Q: I know of one woman who in her second marriage (now in her 70s) has married a man who had previously put everything into a family trust for his now adult children.
So the family home and everything is in there, and the woman does not (on paper) get anything.
And another woman who is the second partner (but not married) of a man who has many assets in a trust, and even after 15 years she can't talk about it with him.
If the men die what is the women's position re money?
Both women are unable/unwilling to rock the boat by pushing for (for example) their name on the house. What to do?
A: Two disturbing situations, which I put to trust and estates lawyer Rhonda Powell for comment.
"My first reaction is that these women need to consider why they are in a relationship with a person who is attempting to undermine their relationship property rights," says Powell.
"Unfortunately, situations in which (normally) men create structures to deny their (normally female) partners a share of family property are all too common," she says.
The men you're referring to may protest that they set up the trusts before they knew the women. But still, they are in the relationships now, and the women are vulnerable.
"Trust property is not relationship property to be divided upon separation, and neither can it be passed by will. So, these women would only be able to share in property outside the trust," says Powell.
She adds that, "At the time of a separation, it is sometimes possible to make inroads into property held in a trust through the Family Court, but only with significant stress and expense."
Her advice: "Don't wait until after the person with the trust dies to sort it out. You need to discuss relationship property up front during the relationship. After they die, it will all be much harder."
I also asked Powell for any advice for others getting into a relationship in which the other person has put assets into a trust.
"People can be reluctant to talk about money and let it get in the way of a romance," she says.
"However, the risks of not doing it are too high.
"If you can't have that conversation, or if the proposal on the table is unfair to you, then you shouldn't be in the relationship. If your partner is not sharing when things are going well, how do you think he will behave if it doesn't work out?"
Sadly, I suspect people's unwillingness to discuss this issue with their partners is quite common — whether they are in a new relationship or well down the track.
If that applies to any readers, can I suggest you point out this Q&A to your partner? It might make your Saturday morning stressful, but the rest of your life less so. Please do it.
P.S. Before the letters flood in, I'm not saying there are no good reasons for putting assets in a trust in these situations. Sometimes, for example, the rights of children from a first marriage need to be protected.
But let's have honest conversations, and fairness to everyone.
Stick with KiwiSaver
Q: I am self-employed and currently contributing $440 monthly into a KiwiSaver growth fund.
Should I continue to contribute this amount given the current financial climate, reduce the contributions or stop entirely?
A: Continue. In volatile times, you benefit more than usual from what's called dollar cost averaging.
This happens if you invest the same amount regularly in shares, KiwiSaver or other managed fund units or any other investment where the value fluctuates.
When the price is low, your $440 buys you more units in your fund than when the price is high. So your average price is lower than the market average price.
My only hesitation is that you are tying up your money in KiwiSaver until you turn 65 or buy a first home. If you might need the money before then, consider putting $87 a month into KiwiSaver — to get the maximum government contribution — and putting the rest in a similar non-KiwiSaver growth fund that is more accessible.
If you're happy with your KiwiSaver provider, ask if they have such a fund.
When to move money
Q: I have been a long-term follower of your Q&A forum since attending one of your Financial Literacy lectures in 2012 and must say thank you. I have learned something new nearly every week. Currently I am working in Canada and saving a decent amount each paycheck. My primary savings are with InvestNow in NZ, and until recently I have been sending money back to New Zealand to further my investments.
Currently the Canadian dollar is worth $1.12 in NZ dollars. I believe I have three options but am unsure which is best:
• Should I save money here in a low interest account and wait for a more favourable exchange rate?
• Should I continue to send money back to NZ and take advantage of dollar cost averaging.
• Or finally, should I open an investment account here in an ETF (exchange-traded fund)?
My long-term plan is to return to New Zealand, hence why I have been saving my money there.
A: I remember you, in the third row from the back in the Uni of Auckland lecture theatre! Well, not really. But how nice to hear from a former student — even if you made it to only one lecture.
Let's look at each of your three options:
• Waiting until the exchange rate improves.
Given that you intend returning to New Zealand, this involves "gambling" on the exchange rate being better then than it is now.
There's probably a 50:50 chance of that. "But," you might say, "it's obvious the Canadian dollar will rise." Don't count on it. Even the experts get exchange rate forecasts wrong all the time — and that was before Covid-19 made forecasting even trickier.
