Inheritance tax and inheritance law in New Zealand
Taxation Researcher | October 25, 2020
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in New Zealand: what restrictions there are and whether making a will is advisable.
No estate duty is payable in New Zealand.
Gift tax was repealed as of 01 October 2011.
|TAX BASE, NZD (US$)|
|Up to 27,000 (US$22,126)||0%|
|27,000 - 36,450 (US$29,871)||5% on band over US$20,984|
|36,450 - 56,250 (US$46,097)||10% on band over US$29,871|
|56,250 - 77,850 (US$63,798)||20% on band over US$46,097|
|Over 77,850 (US3$63,798)||25% on all value over US$63,798|
Thanks to Simpson Grierson
What inheritance laws apply in New Zealand?
Foreigners are subject to New Zealand inheritance law.
The principal laws that apply to inheritance issues in New Zealand are the Wills Act 2007, the Administration Act 1969, the Family Protection Act1955, the Property (Relationships) Act 1976, the Law Reform (Testamentary Promises) Act 1949, and the Estate and Gift Duties Act 1968.
New Zealand´s inheritance laws affect everyone who owns property in New Zealand, regardless of their religion or nationality. Foreign property owners are subject to the same laws as New Zealand citizens. It makes no difference if spouses belong to different nationalities or religions.
New Zealand courts have jurisdiction over all property in New Zealand. Decisions concerning inheritance of property owned by a foreigner in New Zealand are made primarily by the High Court. Where probate or letters of administration are obtained in a court of a Commonwealth country, for example Britain, Canada, and Australia, the New Zealand High Court will recognise the authority of the Commonwealth court. The process to "reseal" the probate or letters of administration in New Zealand is reasonably straight forward. Upon resealing, the probate can be used to deal with assets in New Zealand. The time to complete inheritance proceedings is variable. Cases typically take from 6 to 24 months.
There is no reserved portion.
No specifically defined "reserved portion" of an estate must, by law, go to certain persons. However, in certain circumstances the provisions of the Family Protection Act and the Property (Relationships) Act can override the express wishes of a will-maker.
The Family Protection Act empowers the courts to alter a will if its provisions do not fulfil the responsibilities of the deceased. The Act imposes moral duties on certain persons to provide for close relatives, typically their spouse and children. If these duties are not met, either during the lifetime of the deceased, or by the provisions of their will, the High Court can alter the will to satisfy the duties of the deceased to his/her family members. Claimants under the Family Protection Act have 12 months from the date of the grant of administration in the estate to challenge the will.
The Property (Relationships) Act applies to wills made by married persons and certain de facto couples. The surviving partner can choose to have the provisions of the Act apply rather than a will. The Property (Relationships) Act provides for the principle of equal sharing of "relationship property" to cover the situation where one partner has died, effectively ensuring a spouse receives 50% of the property.
It is normal for people to formally make a will in New Zealand.
It is common for foreigners to own residential property and assets in New Zealand, and such foreigners are advised to make a will in New Zealand to simplify affairs, increase certainty, and reduce the costs of administration of the New Zealand assets in their estate.
For a will to operate regarding "immovable property" situated in New Zealand, the will must be made in accordance with New Zealand law, but need not necessarily be made in New Zealand.
A will validly made in New Zealand must comply with the requirements of New Zealand law, which include:
the will is in writing;
the will-maker signs the document; and
the will is witnessed and signed by two people in the presence of the testator.
Intestate estates are governed by New Zealand law.
In the absence of a will, assets are distributed according to New Zealand´s law governing intestate estates. In the case of intestacy (i.e. where a person dies without a will or if a will is partially invalid), inheritance of the deceased´s property follows the hierarchical framework set out in the Administration Act, with the following obligations:
to the spouse, children and dependants;
if no spouse, children or dependants, to the parents;
if no parents, to the brothers and sisters;
if no brothers or sisters, to the grandparents;
if no grandparents, to the uncles and aunts.
If the deceased is not survived by a person listed above, all of the estate
belongs to the Government. For this reason, it is advisable that all people, particularly those without family, make a will to dispose of their assets in New Zealand.
Property cannot always be given freely by the owner prior to death.
The Estate and Gift Duties Act imposes gift tax on gifts totalling more than $27,000 per year. If a property owner wishes to transfer ownership of property (for example to a family trust) a common method is for the owner to take a debt from the trust for the purchase price, and proceed to forgive the debt at a rate of $27,000 per year. Gifts validly made prior to death are unlikely to be subject to any successful challenges after the death of the deceased. An exception to this is if the deceased was adjudged bankrupt within two years after the making of the gift, in which case the gift may be voidable against the Official Assignee, an officer of the High Court.
Ownership of property is determined by Title Deeds.
New Zealand has an efficient, real time electronic land registration system enabling prompt searching of the owners of all land in New Zealand. The registration process is quick; title can be registered on the same day as settlement occurs. Purchasers are not required to be present in New Zealand to complete registration.
New Zealand law looks primarily at Title Deeds to determine ownership of property. However, equitable ownership may not be apparent from the title as, for example, registered owners of land may be trustees of a trust.
Minors can inherit property.
Minors (under 20 years of age) can inherit assets under a will; however, Title to property may remain registered to the trustees and executors of a will until the minor beneficiary becomes legally adult. It is possible to appoint a guardian in a will and New Zealand´s Family Court also has jurisdiction to deal with issues of guardianship and custody if required.
The information supplied is a general guide for persons looking at property in New Zealand. The information does not consider foreign law, nor its interrelationship with New Zealand law, and does not constitute legal advice. Simpson Grierson accepts no responsibility for any errors or omissions contained in the information supplied.