Blended family estate planning: structures that provide for spouse and prior children

For Australians who have remarried or entered a second relationship with children from a prior partnership, estate planning involves balancing two priorities that can pull in opposite directions: providing for the current spouse for the remainder of their life, and ensuring that children of the prior relationship eventually inherit. The simple approach — leave everything to my spouse — often fails to deliver the testator's actual intent for prior children. In a worst case, the prior children inherit nothing at all.

What is the problem with the simple approach?

A mutual will leaving everything to the surviving spouse, with the remainder to children equally on the second death, has an obvious appeal: it's simple, and it expresses a real intention. The problem is that it relies entirely on the surviving spouse's goodwill and circumstances remaining constant for what may be another 20 to 30 years. After the first death, the surviving spouse can change their own will. They may remarry. They may spend substantially more than expected on health or care costs. They may have their own family and their own priorities. Any of these scenarios can result in the prior children inheriting far less than intended — or nothing. The testator who assumed their spouse would "look after" the prior children has no legal mechanism to ensure that happens.

What structural alternatives provide protection for prior children?

Several structures address this problem by providing legally enforceable protection for prior children without leaving the surviving spouse inadequately provided for.

Mutual wills — actual contractual mutual wills, not merely coordinated wills — involve both spouses agreeing to terms and entering a binding agreement not to change those terms after the first death. The agreement is enforceable as a contract against the estate of the survivor. The limitation is inflexibility: the survivor's circumstances may change materially over decades, and a structure that made sense at age 65 may be problematic at 85. Family provision claims can also still be made against a mutual will estate, so the agreement does not eliminate all risk.

A life interest in the family home provides the surviving spouse with the right to live in the home for the remainder of their life, with the property passing to the children of the first-deceased on the survivor's death. This gives the spouse housing security without giving them the ability to sell and redirect the asset. The practical constraints include that maintenance, rates, and insurance remain obligations of the life tenant, the property cannot be sold easily without consent, and changes in the survivor's care needs can create complications — a surviving spouse who needs to move to a smaller home or aged care may be restricted by the life interest. Appropriate drafting can address some of these constraints, and this is an area where specialist legal drafting matters.

Testamentary trusts created by the will offer more flexible structural options. A spouse-life-interest testamentary trust can pay income to the surviving spouse for life and distribute capital to the prior children after the survivor's death — the spouse benefits from the income while the capital is protected. A structure that sets aside a defined portion for prior children at first death, with the balance to the surviving spouse, ensures the prior children receive a known amount without the delay of waiting for the second death. For substantial estates, a discretionary testamentary trust can provide tax-effective distributions to both the surviving spouse and the prior children simultaneously.

How does superannuation work as a parallel stream for prior children?

For most retirees, superannuation represents a significant and legally separate pool of wealth. A binding death benefit nomination can direct super to named beneficiaries outside the estate altogether. For a blended family, this creates an opportunity: directing super to prior children directly through the BDBN, while directing other assets (particularly the home and joint investments) to the surviving spouse through the will and life interest structure, can achieve both objectives simultaneously without relying on the survivor's discretion. The BDBN provides certainty for the prior children at first death, while the estate provides the surviving spouse with the security intended.

The BDBN must be kept current — lapsing nominations revert to trustee discretion — and the interaction between the BDBN and the assets test (for anyone on the Age Pension) should be understood.

How can blended families manage family provision claim risk?

Blended family estates face elevated family provision claim risk from multiple directions: prior children who feel inadequately provided for, a current spouse who receives less than expected, or adult children of the current relationship who are treated differently from those of the prior one. Pre-emptive planning that makes adequate provision for all eligible parties, documented reasons for unequal treatment, and frank family conversation during life all reduce this risk substantially. A letter of wishes explaining the reasoning behind the estate plan — the competing obligations acknowledged, the structures chosen, and why — gives the court context if a claim is eventually made, and gives the family a record of the testator's thinking.

Transparent communication with both the surviving spouse and the prior children during the testator's lifetime is consistently more effective than testamentary surprise. Knowing in advance what the plan is allows family members to raise concerns and gives the testator the opportunity to address them while still alive.