Wills for blended families – estate planning for step-families and second marriages

What is a blended family when making a Will?

A blended family has both stepchildren and biological children. Blended families have competing interests, requiring more care when drafting Wills.

What are the two main approaches for step-family Wills?

When it comes to Wills for blended families, there are two main approaches:

1. Leave everything to my second spouse

You leave everything to their second spouse. Once both of you die, a portion of the inheritance goes to your family, and the remaining portion goes to your second spouse’s family. This approach aims to balance the interests of both sides.

If you are worth under $5m and you have been with your second spouse for ten or more years, most second couples opt for this.

But your spouse is a good-looking fool. And someone will snap up your second spouse and steal all your money when you are dead. To reduce that happening:

• • • Divorce Protection Trust

      

      A Legal Consolidated 3-Generation Testamentary Trust Wills ensure that all parties are looked after. This includes provisions for your children from a previous relationship and your current spouse, addressing the complexities of blended family dynamics. Combining two Wills and a Contractual Will Agreement is essential to secure your family’s future with precise, legally binding documents.

Legal Consolidated 3-Generation Testamentary Wills all contain a Divorce Protection Trust. It stops your spouse from losing your assets if they marry after you are dead.

• • • Contractual Will Agreement for second marriages

This is not a Will. A Contractual Will Agreement is a standalone document that forces both of you not to change your Wills. This makes sure that when both of you are dead, whatever is left goes to each side of the family. This also stops the Wills from being challenged by each other.

2. Leave nothing to my second spouse in a blended family

Alternatively, you leave nothing to your second spouse. Instead, you leave everything to your children from your first marriage. However, this potentially results in a miserable financial situation for the surviving spouse in their retirement years.

Commonly, this is for a wealthy couple – over $10m in assets. And only have been together for a few years.

There is a problem when you leave nothing to your second spouse:

• • • Your second spouse challenges your Will after you die

To slow up your second spouse from challenging your Will:

• • • put a Considered Person Clause in your second marriage Will
    • you and your spouse sign a Contractual Will Agreement

Which Wills do I build: Mirror Wills or two Single Wills?

This is a simple question. You have two choices:

1. Leaving everything to each other? Build Mirror Wills bundle.
2. Not leaving everything to each other? Build two single Will bundles, one at a time.

Clients seems confused about the potential answer. So let’s break it down:

Q: Professor Davies, I am leaving everything to my second husband, but I am leaving $100k to my son.
A: With respect, you are NOT leaving ‘everything’ to your second husband! You are, in fact, leaving $100k to your son. Therefore, you need two single Wills

Q: I am leaving everything to my second wife, but I am leaving my photographs and my Rolex watch to my daughter. Mirror or Single?
A: Do not muck around with minor issues. Scan the photos and email them to your daughter. Build a Deed of Gift for the Rolex today (before you die).

What do I do with trinkets and heirlooms in my Will?

If you have trinkets and heirlooms, then:

1. it is best NOT to mention them in your Will (but you can if you want to)
2. build a Deed of Gift while you are still alive
3. trust that your second spouse will immediately handover the trinkets if you die first
4. hand over the trinkets and heirlooms today (i.e. get the artwork, put it in the back of your car and drop it off at your child’s home)

Q: Why do first-marriage couples always leave everything to each other?

Second marriages have mixed loyalties. You want to protect your second spouse. But you also want to protect your children from your first marriage.

First marriages only have one loyalty. You and your spouse have the same children. You leave everything to each other. Once you are both dead, everything goes to your children. Since I started practising tax and estate planning in 1988 over 99% of married couples with the same children structure their Wills this way. These are called ‘mirror Wills‘.

 

Q: Do Joint Tenancy assets bypass the Will and go straight to my second spouse?

Correct. For example, you and your second spouse have a $3m home and no other assets. The home is owned as joint tenants. You leave ‘everything’ in your Will to your children – and nothing to your second spouse. However, when you die, there is nothing in your Will. You died with no assets. Joint tenancy assets go to the ‘survivor‘; in this instance, this is your spouse. Check out your Certificate of Title to see what happens to your home when you die.

Bank accounts and shares are by default owned as ‘joint tenants’. This is when you hold them with another person. Talk to your accountant about ‘severing’ joint tenancy. If that is what you want to do.

Q. I want my second spouse to remain in the home until my second spouse also dies

This is called a life estate or its weaker and delicate cousin, a right to reside. When you build 3-Generation Testamentary Trust Wills on our website, you can certainly add Life Estates. But they are not tax-friendly.