make a new Will or give assets away. Either could undo what the couple had planned for one of the children.

What Direct Lawyers did

We prepared a coordinated set of Estate Planning documents. Each one addressed a specific risk.

Document	What it does in this plan
Wills with Testamentary Trusts	Leave each child’s inheritance in a trust suited to their circumstances
Enduring Powers of Attorney	Appoint someone to make decisions if either spouse loses capacity
Binding Death Benefit Nominations	Direct where superannuation benefits go on death
Agreement to Provide Benefits (similar to a ‘Mutual Will’)	Designed to prevent the surviving spouse from changing the agreed benefit for one child
Agreement Not to Diminish Estates	Restricts the surviving spouse from giving away or disposing of significant assets to defeat that benefit
Statutory declaration	Records the history of the estranged relationship, as evidence if a Family Provision Claim is made
Memoranda of wishes	Guide the trustees on managing the trusts, including keeping the properties
Explanatory memoranda	Help the beneficiaries understand why their inheritance is held in a Testamentary Trust, how that protects them and how to use it
Statement of intention	Sets out how the couple want Direct Lawyers to help protect their Estate Plan into the future
Estate transmission plan	Explains all of the above in plain English

The outcome

All documents were signed and finalised in just over two weeks. The couple felt reassured that their wishes had been properly addressed.

Our view: what this matter shows

The Will is only one piece. In this matter, the Wills would not have worked on their own. Joint Tenancy, superannuation and the surviving spouse’s freedom to change their Will could each have bypassed them. It is the difference between a Will and Estate Planning, and why it matters to know what your Will does and doesn’t cover.

Mutual Wills lack flexibility. Mutual Wills can provide valuable certainty for couples who want to protect their agreed Estate Planning arrangements, particularly later in life. However, they can be too restrictive for couples whose family or financial circumstances may change. An Agreement to Provide Benefits offers a more flexible alternative, allowing couples to legally protect specific inheritance arrangements while retaining the freedom to adapt other aspects of their Estate Plans as circumstances change.

Evidence is gathered while you can still give it. A statutory declaration made now documents the nature of the relationship and can provide the evidence the executor will need to defend the last Will. After a person’s death, a lot of that explanation and evidence is also lost which can leave an executor with little armour to protect the estate.

Trustees need guidance, not handcuffs. A memorandum of wishes tells trustees what the family wants, while leaving them able to respond to circumstances nobody can predict. The key is to ensure the right trustee is chosen who will fulfil the wishes.

Is your family’s situation similar?

If you have children from more than one relationship, a child who needs long-term support, or a family member you are estranged from, your Estate Plan needs more than a standard Will. Find out how our Testamentary Trust lawyers and Estate Planning work can help.

Book a Consultation or call (07) 3703 1888.

Sources

• Succession Act 1981 (Qld), Queensland Legislation. Part 4 covers family provision.
• Family Provision Application, The Public Trustee of Queensland.

This case study is general information, not legal advice.