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Are You in a Blended Family? Navigating Estate Planning for Blended Families: Tips for Spouses

Estate planning for blended family

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With the increase in divorces, there is also an increase in blended and step families.

Blended families often involve competing interests between a surviving spouse and children from previous relationships. The surviving spouse may have different financial needs or priorities than stepchildren or children from a prior marriage. Balancing these interests can be challenging and may lead to conflicts.

In this article, a spouse is defined as a husband or wife or a person living in a marriage-like relationship, also known as a de facto relationship.

A child includes biological and adopted children.

What is a blended family?

A blended family is a couple family, married or in a de facto relationship, containing two or more children, of whom at least one is the natural or adopted child of both members of the couple, and at least one is the stepchild of either spouse.

What is a step family?

A step family is a couple family, married or in a de facto relationship, containing one or more children, at least one of whom is the stepchild of one spouse in the couple, and none of whom is the natural or adopted child of both spouses.

According to data from the Australian Bureau of Statistics in 2022, there were 101,558 blended families and 246,550 step families in Australia. In comparison, the total number of intact families was 2,549,430.

An intact family is a couple family containing at least one child who is the natural or adopted child of both spouses in the couple. It does not include a child who is the stepchild of either spouse in the couple.

Who do spouses in blended families usually want to provide for in their will?

Usually, the spouses, whether married or in a de facto relationship, want to provide for each other in their wills. Only after both spouses have passed away will the estate be distributed to their children and stepchildren. Achieving this aim sounds straightforward enough, but there are risks involved with structuring simple wills in this way for blended families.

What risks should spouses in step and blended families consider when preparing their wills?

  1. The surviving party revokes the will they signed during the marriage or de facto relationship by signing a new one that benefits only their children and excludes their stepchildren.

  2. The surviving spouse and the deceased spouse's children become estranged and excluded from the surviving spouse's new will.

  3. The surviving spouse may re-marry and that will automatically cancel their will – for more information read this article: The effect of marriage, separation and divorce on your Will.

  4. After remarrying, the surviving spouse leaves their whole estate in their will to their new spouse.

  5. A party's failure to understand that certain assets fall outside the parameters of their will and must be dealt with in another way. The result may be that significant assets are not passed to the intended beneficiaries, such as children or stepchildren.

  6. The assets may diminish over time after the death of one spouse, leaving little for the children and stepchildren.

Estate planning strategies for blended families

Some strategies in this article are restrictive and others provide flexibility for the surviving spouse. Each strategy is a trade-off between the restrictions imposed on the surviving spouse and the certainty provided to the testator's children. The most appropriate strategy will depend on the testator's wishes and circumstances.

Appointing the right executors

In blended families, selecting an executor who can impartially carry out the wishes outlined in a will can be challenging. Choosing someone trusted by all family members and capable of handling potential conflicts is crucial to ensure the smooth administration of the estate. See this Guide to appointing executors for more information.

Mutual wills

Mutual wills are a legally binding contract between spouses that prohibits each party from revoking or changing their will without the consent of the other. The effect is that upon the death of one spouse, the surviving spouse cannot change their will.

While mutual wills can offer certain advantages, it's important to consider their potential disadvantages.

Advantages of Mutual Wills

  1. Mutual wills provide a sense of certainty and security as they represent a binding agreement between the parties. This can be beneficial when blended families have complex family dynamics, ensuring that both spouses' wishes are respected.

  2. By establishing mutual wills, individuals can create a plan for the orderly distribution of their assets. This can help protect their intended beneficiaries, such as children from previous relationships, by ensuring their inheritance is safeguarded and not subject to change or manipulation after one spouse dies.

  3. Mutual wills require both parties to agree on the terms and provisions, allowing them to have a joint say in the distribution of their combined estate. This collaborative approach can help strengthen the bond between the individuals involved.

Disadvantages of Mutual Wills

  1. Once mutual wills are created and one spouse passes away or loses mental capacity, the surviving party is bound by the terms of the agreement. This lack of flexibility can limit the ability to adapt to changing circumstances, such as new relationships, financial situations or personal preferences.

  2. Mutual wills can be difficult to revoke or amend without both spouses' consent. This means that even if one person wants to change their will, they may not do so unilaterally, potentially leading to legal complications or disputes.

  3. Even with a mutual will in place there is no guarantee that the estate will not be depleted by the surviving spouse leaving the children of the first deceased spouse disappointed.

Right of residence trust

A use and enjoyment trust is a type of trust that can be established through a will. It allows a testator to provide for a beneficiary's use and enjoyment of certain property during their lifetime.

