Case Study: A Nuclear 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 a lawyer before making any decisions.
Meet Hugo and Marama, university sweethearts with two young children who are getting married in just three months. Before they tie the knot, there are a few things they need to consider when it comes to asset and estate planning.
Setting the scene
Hugo and Marama are 35 and share Greta (5) and Manaaki (3). They consider all of their assets to be ‘joint’, including:
The family home
KiwiSaver
Bank accounts (both joint and individual)
Their only liability is a mortgage to ANZ.
Marama’s Koro recently passed away and left Marama an inheritance of $300,000 under his will. Marama wants to use this money to pay off the balance of the ANZ mortgage. Marama also wants to keep this inheritance as her separate property.
Asset and Estate Planning
To ensure that their assets are properly protected and distributed, Hugo and Marama need to prepare three key legal documents: a will, enduring powers of attorney, and a relationship property agreement.
Prepare Wills
Reminder: a will stipulates who gets what when you pass away.
They prepared wills six years ago. However, wills are automatically revoked upon marriage. This means Hugo and Marama will need to prepare new wills prior to their marriage.
Since their previous wills were created before they had children, they'll need to update them to factor in their kids and any future children.
An Additional Consideration: Insurance
Given that they have young kids to look after and a mortgage to service, Hugo and Marama should also review if they need personal insurance (such as health, income and trauma) as part of the asset and estate planning process.
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.
Hugo and Marama don't have an EPA in place. Their lawyer strongly recommends that EPAs are part of their (and every person’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.
An inheritance is deemed Separate Property under New Zealand law, so currently, the $300,000 Marama inherited from her Koro remains her Separate Property.
However, once she uses her inheritance to repay their mortgage, it’s considered intermingled with Relationship Property. As a result, the inheritance will lose its Separate Property status. This means if she and Hugo later separate, Hugo will be able to claim half of it.
To ensure that Marama's inheritance remains her Separate Property, she and Hugo need to enter into a relationship property agreement specifying this.
By taking these steps, Hugo and Marama can protect their assets and ensure they're distributed according to their wishes. Remember, every situation is unique, so it's essential to consult with professionals to create a tailored plan that's right for you.
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
