Legal Tip 388: A blended Family Issue – Leave what of Whom?

Discussion in 'Wills & Estate Planning' started by Terry_w, 31st Mar, 2022.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    With blended families – such as new spouse and kids with a different spouse – there can be issues when deciding who to leave what in your wills. This is especially the case when your only asset is the main residence and you have a new spouse who lives there with you and you have children from a previous spouse – who may have paid for that house in part or in full. Who do you leave that house to?


    Example

    Marge dies and Homer remarries. Homer owns the main residence and his new 18 year old spouse moves in and does Instagram posts all day, not earning anything.

    Homer has a heart problem and is worried. His main residence is his only asset, and he has 3 adult kids whom don’t like his new spouse who is younger than them.

    If he leaves the house to the kids the young spouse will have nowhere to live.

    If he leave the house to the spouse the kids will be upset – their mother did own half of it before she was eaten by a shark.

    What can he do?



    This is a tough one.

    Homer could leave the house to his kids but give his young spouse a right to reside. Being younger, if this right to reside was for life the kids may possible never get to own the property outright as the young spouse of Homer may outlive them.

    He could give a limited ‘right to reside’ for a year or eve 10 years. This could give the young spouse time to find her (or his) feet, find a new spouse, or get a job, build up a following on tik tok etc.

    Another option might be to get the executor to sell the house and divide the proceeds up between Homer’s kids and spouse, using a formula in the will – perhaps 50% to the kids reflecting Marge’s share plus 25% reflecting half of Homer’s share and 25% to the young spouse.


    Whatever happens either the spouse or the children could make a Family Provision claim if they haven’t been left adequate provision.


    It would have been great if Homer had some more assets – but he doesn’t! It would also help if the new spouse had some assets.


    A recent case along these lines was Schneider v Kemeny [2021] NSWSC 524

    A Woman died leaving a spouse and 2 kids from a previous relationship. She left the house to the kids with a right to reside to the spouse for 6 months and $100,000 worth of gifts. The estate was worth $2.9mil at the time of death. They were married for 14 years.

    The husband made a family provision claim asking for his share of the estate to be increased and this was rejected by the courts – partially because they had kept their finances separate and the fact that she had acquired the house and other assets mostly before she met the new husband and the new husband was aware of her wanting to leave the house this way.
     
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  2. MangoMadness

    MangoMadness Well-Known Member

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    Terry,
    great info as always.

    Can a right to reside be imposed by a court or negotiated if it isnt in a will?

    2 Scenarios -
    Scenario 1 - My mother and her partner are a blended family, if the partner dies I am concerned that his adult kids ask for a sale of the property and potentially leave my mother with a reduced capacity to relocate. Can a right to reside be requested whilst they retain 50% of the property ownership?

    Scenario 2 - My mother and her partner are a blended family, if my mother dies I have no desire to force her partner to relocate but I do not want my mothers share of the assets to fall to the partners children. Could I ask for a right to reside for life (for the partner) whilst still retaining 50% of the property ownership?

    Thanks for your time!
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    With family provision claims an 'eligible person' basically tells the court they were not left with adequate provision and they want more. Courts can then look at all the circumstances and resources of the parties and adjust the gifts left by will, or intestacy laws if no will - if they think it appropriate to do so.

    They could leave a life estate or right to reside. I haven't heard of a court doing this though - that I can think of off the top of my head. Actually there might have been one that I wrote about in one of my legal tips here.

    It is best to do it all properly via the will
     
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  4. Stoffo

    Stoffo Well-Known Member

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    Example

    Homer dies, Marge enters into a defacto relationship with Flanders (who tragically lost his entire family many years earlier).

    Flanders owns the main residence, an IP, some shares and a substantial bank account.
    Marge as it turns out has no assets as Homer lost everything in a "get righ quick scheme" and had stopped paying for life insurance long ago.


    Flanders is getting on and has a heart problem and is worried about his will and assets....

    Flanders wants Marge to move on with her life after his demise, but worries that his wealth/home will be exposed to any future relationships Marge has possibly leaving her homeless so doesn't want to leave his estate to Marge.

    Flanders is also estranged from Marge's kids, Bart had a drug habit and disappeared many years ago, Lisa had various relationships and eventually married her girlfriend but didn't invite Flanders or Marge to the wedding (due to Flanders Christian views on marriage, even though he never said anything about it) and they've never seen Lisa's IVF baby, Maggie went on to become an estate lawyer thanks to Flanders financial support of her education, she has been so successful she now has more assets than anyone they know and now lives on the other side of the country, she calls Marge each Sunday though.

    Flanders has very fond memories of his years growing up attending Springfield Private College (high school) and donates to their scholarship program every year.

    Ned wonders how or if he can structure a trust or company so that upon his passing Marge gets to live out her days in their flash house in Springfield Coast estates near the beach with an allowance and upon her demise everything is sold and invested with the returns (after allowing for management and CPI) goes to Springfield College's new Flander's scholarship program for disadvantaged students ?

    Love your posts/tips @Terry_w and am curious if this is even possible ?


    *disclaimer, Ned's nickname may be Stoffo :oops:
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes it could be done a few ways. All assets could be left to a trustee to hold for Marge with the trust vesting and capital going to the college on Marge’s death. You could make the trust a discretionary trust so that Marge could get income and perhaps some of the capital at the trustee’s discretion.


    But Marge, as a spouse, can make a Family Provision claim
     
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  6. Stoffo

    Stoffo Well-Known Member

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    I've always been disappointed when seeing a sizable amount donated to an organization, it's all too often ALL SPENT (often on an extension/redevelopment) and isn't perpetuating........
    Thanks for the guidance ;)
    Am still considering pursing this (largely due to one of the step kids saying I won't have a legacy as I've never had kids of my own) as I've done so much for each of them over the years and I now have no intention of leaving any more than a "token sum" to each (just so they can't say they weren't allowed for in the estate) :p
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You could leave to a trust which makes an annual donation
     

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