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Bridges Financial Services

Fair’s fair for blended families

15 Mar 2018

A blended family can have a huge impact on your finances — whether it’s buying a home with your new partner or ongoing child support. But, one of the most important areas that is often overlooked, is the impact of a newly formed family structure on your estate plan.

One of the biggest concerns is making sure your family fortune doesn’t end up solely with your step-children and leave your children without an inheritance. A fair solution means your wishes are less likely to be challenged and your beneficiaries are left stress-free.

Case study:

Jack and Irene

Jack and Irene are married and have children from previous relationships. Together they have a family home and a self-managed super fund. In the event of one of their deaths, they want to ensure that the surviving partner would be able to live in the family home and have access to a lifetime super pension. They also want their respective super balance to pass to their own children when they die.

The way their affairs are currently structured, on Jack’s death the family home and super would pass to Irene, and then on Irene’s death, all assets would pass to Irene’s biological children — leaving Jack’s children with nothing. Similarly, if Irene dies first, her assets would currently pass to Jack and on his death to Jack’s biological children only.

Their estate planner recommended some changes to their estate plan. 

Their home

Jack and Irene’s home ownership was changed from joint tenants to tenants-in-common. This way, they each have a separate 50 per cent interest in the property that can be dealt with individually in their Wills. They also set up a testamentary life interest trust in their Wills which allows a ‘right of residency’ or, in other words, allows the survivor to be able to remain in the property for the duration of their lifetime. 

After both of their deaths, the property would be distributed as set out in their Will, allowing ownership of the property to be passed equally to their respective children or as they determine is fair.

Their super

Jack and Irene’s super was converted from a self-managed super fund (SMSF) to a small APRA fund (SAF) which is essentially
an SMSF with a professional trustee. In an SMSF, the members of the fund are also the trustees of the fund. In a SAF, the services of an independent professional trustee company are employed so that, in the event that there are family disputes, the instructions of the deceased are carried out.

Their estate plan stipulates that when one of them dies the survivor receives a pension from the deceased’s super. When they have both passed away any balance of Jack’s super will be paid to his children. Any balance of Irene’s super will be paid to her children.

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. 

If you have a blended family and need help arranging your estate plan
call your Bridges financial planner.

Source: Australian Executor Trustees.


Take the next step

To discuss the complex financial choices you’re facing, make an appointment with a Bridges financial planner.

We have an established alliance with Bridges, to provide our customers with financial advice. Bridges has been helping Australians prepare for their retirement for 30 years.

A Bridges financial planner will develop a plan specifically for you; one that’s tailored to your needs and circumstances, to help you achieve your goals, both in the lead up to retirement and during retirement.

To make an appointment with a Bridges financial planner, call Credit Union SA on (08) 8202 7777. The initial consultation is complimentary and obligation free.

Bridges Financial Services Pty Ltd (Bridges) ABN 60 003 474 977, ASX participant, AFSL No 240837. This is general advice only and has been prepared without taking into account your particular objectives, financial situation and needs. Before making an investment decision based on this information, you should assess your own circumstances or consult a financial planner. Examples are illustrative only and are subject to the assumptions and qualifications disclosed. In referring members to Bridges, Credit Union SA does not accept liability or responsibility for any acts, omissions or advice provided by Bridges or its authorised representatives. Bridges is part of the IOOF group.

Credit Union SA refers its members and other people to Bridges and in return receives a commission of up to 22.5% of the fees and commissions they receive on investments, and a trailing commission of up to 0.20% per annum on funds held under management.

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