Blended Family Finances in New Zealand: Getting Yours, Mine, and Ours Right

A blended family is a household where two adults combine their lives and at least one of them has a child from a previous relationship, often alongside a child they have had together. The shape of blended families varies enormously. It might be a couple in their thirties with a school-age child each and a baby on the way, or a different couple in their fifties, with adult children who visit, a house each, and no intention of having more children. One partner may bring no children at all. In blended families the children may live in the home full time, half the time, or mostly elsewhere. The financial considerations can differ greatly, so weigh what follows against your own situation.

The most important step is to define what you both want before deciding anything about accounts, investments, a house or houses, insurance, or wills. To explain this properly, take a step back and consider: any business, sports team or project runs better once someone has written down the aim and the ideal outcomes then worked towards them, and a household is no different. Most of the trouble financial advisers see in blended families traces back to decisions made in the right spirit but in the wrong order. For instance, the joint account gets opened before anyone agrees what it is for.

Define what success looks like for your blended family

Goalsetting and defining success can take many forms. A young blended family may define success as a single team: one home, one budget, one parent at home while the child or children are small. A more established blended family, headed by two mid-career or late-career professionals who want no more children, may aim for something different: independence over their own spending and savings, with a shared account for the running of the home and joint expenses such as holidays. The aim worth writing down, even in a few lines, covers more than finances:

• What the home should feel like, from one fully shared and interlocked unit to two complementary households under one roof
• What each child, from whichever relationship, should be able to count on from the two of you
• Where you will live, whether a home either of you owns stays in that person's name, or if you will buy together
• Who will work, who might be at home, and how care of children and the running of the house count as contributions
• Any commitments either of you might carry to a previous household
• What assets, liabilities, or ongoing financial commitments each of you brought in, and what should happen to them if the relationship ends or one of you dies

One piece of law belongs in this conversation, because it can change the outcome should the relationship end. Under the Property (Relationships) Act 1976, married, civil union and de facto couples generally fall under equal-sharing rules once they have lived together for three years. From then on the family home, and most of what the couple earns and builds together, counts as relationship property. The law treats relationship property as belonging to both partners equally, whoever paid for it or holds the title. A couple who want a house to stay with the partner who brought it can generally achieve it, but only by formal agreement in writing, commonly called a pre-nup or contracting-out agreement. Even then, agreements can be subject to challenge.

Start financial organising with the basics: how the accounts will run

Where both adults explicitly agree on a straightforward and unified approach, the evidence favours merging the household finances, including a joint account, joint investments, and a joint approach to other financial matters such as insurance. A two-year study of 230 couples found those assigned a joint account reported higher relationship quality than those couples who kept finances separate. The researchers explain it through the way couples treat each other. Under a communal norm, each partner meets the other's needs as they arise and nobody keeps score. Under an exchange norm, each partner tracks who paid for what and expects it squared up. A joint account pushes couples towards the communal norm, and the scorekeeping is what wears a relationship down. The study covered first marriages only, which is a caution, and the approach applies to any couple who want to run as one intertwined unit.

For a couple keeping more independence, the same evidence says a hybrid is the common choice. A twelve-year study of Australian couples found re-partnered couples far less likely to pool everything than couples in a first marriage, and dual-income couples the most likely to run a hybrid. Having children shifted this: each dependent child in the household pulled couples back towards a joint account, because running a family from separate purses is hard work. Fully separate finances carry a risk of their own: they can hide unequal living standards under one roof.

Both arrangements can succeed, and so does everything in between, provided the couple chose it and maintain it based on the right reasons and mutual agreement. In contrast, drift is a financial arrangement nobody chose, which is what can happen inadvertently. A couple might set out intending to pool everything, then one partner keeps an old account for convenience and a bonus lands there. Within a few years the household runs on a financial arrangement neither of them would have designed.

