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Strategy 4: the blended family

Setting the scene:

  • Your client is Jay.
  • Jay and Gloria are married.
  • Jay has two children by his first marriage, Claire and Mitchell, who are now both adults. Gloria has one child, Manny, aged 10, who lives with her and Jay.
  • Most assets are held in Jay’s name and include a business, a house, bank accounts and motor vehicles - total value $10,000,000.
  • Jay has $1,000,000 in a self-managed superannuation fund from which he is drawing a transition to retirement pension. He has no life cover through the fund.

Issues for Jay to consider:

Issue Options Instruction
Personal representatives

Could Gloria act solely? Preferably nominate two persons and an alternative (perhaps independent)

Gloria and Mitchell with Claire as a further alternative

Will executors be paid? No payment
Guardian for Manny

If Gloria and Jay die together, consider nominating in the will a guardian for Manny

Claire and Phil to be guardians

Consider including wishes regarding upbringing, schooling etc

Consider including powers regarding accommodation for guardians, purchase of motor vehicle etc

Will guardians be paid?

No wishes, special powers or payment
Nominating beneficiaries

On Jay’s death, does he want his estate to go to: 

  • Gloria solely or
  • Gloria, Claire and Mitchell or
  • some other option
Estate to be divided between Gloria (50%), Mitchell (25%) and Claire (25%)
Use testamentary trusts or outright gifts?  Testamentary trusts
What if a beneficiary predeceases?

If any of Gloria, Claire and Mitchell predecease leaving children, do those children receive the share their deceased parent would have received? At what age?

If Gloria predeceases, whole estate to be distributed between Mitchell (40%), Claire (40%) and Manny (at age 25) (20%) via testamentary trusts

If Claire, Mitchell or Manny predecease, their share to pass to their children who attain age 25, via testamentary trusts
Further gift-over? Provision could be made in the event any child of Claire and Mitchell predeceases or dies before age 25 leaving children of their own

Clients don’t require

Other issues for discussion What will happen to the business on Jay’s death? Has a strategy been put in place to enable it to continue to operate if he died or became incapacitated? Is key-man insurance required? Is there a business partner and should they enter into a buy/sell agreement? Discuss with client
  Has Jay nominated a reversionary beneficiary to the pension in his superannuation fund? Should Jay make a binding nomination/direction for his superannuation fund? Jay makes a binding nomination nominating Gloria. If Gloria predeceases then to his estate with the executors able (if Manny is a death benefits dependant) to allocate death benefit to a superannuation will trust for Manny with Claire and Mitchell’s share to be adjusted upwards accordinglyHas
  Has Jay been informed about family provision principles, including the possibility of Gloria making a claim for greater provision? Discuss with client

 

Jay's stratregy might look like

  Personal representative Custodial guardian Distribution of estate 
Gloria survives

Gloria and Mitchell

If Mitchell predeceases, Gloria and Claire

N/A ½ to Gloria via TT ¼ to Claire via TTIf Claire predeceases, then: ¼ to Mitchell via TTIf Mitchell predeceases, then:
If Claire leaves a child or children who survive and attain 25 years that child or children equally take Claire’s share via individual TT(s) Otherwise, add to Gloria and Mitchell’s shares in same proportions If Mitchell leaves a child or children who survive and attain 25 years that child or children equally take Claire’s share via individual TT(s) Otherwise, add to Gloria and Claire’s shares in same proportions
Gloria predeceases Mitchell and Claire Claire and Phil (subject to Manny’s father’s rights) 1/5 to Manny via TT if he survives and attains 25 years. If not, then: 2/5 to Claire via TT if she survives. If not, then: 2/5 to Mitchell via TT if he survives. If not, then:
If Manny leaves a child or children who survive and attain 25 years, that child or children equally take Manny’s share via individual TT(s) Otherwise, add to Claire and Mitchell’s shares in same proportions If Claire leaves a child or children who survive and attain 25 years, that child or children equally take Claire’s share via individual TT(s) Otherwise, add to Manny and Luke’s shares in same proportions If Mitchell leaves a child or children who survive and attain 25 years, that child or children equally take Mitchell’s share via individual TT(s) Otherwise, add to Manny and Claire’s shares in same proportion

 

Note: “survives” means survives willmaker by 30 days; “predeceases” means fails to survive willmaker by 30 days.