A super solution for blended families

Did you know that one in three marriages ends in divorce1? It’s really no surprise then, that the number of blended families in Australia is rising2. A blended family (or a step family) is simply a family where one or both parents have children from a previous marriage. If you or someone you know are in this situation, what does it mean for your finances?

Source: abs 2009/10. * Includes a small number of families where one or more children had a natural parent elsewhere (eg a foster child living in an intact family). # Includes families which are not classified as intact, step or blended, for example, grandparent families with onlly foster children present.

As families chop and change what happens to the family fortune?

As you can imagine, a blended family can have a huge impact on your finances – whether it’s a new home or ongoing child support just as a start. While your financial adviser can help you develop a strategy to ensure that your finances continue to be managed effectively, what about your estate plan?

Perhaps one of the most important areas often overlooked, is the impact of these changes on your estate plan, the consequences of which can be far-reaching in the generations to come. With advice from a specialist estate adviser, however, you can be sure that both the needs of your surviving spouse and all your children have been considered.

 Case study – Jack and Irene

Jack has been married to Irene for five years and both have children from previous marriages. Although the step-siblings usually get on well, Jack and Irene’s marriage has created a complex family structure and, needless to say, there have been a few squabbles.

A recent death in the family prompted them to start thinking about their own estate planning needs. Jack and Irene both contribute to the home they share as well as a self-managed super fund. But in the event of one of their deaths, while they wanted to ensure that the surviving partner would be able to live in the family home and have access to a lifetime pension, they also wanted their respective assets to pass to their own children once they had both passed away.

Their financial adviser put them in touch with a trusted estate adviser who informed them that if they did not change their estate plan, on Jack’s death the assets would pass to Irene, and then on Irene’s death, to Irene’s biological children – leaving Jack’s children with nothing from his estate. Similarly, if Irene passed away first her assets would pass to Jack and on his death to Jack’s biological children only.

As much as they love their step children, Jack and Irene ultimately want their assets to go to their biological children. Their estate adviser recommended some changes to Jack and Irene’s estate plan to ensure their wishes were carried out after they had gone.

Jack and Irene’s estate planning strategies included the following:

As a result of the planning they have put in place, Jack and Irene have been able to ensure that the survivor is able to live comfortably and after they have both passed away their respective families will inherit their remaining wealth.

Incorporating a small APRA fund as part of their estate planning strategy, gave Jack and Irene peace of mind that their super would be distributed according to their wishes.

 Did you know?

A self-managed super fund gives you greater control over how your superannuation benefits are invested, but it comes with strict trustee responsibilities which can become onerous. If you want the investment flexibility, but not the trustee responsibilities a small APRA fund may be more suitable and, as you can see from the case study above, can have additional benefits when it comes to estate planning for blended families.

For more information on financial planning and estate planning for blended families please speak to Wynyard Park Private Wealth

  1 Source: ABS 2013

2 Source: ABS 2013

Source: AET, October 2013