Running blended family finances day to day

The day-to-day arrangements for paying bills, rent or a mortgage, and funding periodic items like a holiday, car, or new washing machine can be easier to arrange depending on how any couple or family has defined the aim. A couple running as one unit will usually pool everything and budget together, though still might want a little sum set aside each month or fortnight for spending on their own hobbies or guilty pleasures! A couple keeping a degree of independence usually run a personal account each and a shared account for housing, groceries, power and family activities. In this case, agreement will need to be obtained on how the shared account is funded and what counts as a shared expense.

Funding it equally feels fair, but that might leave a lower earner with far less of their own. Funding it in proportion to after-tax income leaves each partner the same share of their own pay to spend as they choose, which is what many couples mean by fair once they think it through. In a blended family the proportion might be worked out after the commitments each partner brought in, for example, because child support paid to a previous household was never available to the new one. A worked example with theoretical numbers shows how it works. Alex takes home $6,000 a month, after tax, and has two children living in the home. Sam takes home $4,000, has one child in the home, and pays $700 a month in child support for a child who lives elsewhere. After the child support, Sam has $3,300 available, so the household's combined income is $9,300. Shared costs of $5,000 split roughly 65 to 35: Alex puts in $3,250 and Sam $1,750, and each keeps a little under half of their available income. Split the household costs equally instead, and Sam would be left with $800 a month and Alex with $3,500. The trade-off is Alex contributing $750 a month more than an equal split, in exchange for a household where both adults keep the same proportion of their own income.

Child support received might be treated the other way. Where one partner receives support for a child in the home, the simplest treatment is to put it towards that child's costs. It goes into the shared account if the couple treats those costs as shared, or into the parent's own account if those costs stay with the parent. The shared budget then carries the net cost of each child. Where the children are in the home only part of the week, the shared budget might need an agreed basis for groceries, activities and transport in the weeks they are present. Having a considered conversation once about this, with figures, is far easier than having it every month without.

You might also want to separate the payments for bills or irregular expenses from the payments which build something one or both of you owns. Groceries, power, rates, insurance premiums, and even replacement appliances are all quickly forgotten. The principal portion of a mortgage payment, and any renovation of a home one of you owns, adds to the value of an asset. So do KiwiSaver contributions. Where an asset is held jointly, such as a joint investment account or portfolio, the shared account can pay for it without complication. Where it is held in one name, the partner helping to pay for it is either accruing an interest the pre-nup records, or might be making a gift, and deserves to know which.

Separate savings and investment accounts generally only work alongside full visibility. Transparency builds trust, regardless of whether you have a blended or more conventional family. Each of you knows the other's assets, debts and commitments, even where the finances themselves stay apart. At worst, a partner may be hiding a debt or a habit.

Non-financial contributions count, at home and in law

It is widely accepted contributions to family and relationships take many forms. A parent at home with a toddler, routine household chores, a step-parent doing the school run, a spouse who renovates the other's house on weekends: all of these are contributions. New Zealand law agrees: the Property (Relationships) Act counts care of children and management of the household as contributions to the relationship, and removes any presumption a monetary contribution counts for more.

The same honesty applies to the partner who earns less or holds less. Some blended or other couples assume the wealthier partner's assets are theirs alone and the household runs on goodwill. The assumption can come crashing if the relationship ends. An honest conversation about what each of you had before the relationship started, what you may share or merge together, such as one family home, and what you will build together, usually matters greatly in a blended household.

Property ownership decisions in blended families

Blended couples with a home each face a decision few first families do: keep or sell one, keep or sell both, or buy together. Keeping a home in one partner's name and renting out the other can suit many households, with one caution. A property owned before the relationship starts is defined in law as separate property. If its mortgage shortfall is topped up from income earned during the relationship, or the other partner's work improves it, the increase in its value can become relationship property. A contracting-out agreement can settle this, and more potential pitfalls.

