Legal Tip 391: Dying with only a Main Residence, a Spouse and Kids from a different Person

When you have children from a previous relationship and a new spouse, things can be complicated. They will be more complicated if your only asset is the main residence.


Example

Homer is a widower with 3 kids. He marries again shortly after Marge’s funeral. His new spouse moves into Homer’s main residence with him – it was previously owned by Marge and Homer as tenants in common and now Homer is the sole owner.

20 years later Homer is preparing for his own death and realises his new spouse will probably live for another 30 years or so and the main residence is Homer’s only asset and half of it belonged to the mother of his children.

He wants to leave the house to the children, but he worries because his new spouse has been living there for 20 years now and if he left it to the children the spouse would have no where to live and he has no other assets to give her or him (gender fluid).

There is no easy solution to this sort of problem. The new spouse could make a family provision claim whatever happens and will probably win because the would have no where else to go and would have lived there for a large chunk of their live and Homer’s life.


One option would be a life interest in favour of the spouse with the house passing to the children once the spouse dies. But this may not be well liked by the children and the children might be of a similar age to the new spouse so they may not live long enough to enjoy their inheritance. The children might even pass before the spouse so this should be considered.


The best action is to plan ahead. If you get remarried to someone without assets help that person buy assets and buy more assets for yourself so that you could leave both your spouse and children assets separately.

 

IMHO the suggestion above is not realistic, the solution is that the house be sold and the proceeds be apportioned to the beneficiaries as the deceased saw fit ...

 

You mean this one Balwoges?

The trouble with selling is it involves kicking out a spouse that has a claim on the house. This is the simplest solution, selling, but it may backfire. Something legal advice is needed on, both before and after the death!

 

Now complicate this with super. The deceased has super. Fund may pay it all to the spouse and bypass the estate. Then they have a claim on the house and the super skips the kids on top. And all it may have taken is a soliictor to explain why a binding death nomination to favour the spouse was a bad idea. If the super went to the estate it may even give the kids some bargaining power to pay out the step mum

 

That could be the most tax effective way to do it perhaps - super to spouse, kids get house.