How Blended Families Are Complicating Inheritance in Australia
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Written by Christopher Hall, AdvDipFP | Authorised Representative, AFSL 526688 | May 2026
More than one in four marriages in Australia today is a second or subsequent union — and the inheritance structures designed to follow those marriages have not kept pace with the family structures they must serve.
Blended families — households involving stepchildren, children from previous relationships, de facto partners, or former spouses — navigate inheritance complexity that a standard will does not resolve. In Australia, superannuation death benefits and life insurance proceeds follow separate legal pathways from the estate: a will governs estate assets, but it does not govern who receives superannuation unless a valid nomination is in place, and it does not govern life insurance proceeds where a beneficiary is directly named on the policy.
According to the Australian Bureau of Statistics, more than 25% of brides and grooms in 2021 were celebrating a second or subsequent marriage, and approximately 2.17 million Australians — 11.5% of adults aged 16 and over — were in de facto relationships (ABS, 2021). As that cohort enters peak wealth-transfer years, the gap between family structure and inheritance structure is becoming one of the most consequential planning problems in Australian financial advice.
How many Australian families are blended — and why the stakes are high
Australia’s divorce rate sits at approximately two per 1,000 people annually, and the ABS 2021 Census confirmed de facto relationships as a mainstream feature of Australian household life, not a peripheral one (ABS, 2021). Second and subsequent marriages account for more than a quarter of all marriages nationally.
The financial stakes those family structures carry are substantial. Finder research estimates that Australia’s Baby Boomers are expected to transfer approximately $175 billion in assets annually in the decades ahead, with the total projected at $5.4 trillion by 2050 (Finder, 2026, cited in Financial Standard, April/May 2026). A material portion of those transfers will flow through families with multiple family units, stepchildren, former spouses, and de facto partners — each carrying different legal entitlements under Australian succession law.
Under state and territory succession legislation, intestacy rules — which apply when someone dies without a valid will — differ by jurisdiction and do not universally treat de facto partners and stepchildren on the same footing as legally married spouses and biological children. In complex family structures, intestacy can produce an outcome far from what a deceased person would have intended.
The emergence of blended families as a planning challenge is tracked in the life insurance industry alongside broader demographic and regulatory shifts — Arrow Equities covers developments in this area through its insurer acquisition and regulatory news hub.
What makes inheritance more complex in a blended family
Peter Leggett, Chair and Chief Investment Officer at AP Wealth, draws a distinction that advisers working in this area find fundamental: succession planning and estate planning are two different conversations, and both are necessary in blended family contexts (Leggett, P., cited in Financial Standard, April/May 2026).
Estate planning addresses what happens at death — wills, trusts, and beneficiary nominations. Succession planning addresses the living transfer of assets, responsibilities, and family roles to the next generation, ideally while the asset-holder is still present to guide it. In blended families, both are complicated by the presence of multiple family units with different legal entitlements, different financial needs, and in many cases, legitimate but competing claims.
In Leggett’s framing, advisers working with blended families need emotional intelligence alongside technical knowledge. The conversations involve not just the distribution of assets but what a client’s legacy looks like for each family unit they are responsible for — and how to structure that legacy in a way each unit can live with.
Dwayne Fernandes, Senior Financial Adviser and Partner at Principal Edge, identifies the first practical step as mapping objectives rather than assets (Fernandes, D., cited in Financial Standard, April/May 2026). In blended families, each family member may have different financial needs, different existing provisions, and different expectations. A plan that works for one family unit may leave another without adequate provision — and that gap is typically invisible until it is too late to address.
Why a will alone does not cover the full asset base
The following is general information only. The specific implications of will structures, trust instruments, beneficiary nominations, and estate planning strategies for any individual depend on their particular circumstances. A qualified estate planning professional can confirm what applies to a specific situation.
