Should Paul’s second wife be the beneficiary?

Paul has married for a second time and doesn’t want to change his will. His second wife thinks he should. Legal expert Rod Cunich offers his take on the situation.

Q. Paul
My wife and I are both in our second marriage; I have two adult children, she has none. We haven’t yet updated our wills and I would simply like mine to remain as it is – my children will currently get everything I have. She doesn’t agree and thinks that she should be the beneficiary. What can we do to break the impasse?

A. When it comes to estate planning, blended families can create a planning nightmare.  Not agreeing what should happen is just the starting point. Even when you do agree, putting into place arrangements to achieve your wishes can be even more daunting.

So let’s start with the easy part of your question. Should you include her as a beneficiary.   The short answer is: Yes.

Why?

First, under the Family Law Act 1975, with the passing of time, assets held by each of you will become matrimonial property, with each party having an interest in the other’s property. If you separated then a court would determine who is entitled to what. The factors are many and varied but include the length of the marriage, what each party brought to the marriage and what each party contributed during the course of the marriage (whether financial or non-financial contributions). I’m not a family law lawyer but from the outside my best assessment of the process is that it involves both art and science to determine respective entitlements.  Rest assured however: there are entitlements. It’s only the extent of the entitlement that is uncertain.  

Second, if you die without making provision for your second wife in your will she could challenge your will claiming that you made inadequate provision for her. Each State and Territory has legislation that gives a spouse the right to make such a challenge. Again, the courts will make a determination. In NSW, for example, there are at least 16 criteria that a court will examine when determining if a spouse should receive a benefit from the estate and if so, how much. In reality, it is really a question of ‘how much’, not ‘if’.

So what do you do?

Accept the fact and deal with it. How? This is where it gets interesting, as there is no definitive answer or solution.

The starting point is to discuss the issue openly and honestly in an attempt to get some understanding about what might be appropriate. This often requires some input from a family law expert who understands how family law might view the situation now and over time. If you can work out what a family law court might decide your respective entitlements are, and you make provision for this, then there is much less chance that any challenge to your will, will result in surprises.

There are many strategies available to protect assets for your children, yet still provide for your spouse. They include:

  • enter an agreement (often called a pre-nup) with your partner (de facto, married, same sex – it’s all the same) under the Family Law Act, expressly agreeing who is entitled to what
  • leave your home to your children, but in your will grant your partner the right to live in the home for their life
  • use superannuation and/or insurance to ensure that you have enough to provide for your children and your partner on your death
  • hold assets jointly with children so they automatically own the asset when you die – it won’t go through your estate.

There are many more options available but none are ‘fool proof’, so incorporating as many as possible is the best strategy. 

Cooperation, agreement and formal documentation are all key to success. If you can’t get past the first base, then you could potentially have greater problems in your relationship than your will.

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