Careful Planning Needed for Blended Families

Blended families are becoming increasingly common and careful planning is required to reduce the risk of challenges to your estate on death. There is often a conflict between your obligations to provide for your current spouse/partner, and your obligations to your children from your previous relationship. You may be quite happy to provide for your spouse or partner in the event of your death. However, You may not be so keen for your assets to then pass to your partner’s children on your partner’s death – particularly if you have children of your own to provide for.

To ensure that your intentions are carried out following your death, careful planning is required not only when dealing with relationship property matters, but also when drafting Wills, establishing trusts, and buying a home or other property.

The Problem

Everyone has a right to be happy and when you meet someone and enter into a relationship often the last thing on your mind will be protecting your assets.

In an ideal world, the assets that you have at the time you meet someone would remain your separate property, and any assets that you accumulate together would be your relationship property. In the real world, it is not that straightforward.

It’s no longer a case of ‘what is yours is yours, and what is mine is mine’. There are a number of ways in which your property or your family trust’s property can be lost.

One tool people use is to keep income and assets separate, but this is far from a complete answer and is often easier said than done. This arrangement is often disregarded when a triggering event occurs such as a separation, death, or one partner going into residential care.

Your Will can make your intentions clear, but this may not be sufficient to provide for both your partner and your children. On your death, your surviving partner may choose to claim their entitlement under relationship property law regardless of the terms of your Will. On the flip side, your children may not be happy with their provision and challenge your Will.

While Trusts are a very useful asset planning tool, the current law of Trusts is uncertain and has recently undergone a huge review. In recent times Family trusts are being challenged, and the courts have been leaning towards breaking them down rather than holding them up. Property transferred to a Trust, even before the start of a relationship, can be left exposed to claims by a partner.

Risk arises from the way couples own their property too. If you own property jointly with your partner rather than in shares, on your death your interest in the property passes directly to your partner. If you intended under your Will to give your interest in that particular property to your children from an earlier relationship, that would not be possible.

Entering into retirement village occupation right agreements can also create this trap as joint ownership of occupation right agreements is almost always required.

Risk arises from the way couples own their property too. If you own property jointly with your partner rather than in shares, on your death your interest in the property passes directly to your partner. If you intended under your Will to give your interest in that particular property to your children from an earlier relationship, that would not be possible.

Entering into retirement village occupation right agreements can also create this trap as joint ownership of occupation right agreements is almost always required.

The Solution

The good news is that steps taken at the right time can achieve your asset planning objectives. Carefully considered and formally recorded relationship property agreements can provide mutually agreed outcomes in the event of separation or when you die.

Life interest wills can protect a partner from being forced to leave the relationship home during their lifetime while, at the same time, can protect an interest in the property for

your children.

If done right, Trusts can also be a very useful tool for preserving assets and providing for the entire family. It is important to note however that arrangements made a short period before a relationship or marriage begins without a relationship property agreement are still at risk.

Where you own property as a joint tenant but decide this is not right for you, you can sever the joint tenancy, and separate your interest in the property.

Doing nothing is unwise. Whether through fear of rocking the boat or complacency, inaction can result in family disputes and disappointment. The cost and upset caused by a family dispute arising on separation or death can often be avoided or minimised by taking advice at the right time – sooner rather than later.

At DTI Lawyers, we have a team of lawyers with experience in this area who would be happy to help.

(Article by Hayley Willers, first published in the Raglan Chronicle, September 2017)