Blended Families and Estate Planning: Avoiding Future Disputes

Why Blended Families Require Careful Planning

The standard "leave everything to my spouse, then to my children" arrangement assumes that the survivor will honour the deceased's wishes after they die. In a first-marriage family, that assumption is generally safe. In a blended family it is not. The survivor's natural inclination is to favour their own children — and there is little, in most cases, to stop them updating their will to do so.

That structural risk is the reason blended-family estate planning relies less on mirror wills and more on mechanisms that lock in the deceased's wishes — life interests, testamentary trusts, binding superannuation nominations and, in suitable cases, mutual wills.

Common Sources of Disputes

• the family home — who lives in it, who eventually inherits it;
• superannuation — whether nominated to the spouse or to children;
• family heirlooms and items of sentimental value;
• differing levels of contribution to the relationship's assets;
• perceptions of unequal treatment between children of different relationships;
• the survivor's later remarriage, which can revoke their will and disrupt the original plan.

What Happens Without a Will?

Without a will, the intestacy rules under the Administration and Probate Act 1958 (Vic) decide who inherits. In a blended family, those rules typically produce a split between the surviving partner and the children of every earlier relationship — an outcome that often pleases no one. Our article on dying without a will in Victoria sets out the mechanics in detail.

Protecting a New Spouse

Protecting a new spouse usually means ensuring they can continue to live in the family home, maintain their standard of living and access the assets they need. Tools include:

• holding the home as joint tenants (with the home passing automatically to the survivor);
• granting a life interest in the home with the remainder to children;
• using a testamentary trust to provide income to the surviving spouse with capital preserved for the children;
• directing superannuation death benefits to the spouse via a binding nomination.

Protecting Children From Earlier Relationships

Protecting children from earlier relationships generally involves limiting the survivor's ability to redirect assets away from them. The most common tools are:

• tenants-in-common ownership of the home, with the deceased's share going to their children (subject to a right of occupation for the survivor);
• life interests with the remainder fixed in the will;
• testamentary trusts with the children as beneficiaries and a trusted independent trustee;
• mutual wills in carefully chosen cases;
• binding superannuation nominations directing benefits to children.

Life Interests and Rights of Occupation

A life interest gives the surviving spouse the right to use and benefit from a particular asset — most often the home — for their lifetime, after which the asset passes to named remaindermen. A right of occupation is a narrower version, granting only the right to live in the property, often subject to conditions (paying rates, insurance and maintenance).

These tools are powerful but inflexible. They need careful drafting around portability (can the survivor downsize?), shared expenses, and what happens if the survivor enters aged care or a new relationship. A poorly drafted life interest can be as damaging as none at all.

Testamentary Trusts

Testamentary trusts are particularly valuable in blended families because they separate the legal ownership of assets from the people who benefit from them. A child of an earlier relationship can be the beneficiary of a trust managed by an independent trustee, with income and capital distributed according to a structure the testator has set. Our article on testamentary trusts explores their wider tax and asset-protection benefits.

Superannuation and Death Benefits

Superannuation often forms the largest single asset in an estate, yet does not automatically pass under the will. In a blended family, the importance of getting nominations right cannot be overstated. Binding death benefit nominations should be reviewed at every significant life event and after any change in fund or trustee. Our article on superannuation and your will explains how nominations interact with the estate.

Family Provision Risks

Even the most carefully constructed plan can be tested by a family provision claim. The Court considers the size of the estate, the relationship between the claimant and the deceased, the financial circumstances of the claimant and the obligations the deceased owed. Contemporaneous statements of reasons, properly executed wills and structures that genuinely address each claimant's reasonable needs all help to defend an estate. See our companion article on defending family provision claims for the executor's perspective.

Practical Estate Planning Strategies

• review the title to the family home — joint tenancy versus tenants in common;
• complete and review binding superannuation nominations;
• consider a testamentary trust for children of an earlier relationship;
• document reasons for the chosen distribution in a separate statement;
• review wills after any new marriage, separation or significant change in financial position;
• consider whether a financial agreement (binding financial agreement) is appropriate for the new relationship;
• obtain coordinated advice from a lawyer, accountant and financial adviser.

Conclusion

Blended families almost always benefit from a more sophisticated estate plan than a single mirror will. The additional time and cost is modest compared with the financial and emotional cost of a contested estate. Adults entering or settling into a second relationship should treat estate planning as one of the foundational tasks of that relationship — alongside reviewing powers of attorney and the executor appointments that determine who carries out the plan after death.

Frequently Asked Questions