Case Study: A Single Parent with a Dependent Adult Child
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.
Mee Helena, a single mother of two who takes sole care of her adult son Elliot. Elliot has an intellectual disability, and he’s lived with Helena his whole life. Elliot works part-time, but Helena pays for almost all of his living expenses. Helena’s husband died some years ago, and she’s concerned about providing for Elliot after she passes away. Helena’s daughter Christine has forged a successful career as an engineer. To ensure Elliot's financial security after her passing, Helena needs to consider asset and estate planning.
Setting the scene
Helena is in her mid-50s, and she’s the proud mother to Elliot (31) and Christine (29).
All her assets are in her personal name, including:
A residential property in Auckland
Bank accounts
KiwiSaver
An investment account
Asset and Estate Planning
The two key legal documents for Helena to provide for Elliot are a will and potentially a trust.
Prepare a Will
Reminder: a will stipulates who gets what when you pass.
Helena will need to consider whether she should leave a greater proportion of her estate to Elliot, as opposed to splitting it equally between both children. This is because her daughter Christine has a successful career, is financially independent and has no special healthcare expenses like Elliot has. Helena will need to discuss this carefully with her lawyer. Under the Family Protection Act 1955, she has a ‘moral duty’ to make provisions for all her children.
In addition, Helena will need to appoint a testamentary guardian for Elliot. Christine has agreed to take on this role but is concerned about her capacity to care for her brother if she decides to start a family. Helena will need to review her will annually.
Prepare a Trust
Reminder: assets in a trust are managed for the benefit of one or more persons.
Helena should discuss with her lawyer whether a trust should be established for the benefit of Elliot. She could specify in her will that Elliot’s share of her estate goes into the trust. Helena has the option to establish the trust now or only upon her death.
Establishing the trust upon her death may be the more preferable option because:
Helena can easily update the terms of the trust by simply revoking her will (which also outlines the terms of the trust) and preparing a new one. It is more difficult to update the terms of a trust that is already in existence.
Helena is still young. Trust law and succession law in New Zealand will likely change between now and her death. These changes may lead her to adjust her plans. Having the trust established upon her death (as opposed to now) gives her flexibility to easily change arrangements.
The costs (lawyers, accountants, tax advisors) and compliance requirements that come with having a trust will not exist until the trust is actually needed and being utilised, i.e. on Helena’s death.
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.
Helena doesn’t have an EPA. Although it’s not specific to taking care of Elliot, her lawyer advises her to prepare one as part of the process because everyone should have one
By taking these steps, Helena can ensure that Elliot's needs are taken care of well into the future.
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
