Six inheritance mistakes for blended families to avoid


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Blended families should take a holistic approach to estate planning and how they pass on their wealth because getting it wrong can cause irreparable damage to their finances and their family relationships.

Tax effectiveness and asset protection are important, but so too are legacy and the preservation of family bonds.

Demographic trends have brought significant changes in how we plan for intergenerational wealth transfer.


Recent decades have seen a rise in longevity, change in family units, relative growth in property prices, a sharp spike in private school fees, and an increase in numbers of dual income professional couples.

These trends have changed the shape of the estate planning advice for families seeking to protect and pass on their wealth. Blended families can face particular complexity in planning how to pass on ownership and control of their wealth.

Here are six planning mistakes for blended families to avoid.

Expecting a single solution

Blended families bring more complexity and trade-offs in estate planning, as partners consider the difficult decisions about distributions and appointments.

There is no one single solution. Blended families and their advisers will generally settle on a strategy in line with the competing responsibilities and goals, and the emotional and financial trade-offs. What that looks like will vary from family to family.

There are simply a lot more options for how and where the wealth should pass.

Not asking about your beneficiaries' hopes and expectations

It is important to talk to our loved ones about how we want to pass on our wealth, and why. It's not uncommon for couples to realise there is a divergence of views on wealth transfer for the first time in an estate planning lawyer's office.

Without asking your family about their hopes and expectations, and without considering the interests of your beneficiaries, you have a greater risk that you won't achieve your estate planning goals and that there will be a challenge to your estate.

Focus only on what happens after death. Thinking about transferring your wealth before your death can open up planning opportunities, such as providing help to a child when it is most needed, making a philanthropic gift when you see the impact, or undertaking lifetime restructures of your asset base.

How you transfer control of your financial decisions during your lifetime can impact the gifts you intended after your death. Whom you appoint and the powers you give them requires careful consideration.

Intermingling family finances

Couples in subsequent relationships may have accumulated wealth separately and plan for their assets to go back to their own families and children, and it is important to keep this in mind with how you manage your joint finances.

It's worth getting advice about how your decisions now affect your plans later on. It is important to take the time to plan before you sell your home or help your partner renovate their house, or before you buy a home as joint tenants.

wills estate planning

Tying your beneficiaries together financially

Life estates and capital reserved trusts are examples of strategies which tie your beneficiaries together after your death and may produce family conflict.

Consider how and when your children may inherit, and under what circumstances, particularly if your partner is likely to outlive you by some time.

Assuming your family will never be blended

In many first marriages, you and your partner probably agree that you want your wealth to eventually pass to your joint children on the death of the survivor, and you are probably comfortable leaving it all to each other in the first instance.

However, estate planning is ultimately about planning for protecting your loved ones if anything happens to you.

In first marriages, some couples are choosing to acknowledge and plan for the prospect of later remarriage if one of them passes away.

They want to protect the wealth they have built together to benefit their children.

Ultimately, how you plan for the transfer of your family wealth can help to preserve or contribute to damaging relationships in your family.

You should consider whether your financial and estate planning recognises your values, your family dynamics, and the goals and interests of the parties involved.

This article was first published by FS Private Wealth

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Kirsten Lynn is a private wealth adviser with Stanford Brown. She entered the financial advice profession in 2015 after a decade providing advice in the fields of public policy and law. Kirsten studied law at UNSW and holds a graduate diploma of legal practice from College of Law, a Masters of Public Policy from ANU, and an advanced diploma of financial planning from Kaplan Professional. She was previously the head of governance and professional standards at an Australian Financial Services Licensee.

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