One of the most significant planning gaps in blended families is the assumption that updating a will resolves the inheritance question. Fernandes describes the correct approach as mapping the full asset base — not just the estate (Fernandes, D., cited in Financial Standard, April/May 2026). That full asset map typically includes:
Superannuation: A superannuation death benefit is not automatically an estate asset. Unless a valid binding death benefit nomination directs the fund trustee, the trustee retains discretion over who receives the death benefit — and that discretion may produce an outcome different from what the will intends.
Life insurance: Life insurance proceeds paid directly to a named beneficiary bypass the estate entirely. Where the proceeds flow to the estate — because no beneficiary is named or the nomination is invalid — they are distributed under the will.
Family trusts and companies: Assets held in family trusts and company structures are not estate assets. They do not pass under a will and require separate succession documentation.
A related gap is examined in Arrow Equities’ article on updating life insurance beneficiary nominations alongside a will: a formal amendment to a will does not update life insurance policy beneficiaries or superannuation nominations. Each requires separate action directly with the insurer or fund. The distinction between succession planning and estate planning is explored further in Arrow Equities’ earlier article on that topic, which provides additional context on structuring plans across multiple asset classes.
Life insurance and superannuation in blended family estate planning
This is the area where Christopher Hall, AdvDipFP, Authorised Representative, AFSL 526688, sees the most consequential planning gaps in practice. Having reviewed more than 500 life insurance policies for Australian families, Christopher Hall finds that the majority of clients are unaware of two critical structural questions: who is currently named as beneficiary under each policy, and whether that nomination is binding on the trustee or merely advisory (C. Hall, Arrow Equities, 500+ policy reviews).
In a blended family, those structural questions carry significant weight.
Superannuation death benefits are governed by a binding death benefit nomination — a formal written instruction lodged with the super fund trustee specifying who must receive the benefit and in what proportions. Unlike a non-binding nomination, which is advisory only and leaves the decision to trustee discretion, a binding nomination is legally enforceable provided it meets the fund’s requirements and remains current. Most binding death benefit nominations lapse after three years unless renewed — a detail that is easily overlooked as family circumstances change.
Where a nomination lapses or was never made, the fund trustee exercises discretion. In blended families, that discretion may result in benefits flowing to a former spouse who qualifies as a dependant, to a stepchild the member did not intend to benefit, or to the estate — where they are then distributed under the will rather than directly. The trustee is not acting improperly; the problem is a structural one that nomination management prevents.
Life insurance held personally outside superannuation operates differently. A named beneficiary on a personally held policy receives the proceeds directly, outside the estate. Where no beneficiary is named or the named beneficiary has predeceased the policyholder, proceeds flow to the estate and are subject to the will.
A professional life risk adviser reviewing a blended family client’s full insurance position would typically examine whether current nominations reflect current family intentions, whether any nominations have lapsed or remain non-binding, and whether insurance held through super aligns with the intended estate plan.
Practical steps for blended families
The following considerations are general information only — individual circumstances vary, and a qualified professional can confirm what applies to a specific situation.
Families with blended structures may find it useful to address several areas as part of a formal review:
Mapping all assets and their legal ownership — separating estate assets from superannuation, insurance, and trust-held assets
Reviewing whether super fund death benefit nominations are current, binding, and reflect current family intentions — and confirming when any existing nominations are due to lapse
Reviewing life insurance policy ownership and beneficiary arrangements across all policies — an insurance coverage review examines these structures as part of its standard process
Understanding how assets held in trusts or company structures will transfer, and whether separate succession documentation is in place
Engaging both a qualified estate planning professional and an insurance specialist — given the different legal frameworks that apply to estate assets, superannuation, and insurance
Felipe Araujo, Chief Executive of Generation Life, notes the importance of having these conversations early — before an unfortunate situation makes them urgent — and cautions against relying on any single structure as a complete solution (Araujo, F., cited in Financial Standard, April/May 2026). Superannuation, family trusts, insurance, and wills each serve different functions; the goal is ensuring they operate coherently rather than at cross-purposes.
