How to avoid an estate planning nightmare

With every third marriage ending in divorce and nearly half of all divorcees re-marrying, estate planning is arguably more important than ever.

Estate planning simply refers to the arrangements you have in place to ensure your wishes are carried out in the event of death.

Estate planning can be a simplistic or highly complex process. The level of complexity will be determined by your individual situation and requirements.

In the event you divorce and re-marry, your estate planning position can become more complicated than before. Because of these complexities, the likelihood of disastrous consequences is also far greater than before.

If you re-marry and you have children from a previous relationship, a step family is created. Additionally, if you and your new partner decide to have your own children, a blended family is created. Both these scenarios are becoming more common today, and it is not unusual for there to be tense and strained relationships between new family members. Fragile relationships compound the already complex nature of estate planning for step and blended families.

So what are the estate planning issues for step and blended families?

A major problem can occur if you re-marry and do not update your Will. This is because marriage renders your Will invalid (i.e. you must draft a new Will after marriage).

If your Will is invalid and you pass away after re-marrying, you will die intestate. This simply means you have died without a valid Will. Under these circumstances, each state (and territory) have their own intestacy rules that determine who receives your assets.

While the rules do vary between states, in most cases your spouse will inherit most (if not all) of your assets. But what about your children from your previous marriage? The rules of intestacy generally favour your spouse, so it is entirely possible that your children, and your ex-spouse, will not receive any share of your assets.

The consequences of this situation could be tragic, but are avoidable. Simply remember, if you re-marry and you have children from a previous relationship, make sure you draft a new Will.

This is one of many issues for step and blended families in terms of estate planning. To make sure you have adequate arrangements in place you should seek advice from an expert.


This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax advice prior to acting on this information. Opinions constitute our judgement at the time of issue and are subject to change. Financial Planning Expert Pty Ltd does not give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document.

 

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    Financial Planning Expert is an independent financial planning business based in Melbourne. We provide genuinely independent and conflict free financial advice. We’re experts in self-managed superannuation fund (SMSFs) advice and strategy, retirement planning, property and share investment advice, life and income protection insurance, tax planning, asset protection, estate planning and advice for Australian expatriates.