Case Study: A Blended Family
Case studies are a great way to see how the theory plays out in practice. While every situation is unique, reviewing different scenarios can be useful to you. Keep in mind that Crayon and our guests are not providing financial or legal advice, so be sure to consult professionals before making any decisions.
Meet Marie and Oscar, a couple who found each other a bit later in life. They’ve each been professionally successful, and they are committed to providing for their children from prior relationships. Here's what they need to consider.
Setting the scene
Meet Oscar
Oscar is father to Tom (17) and Ally (15). He established the OB Family Trust following his separation from his first wife. Oscar and his children are beneficiaries of the trust, which includes:
A residential property in Wanaka
An investment property in Auckland
Bank accounts
An investment account
Additionally, Oscar has his KiwiSaver in his personal name.
Meet Marie
Marie is mother to Josie (18) and Theo (15). All of her assets are in her name and include:
A residential property in Auckland
A commercial building in Auckland
Bank accounts
An investment account
KiwiSaver
Additional context
Oscar and Marie have been living together in Marie's Auckland home since June 2019, and they regularly spend school holidays at Oscar's property in Wanaka. They share a joint bank account to cover shared expenses but prefer to keep the rest of their finances separate.
Marie is a talented architect. She recently designed a new guesthouse that has been built on the Wanaka property. Because she sees it as contributing to their future together, she did not charge for her services.
Asset and Estate Planning
Since Oscar and Marie want to maintain separate assets, they will each need to seek independent legal advice from different lawyers. They need to prepare a will, enduring powers of attorney, and a property relationship agreement.
Prepare Wills
Reminder: a will stipulates who gets what when you pass away.
Oscar and Marie have decided not to leave anything to each other in their wills. Instead, Oscar's estate will go to his children, and Marie's estate will go to her children. To make sure this happens, they need to specify this in their wills.
They should review their wills annually to ensure they reflect any changes in their relationship or finances. As Oscar and Marie’s romance develops further, one or both of them may decide that they want to make some financial provision for the other. If so, they may need to update their will to reflect this change.
An Additional Consideration: Insurance
If Oscar and Marie decide to provide for each other but don’t want to take away from their children's inheritance, they could consider taking out life insurance policies and naming the other as the beneficiary. This means that if Oscar passes away first, Marie would receive his life insurance payout and vice versa.
They should also ensure they have adequate personal insurance, such as health, income, and trauma insurance, to protect their assets.
Prepare Enduring Powers of Attorney (EPA)
Reminder: an EPA gives someone else the power to make decisions about your money and your welfare if you’re not able to.
Neither Oscar nor Marie have EPAs in place. Their lawyers both strongly recommend that they create them since EPAs are an important part of everyone’s asset and estate plan.
Prepare a Property Relationship Agreement
Reminder: a property relationship agreement stipulates how assets will be divided if the relationship ends.
Since Oscar and Marie want to keep their finances separate, they should obtain advice about entering into a property relationship agreement. Without a relationship property agreement, if they were to separate:
Oscar could be entitled to half of Marie’s Auckland home. They have been living together in a de facto relationship for more than three years in Marie’s Auckland property, so it’s considered their ‘family home’ under New Zealand law and therefore counts as Relationship Property - even though Marie bought this property before she met Oscar.
Marie could argue that she has certain rights under the OB Trust that Oscar set up for his kids. This is because Marie provided her architecture services free of charge for the Wanaka property that sits in the OB Trust and therefore enhanced the value of the asset.
Oscar and Marie both want their respective children to receive their assets, but as you can see, things could get messy if they found themselves in a relationship property dispute. A property relationship agreement can mitigate this risk and provide clarity about how assets will be divided.
This is part of Crayon’s mini-series on asset and estate planning for parents:
Now for the important legal part: The information we provide is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as at 3 February 2023.
All of our content is independent. Crayon provides you with accurate and valuable information you can use to make smart money moves for your family. We work with people we respect, and all collaborations are unpaid.
Sarah Kelly
Senior Associate, Private Wealth team at Dentons Kensington Swan
Stephanie Pow
Founder and CEO, Crayon
