Review for Accountants & Financial Planners
April, 2015

Second relationships.... protecting the family

Two minute scenarios...

Entering a second relationship can present issues for some people who are concerned about protecting their children's inheritance.

Scenario One... Rob and Tracy

Scenario: Rob and Tracy have been going out now for twelve months. They are both divorced and each have two adult children.

What's the issue? Rob and Tracy are looking to buy a home together but when they die they each want to leave their share in the property to their children and not each other. They are not sure how to handle this.

Solutions: First, they should buy the property as tenants in common and not joint tenants so that their share in the property will be an estate asset and not automatically pass to the other joint owner. What they can then do is leave a life interest in their 50% share to the other partner so they can live in the property for their lifetime. When the surviving partner eventually passes away, the property is sold and the proceeds are distributed 50% to each estate.

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Scenario Two... Tracy is challenging

Scenario: Rob dies ten years later, leaving Tracy the life interest in the home.

What's the issue? Since they had their Wills done, Tracy has retired. She wants to challenge the estate as the life interest is not enough to provide for her maintenance.

Solutions: Rob should have had his Will reviewed and possibly updated to determine whether he needed to not only provide Tracy with a place to live in but also something to live on.

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Scenario Three... managing competing interests

Scenario: Rob is happy leaving the life interest in the home for Tracy and has also decided to leave a life interest in his investments so she can live on the income until she dies. Then the 50% share in the property and the investment capital will pass to his children.

What's the issue? Tracy is only 40 years old so Rob realises it could be quite a while until his children get the benefit of their inheritance.

Solutions: Rob may only need to leave a portion of his investments in an income-producing trust for Tracy and the balance can go to his children immediately. Life insurance can also be an ideal solution to provide an estate asset. The lawyer can provide advice as to what is needed to avoid a challenge.

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More information for clients

Please feel free to forward this insight on Wills and Testamentary Trusts to your clients. Or if they would like to discuss how we can help them please call 03 8621 9000 or email with their details and we will contact them, obligation free.

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