The property is distributed to the ultimate beneficiaries upon the beneficiary's death or satisfaction of certain conditions.

This strategy is commonly used for the family home as this is often a person’s main asset. However, most couples who own property together do so as joint tenants. Under this ownership, the property automatically passes to the surviving joint proprietor if one spouse dies.

However, it is possible to change this joint tenancy with no transfer duty and for the couple to hold the property jointly as tenants in common in equal. Owning a property as tenants in common allows each party to leave their share of the property to their beneficiaries.

Under this estate planning strategy, a spouse creating a will can allocate their portion of the property to their children, ensuring that their children will inherit some assets while allowing the surviving party to continue residing in the property for a predetermined duration. This arrangement can extend for the individual's lifetime, until they remarry, or until they choose to vacate the premises. The terms of this arrangement may include the option of rent-free occupancy, with the responsibility of covering expenses like insurance, council rates, and other related costs falling on the occupying party. These terms are customised to meet each client's specific needs and preferences.

Here are some advantages and disadvantages of using a right of residence trust by clients in blended families:

Advantages of a right of residence trust

  1. The right of residence trust provides security and stability for the beneficiary, typically a surviving spouse or another loved one. It ensures they may live in the property for the rest of their life.

  2. By establishing a right of residence trust, the testator can protect the property from potential risks, such as creditors or unwise financial decisions by the beneficiary. This helps to preserve the property for the ultimate beneficiaries, ensuring that it passes according to the testator's wishes.

  3. The right of residence trust allows the testator to preserve the property's value for the ultimate beneficiaries. It prevents the property from being sold or disposed of during the beneficiary's lifetime, ensuring it remains intact and available for distribution according to the will.

Disadvantages of a right of residence trust

  1. Creating and managing a right of residence trust requires careful legal documentation and ongoing administration. Therefore, establishing and administering the trust can involve legal complexities and costs.

  2. Some of the CGT benefits associated with the principal place of residence may be lost compared to a scenario where the property was gifted outright to the surviving spouse.

For more information please see the article Life Estate or Right of Residence for your beneficiaries.

Gift of the whole estate to surviving spouse

This most straightforward strategy provides maximum freedom and flexibility to the surviving spouse.

The testator leaves 100% of their estate to their spouse, and the spouse’s will benefits all the children, including the testator’s children from the previous relationship — the spouse’s stepchildren.

The arrangement is not contractual — there is no mutual will arrangement.

The testator is acting in the faith that the spouse will not change their will to remove the testator's children from their previous relationship.

Advantages of a gift of the whole estate

  1. Maximum freedom to the surviving spouse as there are no restrictions about the family home.

  2. Even though not necessarily an estate asset, superannuation can pass to the surviving spouse as a tax-effective pension or a lump sum tax-free payment.

Disadvantages of a gift of the whole estate

  1. If the surviving spouse remarries their new spouse will have a claim on the assets under the family laws of Australia. This may result in a depletion of the estate to the detriment of the surviving spouse and the children of the deceased's spouse if the surviving spouse and the new spouse separate or divorce (death of the surviving spouse is considered separation).

  2. Nothing stops the surviving spouse from changing their will and leaving the deceased spouse's children out of the new will.

Partial gifts to children

A blended family produces an enhanced risk of a family provision claim leading to a relationship breakdown and wasting the estate assets on legal fees.

A testator can minimise that risk by making a specific gift or giving their children a percentage of their estate and leaving the remaining estate to the surviving spouse.

This strategy may be suitable if the estate has sufficient assets to provide for the surviving spouse adequately. However, if the estate is modest such partial gifts to children may substantially reduce the benefits to the spouse.

Capital protected trust

Using a capital protected trust in a will is the most restrictive strategy on the surviving spouse but it provides certainty that the testator’s children will ultimately inherit.

This strategy involves leaving all or part of the estate into a capital protected trust in the will, where the income generated by the assets is provided to the surviving spouse. Still, the capital is preserved to benefit the children.

Advantages of a capital protected trust

  1. It ensures that the trust's capital will be preserved to benefit the deceased spouse's children.

Disadvantages of a capital protected trust

  1. It is likely to be subject to a family provision claim if the court takes the view that despite the capital protected trust, inadequate provision was made for the spouse.

  2. If the income from the trust is insufficient, it may be necessary for the surviving spouse to access the capital. Depending on the terms of the trust, access to the capital may not be possible.

  3. A capital protected trust may not be as tax effective as a discretionary testamentary trust, resulting in a larger tax bill.

  4. The surviving spouse may have to deal with the pressure from the residual capital beneficiaries, keen to get their share of the inheritance.

