New Zealand has a large proportion of economically prosperous citizens, many of whom have benefited from salary, business and investment income, inherited wealth and a relatively favourable taxation environment over a number of decades (for example, citizens have made considerable profits in the last 50 years from private property ownership, which has resulted in significant and largely untaxed capital gains).

There is no forced succession in New Zealand, aside from certain limits on testamentary freedom, which are covered further in this chapter. This means that succession planning can be extremely variable between families, and different motivations and principles are reflected in this planning.

A peculiarity in New Zealand is the prevalence of discretionary trusts. These trusts are used regularly, for reasons of creditor protection, succession planning, ringfencing separate property from the relationship property pool, historically favourable tax settings, and sometimes to facilitate eligibility for certain government support. A modest estimate of the number of such trusts in New Zealand is 300,000 to 500,000 although there are likely more, and there is no official register.

For succession purposes, these trusts are used to provide flexibility in distributions to a deceased’s family members (typical trusts allow trustees to treat the beneficiaries equally) or to hold family assets long term and across multiple generations (trusts can presently hold assets for a maximum of 125 years). They can also facilitate the succession of business interests, providing for a common owner of a long-term company-owned business, that can accommodate a number of generations taking an interest in the business, rather than being disrupted or forestalled on the death of a founder or long-term owner.

Charitable giving in New Zealand varies from person to person. There is evidence of significant lifetime distributions for charitable purposes being made, and individuals also choose to make charitable gifts in wills, or establish charitable entities during their lifetime (or by means of a testamentary direction). This activity could not be described as commonplace, as there are others who prefer to retain wealth in their family line and let the individuals receiving that wealth choose how they wish to use it. Reduction in certain government intervention or services has resulted in an increased reliance on charitable entities contributing towards unmet needs in social welfare, cultural life, research and recreation. Certain charities rely on a hybrid of government support and philanthropic contribution, but more and more are charitable entities relying on the resources they can raise privately to make their own way.

New Zealand is culturally diverse. There are certain cultural practices that infuse into its succession practice, including filial piety, marriage contracts and dowries, and cultural charitable practices.

Along with a migrant population, whose cultural practices are reflected in succession practices, New Zealand has an indigenous population, and the distinction between Māori (indigenous New Zealand) and Pākehā (non-Māori) land ownership and inheritance is significant.

Under the general New Zealand land law system, land is typically individualised and governed by statutory and common law principles. The land is owned outright by individuals or entities and generally passes in accordance with conventional succession law. There are set legal rules and guidelines to follow. By contrast, Māori land is governed by Te Ture Whenua Māori Act 1993, which is informed by tikanga Māori. Ownership reflects a more collective framework, with land often held by whānau, hapū or iwi members as undivided shares. Māori land is commonly regarded as taonga, reflecting deep ancestral and spiritual connections, and carries obligations of stewardship.

As a result, Māori land is subject to restrictions on alienation and succession. It is generally not freely divisible or transferable in the same way as general land, and succession is typically limited to preferred classes of beneficiaries (such as descendants), with the aim of retaining land within the whānau. This differs from the broader testamentary freedom available under the general law system. Under Pākehā or Western law, land is typically individualised and governed by general land law. The land is owned outright by individuals or entities and typically follows conventional succession law. There are set legal rules and guidelines to follow. Under tikanga Māori, or Māori customary law, land ownership is based on communal ownership and guided by the values set out by tikanga Māori.

In tikanga Māori, land is often owned collectively by progressively larger groups known as whānau, hapū or iwi. The members of these groups will often have an indivisible interest in the land. Under tikanga Māori, land is often viewed as more than just a resource, but can reflect a very important spiritual, ancestral connection, and comes with cultural obligations to care for the land.

As a result, Māori land is often held in multiple ownership and cannot be divided between spouses or given solely to a recipient. Instead, a Māori descendent of those connected to the land will automatically have an interest in the land under tikanga Māori. Succession is now handled under the Te Ture Whenua Māori Act 1993, where tikanga Māori is taken into account in the process. This is in contrast to the familiar set processes outlined in Western or Pākehā law for succession and inheritance.

As noted in 1.1 Social and Cultural Attitudes, the property-owning class of the past few decades holds significant wealth, and a common matter of note in New Zealand practice is the current intergenerational wealth transfer that represents the transfer of significant assets from the “baby boomer” generation, to their chosen heirs. This is a source of industry for private client advisers, as significant transactions are being made or contemplated, and each transfer is different from the next. This can often involve significant and fraught transfers of power, restructuring of large business, division of assets across multiple parties, and in the midst of this, the navigation of diminished mental capacity as property owners age and decline.

Primary industry and farming is still a major component of New Zealand industry, and this has developed significantly in scope and complexity over the last 50 years. Farms and other primary industries that were previously traditional landholdings with a manual workforce and a simple personal ownership structure are now highly mechanised and technical, carefully structured (often in a corporate method) and larger in size and output. Trade relationships are global and succession of such assets can be fraught and complex, due to financial structuring and the difficulties of transferring a single business interest to multiple parties.

There is also an increase in business relating to technology and science, harnessing AI technology and international markets. Given the subject matter, younger wealth cohorts are benefiting from this market successfully, and this will likely result in a new cohort of wealth on the horizon, with examples of this already existing following significant capital raises and early liquidity events.

