What are the Risks of 'Sideways Inheritance' in a Blended Family?

If you are part of a blended family, one of the most significant risks you face in estate planning is what lawyers call “sideways inheritance” — where your assets end up benefiting your partner’s children rather than your own.

How Does Sideways Inheritance Happen?

The scenario is common: you and your new partner each have children from prior relationships. You both agree verbally that if one of you dies first, the survivor will be looked after, and when the survivor eventually passes, everything will be divided equally between all the children.

The problem is that without a legally binding structure, your surviving partner is free to change their Will after you die. Over time, they may:

• Remarry and redirect assets to a new spouse
• Have a falling out with your children
• Be influenced by family or advisors to change their estate plan
• Need to spend the assets on significant aged care costs, leaving nothing for anyone

This is sideways inheritance, and it is one of the most common causes of bitterly disputed estates on the Gold Coast and across Queensland.

What Can I Do to Prevent It?

1. Mutual Wills

A Mutual Wills agreement is a legally binding commitment between two partners to maintain the same beneficiaries regardless of who dies first. Unlike a simple promise, a Mutual Wills agreement is enforceable in court, meaning the surviving partner cannot simply rewrite their Will and redirect the assets.

2. Testamentary Discretionary Trust

A Testamentary Discretionary Trust (TDT) is created by your Will and activated on your death. Instead of giving your share of the estate outright to your surviving partner (who could then do whatever they wish with it), the Trust holds the assets. Your partner can receive income from the Trust during their lifetime, but the capital remains protected and will pass to your specified beneficiaries, typically your own children, when the survivor eventually dies.

This is one of the most effective tools available for blended families.

3. Property Title, Tenants in Common

If you own property as Joint Tenants, your share automatically passes to your surviving partner regardless of your Will. To give your Will control over your share, you should hold the property as Tenants in Common, each owning a defined percentage. You can then specify in your Will exactly what happens to your share, including granting a Life Interest to your partner.

4. Binding Financial Agreements

At the start of a new relationship, a Binding Financial Agreement (BFA) can clearly separate and quarantine each party’s pre-existing assets, ensuring they are preserved for your respective children.

The Bottom Line

Do not rely on verbal promises or goodwill in estate planning for a blended family. The legal structures are straightforward to put in place and comparatively inexpensive relative to the potential disputes they prevent.

Related Topics

• Will Kits and the Public Trustee in QLD
• Legal Matters: Blended Families & Wills, Radio Episode
• What is a Testamentary Discretionary Trust?
• Tenants in Common vs Joint Tenants
• Who Can Challenge a Will in QLD?