Second Marriages and Children’s Inheritance

With people living longer and many marriages not lasting the distance, it is common for people to marry or enter into a de-facto relationship, for a second, third or subsequent time. When these second or subsequent marriages or de-facto relationships are entered into, there are often children from previous marriages or unions. In this situation, questions often arise about how one can ensure that assets and property are protected so that they pass to the children and not the partner, should the second marriage or relationship fail. Questions also arise about how to ensure a spouse will be properly cared for should one pass away while also ensuring that children also receive their fair share of the inheritance. This article examines how second marriages affect children’s inheritance.

What happens to children’s inheritance if the second marriage fails?

It is important to understand what may happen if you do not take steps to protect your assets and property pre-emptively. The Family Law Act 1975 governs what may occur in a distribution of property and assets after separation or divorce. If there is no agreement about how property is to be divided at the end of a relationship, then the Family Court may make an order about how this should be done. The Family Court seeks to do what is just and equitable and bases this on the circumstances of each case. There are a number of factors that the Family Court will take into account when making its decision about how to distribute property. These factors are contained in sections 79(4) and 75(2) of the Family Law Act 1975 (for marriages), and 90SM(4) and 90SF(3) of the Family Law Act 1975 (for de facto relationships), and include:

1. How long the marriage lasted and how this may have affected the earning capacity of either party to the marriage;
2. What financial and non-financial contributions each partner to the marriage made;
3. What are the future requirements of the spouses? For example, the health, ability to earn, future responsibilities for caring for children and financial resources can be taken into account.

If your second marriage or de facto relationship did fail some property or assets may pass to your former partner if no agreement is in place about what should happen in this situation. Accordingly, your children’s inheritance may be reduced.

Pre-nuptial agreements or binding financial agreements

One way to avoid a situation where your children’s inheritance is reduced because of a separation from a second marriage or de facto relationship is to come to an agreement with your partner about how the property should be distributed if the relationship ends. Such agreements are known as pre-nuptial agreements or binding financial agreements. Independent legal advice needs to be obtained by either party before entering into such agreements, and other criteria need to be met for these agreements to be held enforceable by the court.

What happens if you die intestate?

If you pass away and you are in a relationship with a second or subsequent spouse, what happens to the property and assets? A lot will depend on the way in which you and your spouse, at the time of death, hold any property. If, for example, the house you reside in will pass to your spouse at your death, then if your spouse remarries, or enters into another relationship after your death, or creates a new will after your death, your children may never inherit this property.

Intestacy laws are such that if you pass away without a valid will, your second or subsequent spouse, will automatically be entitled to a share in your assets. And, accordingly, assets that you want for your children’s inheritance, may never pass to them.

Will a properly drafted will solve the problem of second marriage and children’s inheritance?

It may seem logical to think that to prevent your children’s inheritance from being diminished, all you may need is a properly drafted will. However, if you die and do not provide adequately for your spouse, they may contest the will claiming this. This should be taken into account when drafting your will and planning your estate.

One solution that can serve to ensure your spouse is well-cared for upon your death as well as protect your children’s inheritance is to create trusts over relevant property and assets. Such a trust can be structured in such a way that it enables your spouse to live in the property or off the assets for the rest of their life, or until they enter a new relationship. Thereafter, the rights to the property and assets return to the children. Sometimes these trusts are referred to as discretionary testamentary trusts. Proper professional legal advice should be obtained prior to attempting to create such a trust.

It is also advisable when entering into a relationship, to check your partner will be adequately covered in the event of your death through insurance. Such insurance is sometimes held with the company that holds your superannuation.

What if you are in an international relationship?

It is also important to remember that family law and succession law are not the same worldwide. Difficult legal questions can arise if one member of a couple is from a country other than Australia, significant assets are held offshore or the couple resided in a different country for a significant amount of time. The law about which jurisdiction will apply for the distribution of assets upon death can be complicated. If there is another location that is relevant to your marriage or relationship, then it will be important to speak with your legal practitioner in Australia about this. They will be able to advise you on whether you will need to also consult with an overseas legal practitioner to ensure you have the appropriate asset and property plans in place and that your children’s inheritance is protected.

If you require legal advice or representation in any legal matter, please contact Armstrong Legal.