Buying a home together can raise the matter of ownership. Joint tenants own the whole property together, and when one dies the survivor automatically takes everything, outside the will entirely. Tenants in common each own a defined share, equal or unequal, which passes under the owner's will. Unequal shares can reflect who contributed what deposit and allow each partner to leave their share to their own children. A deposit is only the first contribution, though. The shares should reflect the arrangement you intend over the years, including who services the mortgage and who funds improvements. Because the family home is usually defined as relationship property by New Zealand law, unequal shares on the title do not by themselves override equal sharing on separation or on death. Whatever the ownership shares, each borrower on a joint mortgage is usually liable for the whole loan.

Investing and retirement as a blended family

"Building wealth is different to sharing household expenses. It can be easy to think household finances start and end with the shared costs of family life, though the big conversation is about what you're building together. I think shared ambitions are key." Josh Copeland, financial adviser at Become Wealth

Blended families save for the same things as any other household: a holiday which takes two or three years to fund, a bigger house, maybe a bach, perhaps the children's education, and what is often the biggest expense of all: retirement. The difference can be how such goals are funded. A shared goal is usually best funded from a shared account or a jointly held investment, contributed to in the agreed proportion. Where one of you is building something for your own children, holding it in your own name and recording it in writing is one way to keep the intention intact.

KiwiSaver Scheme savings are held individually by nature, so each of you has a balance in your own name regardless of whatever else you merge. Beyond that, the choice between joint and separate investing follows the aim. A couple running as one unit typically invest jointly for shared goals and treat the combined result as theirs. A couple maintaining more financial independence often run separated investment accounts, perhaps with a joint holding for shared goals. Some people obtain comfort from ensuring both partners have an emergency fund they each individually control, so their financial sense of security does not depend on an asset held by the other.

Retirement, and how to fund it, is where blended couples most often have unresolved differences. Age gaps are common in second relationships, so one partner may retire a decade before the other. The couple then has to settle whether retirement income is pooled, whether the working partner supports the retired one, and how a retirement with an age gap is funded fairly. Preserving capital for children from a first relationship can also sit in tension with the surviving partner's standard of living in old age. One common resolution is to let the retirement savings fund both partners' agreed standard of living. A specific asset, a share of the home, or a life insurance policy is then set aside for the children. Unless something is deliberately set aside, the children's inheritance is whatever is left after the couple's retirement, and where everything passes to the survivor first, whatever the survivor later chooses to leave. Making your retirement income last across both lifetimes is key.

"New Zealand families have changed markedly over the last decade or so," says Marcus Mannering, financial adviser at Become Wealth. "Blended families, changing work habits, age gaps, and even different cultural expectations within the same household have made financial and family alignment more important than ever. The team see this firsthand with many blended households, who need to carefully consider trade-offs between different financial and other priorities. Situations are so varied that what works for one family might be a terrible idea for another."

Insurance that reaches the right people

Both partners in any family usually need a suite of appropriate insurance cover, some mix of life, income and health insurance, and blended families are no different. The cover types and amounts are sized by an assessment of their risks, their commitments, what they can afford and what they are trying to protect. The blended-family makeup is intertwined with that assessment.

One area which needs careful consideration is who receives the payout if a life insurance claim is paid. In New Zealand the life insurance payout follows policy ownership. Where you are the insured person and the sole owner, the proceeds are commonly paid to your estate unless the policy names a beneficiary. Your estate is everything you own at death, handled by the executor named in your will. The will decides who receives the proceeds, and the estate can be claimed against, by a surviving partner or by a child under the Family Protection Act, before anything is paid out. A policy owned jointly with your partner is generally paid to the surviving owner directly. Ownership and beneficiary arrangements produce different outcomes, so the policy schedule and wording decide. A policy which might have been taken out during a first relationship often still reflects the intentions at the time, not the current family situation.

If you have children from a previous relationship and leave everything to your current partner, you are essentially trusting them to look after children they have no legal obligation to support. You are also trusting every future version of their life. The same applies in reverse to a partner who brought no children and would be left relying on the goodwill of stepchildren. Many blended families instead run separate policies for separate purposes, or direct proceeds through the will or a trust with explicit rules about who receives what. Income protection carries extra weight where one salary holds up two households, because an illness stops the child support and the mortgage payments at the same time.