For eligible clients, an Arrow Equities insurance review is complimentary. A review examines the policy ownership and nomination structures of existing life insurance and superannuation cover — including whether current arrangements align with the intended estate plan in blended family situations. Find out if you’re eligible →
Frequently asked questions
What happens to superannuation when someone in a blended family dies without a valid nomination?
Where no valid binding death benefit nomination exists, the superannuation fund trustee exercises discretion over who receives the death benefit. The trustee must pay to one or more eligible beneficiaries — typically dependants or the legal personal representative. In blended families, this discretion may result in benefits flowing to a current spouse, a former spouse who qualifies as a dependant, or the estate — rather than the specific family member the member would have chosen. A valid, current binding nomination removes trustee discretion — the trustee is required to pay in accordance with the nomination, provided it meets the fund’s requirements and remains current (ATO, 2026).
Can stepchildren be included in a superannuation death benefit nomination?
Stepchildren can be included in a binding death benefit nomination if they meet the definition of a dependant under the fund’s trust deed — which generally includes children, including stepchildren, of the member. Eligibility conditions vary between funds and may depend on the child’s age, financial dependence on the member, and the nature of the relationship at the time of death. A qualified adviser can confirm the rules that apply to a particular fund.
Does updating a will automatically update life insurance beneficiaries?
No. A will and a life insurance policy are separate legal instruments, and updating one does not update the other. Changing or adding to a will — including through a formal codicil — does not alter the beneficiary named on a life insurance policy or the nomination lodged with a superannuation fund. Beneficiary updates require separate action directly with the insurer or the fund. This is among the most common points at which blended family estate plans fail to operate as intended.
How often should binding death benefit nominations be reviewed in a blended family?
Most binding death benefit nominations lapse after three years unless renewed. In blended families — where family structure may change through remarriage, the birth of children, or the death of a nominated beneficiary — reviewing nomination currency at each significant life event is a practical discipline, not just a triennial exercise. Non-lapsing binding nominations are available through some funds; whether a fund offers this option and under what conditions varies.
What is the difference between estate and non-estate assets in a blended family context?
Estate assets — property, cash, personal possessions — pass under the will. Non-estate assets — superannuation, life insurance paid directly to a named beneficiary, and assets held in trusts or companies — follow separate legal pathways and are not governed by the will. In blended families, the distinction matters because each asset class may flow to a different family unit depending on the structures in place. Mapping the full asset base, rather than relying on the will alone, is the starting point for a complete plan.
Does it matter whether life insurance is held personally or through superannuation in a blended family?
Yes, the ownership structure affects how proceeds are distributed. Life insurance held personally with a named beneficiary pays proceeds directly to that beneficiary, outside the estate. Life insurance held through superannuation is subject to the fund’s trust deed and the member’s nomination — the fund trustee controls distribution. In blended families where different family units have different intended entitlements, whether a policy is personally held or super-held, and who is nominated under each, can determine the outcome at a claim.
Australian Bureau of Statistics (ABS) 2021, Census of Population and Housing 2021, ABS, Canberra, <https://www.abs.gov.au/census>.
Araujo, F 2026, commentary cited in Bavin, E 2026, ‘Estate planning feature — Baby Boomers, blended families and the $175bn annual handover’, Financial Standard, April/May 2026.
Fernandes, D 2026, commentary cited in Bavin, E 2026, ‘Estate planning feature — Baby Boomers, blended families and the $175bn annual handover’, Financial Standard, April/May 2026.
Finder 2026, intergenerational wealth transfer research, cited in Bavin, E 2026, ‘Estate planning feature — Baby Boomers, blended families and the $175bn annual handover’, Financial Standard, April/May 2026.
Leggett, P 2026, commentary cited in Bavin, E 2026, ‘Estate planning feature — Baby Boomers, blended families and the $175bn annual handover’, Financial Standard, April/May 2026.
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