There's another issue too. Let's say the exchange rate does improve. When do you move the money? How do you know the rate won't get even better soon? Meanwhile, you're earning low interest.
• Sending money regularly to New Zealand to invest.
As you say, you'll benefit from dollar cost averaging. And funnily enough, it will be a sort of turbo-charged dollar cost averaging.
First, your Canadian dollar will buy you more Kiwi dollars when our currency is weak, and fewer when the Kiwi is expensive.
Second, those Kiwi dollars will buy more shares or units when their prices are down, and fewer when prices are up.
When all the stars are aligned, you'll get heaps of investments at low prices. When it's the opposite, you'll get few investments at high prices. And when it's a mixture — the currency is favourable but the prices are not, or the reverse — you'll do just okay.
In the end, though, it all averages out the same as with ordinary dollar cost averaging.
And a big plus is that you can just keep sending over regular amounts and not worry about the ups and downs of currencies and investment markets.
• Investing in a similar investment but from Canada.
At first glance, it seems this would expose you to the same foreign exchange risk as option one — that the rate might be bad when you move the money to New Zealand.
But that's not so. This is a bit complicated, but bear with me. Let's say you're investing in an international share ETF — the sort of long-term investment I would recommend. Every time you invest in that fund, you're taking that day's foreign exchange rate risk. If the Canadian dollar is high that day, you'll get more units, and the reverse.
You are spreading out your risk over time in just the same way as in option two.
Sure, when it's time to move your money to New Zealand it will be denominated in Canadian dollars. But that's just window dressing in this situation. The number of units in the ETF is what really matters, and that has been set by your investments over the years.
Okay, so options two and three are pretty much the same. But if you're planning to spend the money in New Zealand, the second option will be more convenient — regularly sending money back here and managing it from a New Zealand perspective.
Oh, and when you come back to New Zealand, change your spelling back to "paycheque", or you'll make a lot of old fogeys crabby — possibly including me on a bad day!
Money - it's nothing but trouble
Q: I have approximately $1.5 million in the bank.
I have had nothing but trouble and worry with money throughout my life. I invested in mortgages with lawyers, who stole one million dollars from me. I had money invested in Equiticorp in debentures, and I lost that money. I was then ripped off by another lawyer, who I loaned money to. I even lost interest for about eight years with a bank who would not return this money in Australia. I loaned money to a real estate agent, who I had to litigate with for years to get a pittance back. So, with the ridiculously low interest rates for bank term deposits now, can you please advise me as to what to do? I am 73 years of age. If I went to KiwiSaver or a managed fund, I am told that the fees that they charge outweigh the returns. And financial planners cannot be trusted as they have a vested interest in the companies they recommend.
If you buy an investment house, and put it in the hands of a real estate agent to look after it, I have heard that the property can be trashed, and $3500 rent in arrears cannot be collected. I do not want the stress and the hard work of collecting the rent myself, so I guess that I would have to put it into the hands of a real estate agent because I would not be in the country. So, my question is where can you put the money in other than the bank?
A: It's hardly surprising that you've retreated to bank term deposits! It's been a long time since I read such a tale of woe.
But let's not dwell on history. What should you do now? I've got three suggestions:
• Go to one of the financial advisers listed on the Advisers page on maryholm.com. They don't have the vested interest you describe.
• Use a KiwiSaver fund. They can work well for people over 65, who can access their money whenever they want to.
I don't know who you've been talking to, but it would be unusual for fees charged by a fund to outweigh returns over the medium to long term – and rare, indeed, for that to happen if you choose one of the funds with the lowest fees. The KiwiSaver Fund Finder on sorted.org.nz ranks funds by fees.Put the money you plan to spend soon in a lower-risk fund, and the longer-term money in a higher-risk fund, where returns are likely to be higher — as often explained in this column.
• Stay put, regardless of the low interest rates. Given your history and scepticism, this might be best.
Even if you earn zero interest, with $1.5 million at 73, you could spend $75,000 a year, plus NZ Super, until you are 93, and then get by on just Super. Or spend more in your seventies and less later on.
You are much wealthier than most people your age. It's time to forget the past and enjoy life!
- Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to firstname.lastname@example.org. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.