What is fair for the children?

Children do not need identical dollar amounts spent on them. They need to know what their parent, and the new household, will reliably provide. Many blended couples aim to spend equally on every child. Equal spending and attention is often impossible even in more conventional families: one child plays club sport with travel costs and a heavy transport commitment, another reads books. Blending families comes with its own challenges, too. For example, the biological parents may be financially contributing to the household in the form of child support, or may not. If one spouse is receiving child support from outside the relationship, how will those funds be fairly allocated to the joint household? And if no child support is forthcoming, how will the burden of child rearing be fairly shared within the blended family? Furthermore, with childcare, the courts are increasingly leaning towards 50/50 care arrangements between biological parents, which can add all manner of financial and logistical complexity.

What works is agreeing how child spending decisions get made, rather than aiming for identical amounts. Each significant child expense gets raised, checked against what you agreed is shared and what stays with the parent, and decided together. The agreed split is updated when either of you chooses to take on more. Simply becoming a step-parent does not ordinarily make you liable for financially supporting a child, although a court can step in and impose liability in limited circumstances.

Child support assessed through Inland Revenue is usually predictable and in our view is generally preferable to any other arrangement, as it removes a potential source of disagreement over how much is the right amount. Another benefit is the IRD will keep track of and follow up any arrears (child support debt). Even so, it still may lead to a source of friction, as different biological parents may find, especially in anything other than a 100 percent care scenario, that they are funding more than their share of child expenses such as sports or school trips, uniforms, and so on. Income differences between former spouses can exacerbate frictions. Parents who agree on a regular amount can register a voluntary agreement so Inland Revenue collects it and follows up missed payments. Agreements about irregular expenses may need a separate written process. Both households can then budget with certainty, assuming the agreement is adhered to.

The legal defaults, in brief

Everything above is yours to design. The law supplies a default wherever a couple leaves something undecided, and in a blended family the legal defaults were often written with an altogether different family structure in mind.

On separation or death of a spouse or partner, the Property (Relationships) Act starts from equal sharing of relationship property, which includes the family home and usually the income, investment gains and KiwiSaver savings built up during the relationship. A contracting-out agreement replaces the defaults with your own, provided it is in writing, each partner is independently advised, and a lawyer witnesses each signature.

On death, the surviving partner's need for a home and income collides with the expectation of the deceased's children. The survivor has a formal choice, made in writing with legal advice, usually within six months of the estate being opened for administration. They can apply for an equal division of relationship property, or accept whatever the will provides. Separately, the Family Protection Act 1955 lets children, including independent adult children from a first marriage, claim against an estate which fails to provide adequately for them. If there was a stepchild the deceased was maintaining, then they can usually make a claim, too. Where there is no will, the intestacy rules give stepchildren no automatic share, however long they lived with you, so a claim under the Act is their only route. A will written for a blended family balances potential claims deliberately, often through a life interest, a structure widely used for blended families. The surviving partner lives in the home for life, and the capital then passes to the deceased's biological children. Your KiwiSaver balance is paid to your estate when you die, so your will decides where it ends up. Estate planning for a blended family also covers enduring powers of attorney, which keep your partner and your adult children from becoming competing applicants in the Family Court.

Blend the finances on purpose

Treating every person and every dollar identically is impossible in a blended family. The aim is for the promises each of you makes, to each other and to each child, to be explicit, written down, and financially supportable. Decide those first, and the accounts, the ownership, the investments and the cover fall into place behind them.

If you are blending households with assets, children or commitments on either side, a complimentary first conversation with a Become Wealth adviser can help ensure that each family ambition is clear, funded, and supported by the way your money and assets are structured. It also shows whether your accounts, investments and insurance produce the outcome you intend, and which gaps might need a lawyer.