Review for Accountants & Financial Planners
May, 2016

Blended families...

Two minute scenarios...

Many clients have expressed concern about how to manage blended families when it comes to estate planning. Let's look at some options.

Scenario One... Paul & Diana

Scenario: Paul and Diana married about fifteen years ago. They each have two adult children from previous relationships.

What's the issue? Paul is in a quandary. He wants to make sure Diana is well looked-after but also wants to ensure his children receive an inheritance. Paul feels his children should at least get the holiday house that was left to him when his first wife died.

Solutions: Paul can choose to leave his children the holiday house, and the balance of his estate to his second wife, Diana. Paul has enough other assets to ensure she is well looked after.

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Scenario Two... but where will she live?

Scenario: As above, but the property is now the home in which Paul and Diana are still living.

What's the issue? Where will Diana live if Paul leaves the home to his children?

Solutions: One option is for Paul to give Diana a right to live in the property until her death. Care needs to be taken however, to address a potential challenge. It will help for example, if Paul's Will gives the executor the ability to sell the home and use the proceeds to fund a smaller property, or pay an accommodation bond for a retirement facility for Diana. It may also be important to ensure Diana has enough funds to live on. When Diana dies, the house is sold, or bond refunded, and can be distributed to Paul's children.

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Scenario Three... keeping it safe

Scenario: Paul and Diana are talking about leaving everything to each other on the understanding that whoever dies last, will leave their estate equally to all four children.

What's the issue? Diana is concerned that if she leaves everything to Paul, and he re-marries and changes his Will, her children will 'miss out'. However, if she leaves something in the first instance to her children, Paul may challenge.

Solutions: Diana decides to take out a separate life insurance policy. To avoid the challenge, she appoints her two children as beneficial owners so that the insurance proceeds by-pass the estate. Note: This may not be an appropriate strategy in all states e.g., NSW.

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Advisers looking to upskill in Estate Planning?

Details on our one-day workshops are available here Estate Planning Workshop. If you would like to know more please call 03 8621 9000 or email

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