Protecting Assets in Blended Families: Testamentary Trusts, Super and Wills

When a family includes children from earlier relationships, a new partner or stepchildren, estate planning needs extra care. A simple will can leave a partner or children exposed, or lead to a dispute. This article looks at asset protection tools that are often used in blended families in NSW. It is general information only.

Testamentary trusts

A testamentary trust is created by your will and takes effect on your death. Instead of leaving assets directly to a beneficiary, they can be held in trust for that person. This can help protect an inheritance from a beneficiary's creditors, from the risks of their business or from a future relationship breakdown. It can also provide control, for example by holding assets for a surviving partner for life, with what remains passing to your children. A testamentary trust can also have tax advantages in some cases, so ask for advice.

Superannuation does not follow your will

Super is generally paid under the fund's rules and your nomination, not under your will. A binding death benefit nomination can direct that it be paid to eligible dependants or your estate, if the fund's rules allow, but it may lapse after a fixed period unless it is a non-lapsing nomination and the fund allows it. Reviewing nominations regularly is important, especially after a change in family circumstances.

Jointly held property and the risk of claims

• Property held as joint tenants passes to the survivor automatically, outside the will.
• Eligible people, such as spouses and children, may apply for provision from an estate under the Succession Act 2006 (NSW). Courts can look at a wider "notional estate" in some cases.
• Clear records of your reasons and well-structured arrangements may help a court understand your intentions, although outcomes cannot be guaranteed.

Frequently asked questions

Can I leave my home to my new partner and still protect it for my children?

There are ways to do this, such as holding it as tenants in common or giving the partner a life interest through a trust, with what remains passing to your children. The right option depends on your situation.

Do I need a testamentary trust?

Not everyone does. They tend to be most useful where beneficiaries face financial risk or where control over the assets matters.

How often should I review my estate plan?

After any major change, such as separation, remarriage, a new child, or a change in assets or business interests, and in any event every few years.