  5. If the surviving spouse is significantly younger than the deceased's children, they may have to wait many years to access the trust's capital.

Joint assets

If you owned any real estate with your spouse as joint tenants instead of tenants in common, that property would automatically pass to your spouse on your death, regardless of your will.

The same happens with joint bank accounts and jointly owned shares.

If you don’t want your interest in these joint assets to pass to your spouse, you must change ownership to ensure the asset passes to your preferred beneficiaries.

As a will does not govern the passing of joint assets to the surviving spouse, structuring the ownership of assets is an important estate planning strategy that eliminates the possibility of a challenge to the estate after one spouse dies. However, this does not apply in NSW.


Your superannuation death benefits, comprising the balance in your super and any life insurance component in your superfund, will not automatically form part of your estate.

You can nominate your spouse, your children, your estate or a combination of those as beneficiaries of your superannuation death benefits in a binding death benefit nomination (BDBN).

Using super as an estate planning strategy has these advantages and disadvantages:

Advantages of BDBNs

  1. Your nomination cannot be challenged. A BDBN provides certainty and clarity regarding the distribution of your superannuation death benefit. It allows you to specify the beneficiaries and the proportions in which they should receive the benefit, ensuring your wishes are followed.

  2. By making a binding nomination, you have control over who will receive your superannuation death benefit, rather than relying on the discretion of the trustee of the superannuation fund.

  3. You can leave your superannuation death benefits to your children from your first marriage under a BDBN.

  4. A well-structured BDBN can be used for tax planning purposes. You may minimise the tax payable on the benefit by directing your superannuation death benefit to tax-dependent beneficiaries, such as a spouse or minor children.

Disadvantages of BDBNs

  1. There are limited options about who can be named as a beneficiary in a BDBN.

  2. Nominating your adult children as your beneficiaries will likely result in a tax bill.

  3. As the name suggests, a BDBN binds the superannuation fund's trustee. If the nomination is valid and current, the trustee must follow it, even if circumstances have changed or the nomination no longer reflects your wishes at your death. Therefore, remember to review your binding death benefit nominations regularly.

Life insurance

Using life insurance is a valuable estate planning strategy for blended families.

Case scenario: You are in a blended family because you have remarried/re-partnered following a divorce or your spouse's passing.

Some of your children may be young and others are financially independent adults. If you die, you want to ensure that adult children from your previous relationship are provided for.

You take out life insurance and nominate such children as your beneficiaries. If you die, your children from the previous relationship will receive your life insurance payout so that the remaining estate will be left to your current spouse and younger children. This strategy will minimise the potential for your children to contest your will, claiming you have not provided adequately for them.

You can read more on insurance as an estate planning strategy at this link: Estate planning and life insurance.

Investment bonds

Investment bonds can be a cost-effective, tax-effective and convenient way to pass on your wealth to your dependants and others.

Investment bonds have features that can be used in conjunction with, or as an alternative to, conventional estate planning tools – such as a will and superannuation.

Most investment bonds will provide the ability to transfer benefits on your passing to your nominated beneficiaries. In some cases, an investment bond may also offer the option to transfer ownership of the investment bond to another person on your passing.

As a form of life insurance policy but linked to investment returns, an investment bond has a life insured, which would typically be you for estate purposes. On your passing, the investment bond benefits would be paid to your estate or your nominated beneficiary.

The investment bond, nominated in favour of a beneficiary, is a non-estate asset and is therefore not subject to any directions under your will, challenges to your will or any delays in the distribution and finalisation of your estate. The payment of proceeds can be made confidentially and without the knowledge of other interested parties.

Benefits of using an investment bond for estate planning

Using an investment bond’s beneficiary nomination can help supplement your estate planning strategy and may be useful for:

  • providing for blended families to financially provide for children of previous relationships, for a new spouse’s children or estranged children – whilst using a conventional will to provide for a current spouse and children

  • solving potential conflicts and inequities between children and grandchildren that might be complex and difficult to handle under a will

  • making gifts to organisations such as charities, hospitals, schools and religious groups (beneficiaries can be a natural person or an entity, including a company or trust)

  • privately meeting moral obligations to non-related parties and friends.

Using an investment bond’s transfer on death facility as an alternate estate planning strategy may be useful if you:

  • want to pass on your wealth outside of your will and estate

  • pass on your wealth with no tax being incurred

  • want to manage when your intended recipients access the investment and also limit how much they can access each year.

Blended families provide a unique set of estate planning challenges.

One or more of the estate planning strategies in this article may suit your circumstances. If you are in a blended family, call us on 04211 45637 for personalised estate planning guidance based on your circumstances and goals.


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