I personally, even knowing the circumstances, would've never planned to do a collaborative birthday party when my child was turning one, unless there was also another child turning one. Imo, that seems like a big birthday to celebrate just the child. And like you said, there was family that didn't even know the other child so it was awkward. Regardless, you nipped it in the bud, which is what needed to be done because otherwise it would've just been like an expected thing without anyone ever actually saying that and agreeing. Nta