Domicile is distinct from tax residence in New Zealand. Although domicile once determined whether gift duty applied (because gifts by donors domiciled in NZ were taxed on worldwide property and gifts by donors domiciled overseas were taxed only on NZ situated property), gift duty was abolished for all gifts made on or after 1 October 2011. Domicile itself is defined under the Domicile Act 1976, which adapts the common law rules for establishing a person’s permanent home.

The Act assumes the common law rule that a person can have only one domicile at a time.

Although the Act does not define these terms, it preserves the structure of the “domicile of origin” (acquired at birth) and the “domicile of choice” (acquired by residing in a country with the intention to remain indefinitely). The concept of a dependent domicile has been abolished for married women.

To determine the treatment of a will, will makers commonly declare their domicile in their will, which may require further evidence at the point probate is applied for.

The Income Tax Act 2007 (s YD 4) provides that a New Zealand resident is liable for tax on all their worldwide income. A non-resident is liable for New Zealand income tax only on income which is derived from New Zealand.

An individual is tax resident in New Zealand if they meet any of the following tests:

• they have a permanent place of abode in New Zealand, even if they also maintain one overseas; or
• they are physically present in New Zealand for more than 183 days in any 12 month period; or
• they are working overseas for the New Zealand government.

The permanent place of abode test is the primary basis for establishing New Zealand tax residence. If a person has an enduring relationship with New Zealand, which is assessed through factors such as their presence, use and availability of a dwelling, intentions, family and social connections, employment and business ties, and location of personal property, then they may be considered tax resident even if they also maintain homes or ties overseas.

The day-count test only applies if no permanent place of abode exists, meaning that a person becomes resident after spending more than 183 days in New Zealand in any 12‑month period, and ceases to be resident only after being absent for more than 325 days in a 12‑month period. Any part-day spent in New Zealand counts as a full day.

A transitional resident is exempt from New Zealand income tax on most foreign-sourced income for up to 48 months after becoming a New Zealand tax resident. The exemption does not apply to foreign-sourced employment income earned while the person is a transitional resident or to income from supplying services. To qualify, a person must be an individual who has become NZ resident (under the permanent place of abode test or the 183 day rule), must not have been NZ resident for at least the previous ten years, must not have previously been a transitional resident in that period, and must not have ceased transitional residence after that time. Transitional residence can be declined by an irrevocable election. Where a person is tax resident in more than one country at once, double tax agreements determine which country has taxing rights, preventing double taxation.

The Administration Act 1969 sets out the order of inheritance upon intestacy. When a person dies intestate in New Zealand, Section 77 of this Act prescribes a clear hierarchy of beneficiaries. A surviving partner generally takes priority, with children, parents, siblings and then extended family inheriting in descending order if closer relatives are absent. If no eligible relatives exist, the estate ultimately passes to the Crown.

In more detail, as follows.

• If an intestate person is survived by a spouse, civil union partner or de facto partner and has no children or surviving parents, the surviving partner inherits the entire estate outright.
• Where an intestate is survived by a spouse, civil union partner, or de facto partner and has surviving children, the partner receives all personal chattels, a statutory legacy (currently NZD155,000 plus interest), and one third of the remaining estate. The children then take the remaining two-thirds on statutory trusts, and if none of those children attain an absolutely vested interest, then the estate is treated as if there were no issue.
• Where an intestate leaves no children but has surviving parent(s), the surviving spouse, civil union partner or de facto partner receives all personal chattels, the statutory legacy with interest, and two-thirds of the remaining estate, while the remaining one-third is held for the deceased’s parent(s).
• If an intestate dies without a spouse, civil union partner or de facto partner, the children (issue) inherit the entire estate on statutory trusts. If there are no children, but there are surviving parent(s), the estate is held on trust for the parent(s). If there is no partner, no issue and no surviving parents, the estate passes to the surviving siblings (full or half blood) on statutory trusts.
• If no immediate family member takes a vested interest, the estate is distributed to grandparents and then to aunts and uncles. Half goes to the maternal side (grandparents, then maternal uncles and aunts if no grandparents survive), and the other half goes to the paternal side in the same order. If one side has no surviving relatives, the estate passes entirely to the other.
• If no eligible relative receives a vested entitlement under the intestacy rules, the estate passes to the Crown as bona vacantia, which may still choose to make provision for dependants or others the deceased might reasonably have been expected to support.

There are no formal forced-heirship rules in New Zealand as there are in certain civil jurisdictions, and it is commonly noted that New Zealanders have what is referred to as “testamentary freedom”, that is, an ability to make provision to whomsoever they please in their testamentary documents.

This is not an unbridled freedom, and will-makers are still subject to certain statutory limitations, and their dispositions are subject to the possibility of certain claims following the will-maker’s death. Such claims are usually brought under the Family Protection Act 1955, the Law Reform (Testamentary Promises) Act 1949 and the Property (Relationships) Act 1976.

Family Protection Act 1955

The Family Protection Act 1955 allows certain close family members, including spouses, partners, children, grandchildren, (and in limited cases, stepchildren and parents), to claim against an estate where the deceased has failed to make proper provision for their maintenance and support. The court may order provision from the estate if justified, subject to factors such as the deceased’s reasons and the claimant’s (disentitling) conduct, with special limitations applying to de facto relationships of less than three years. Claims must generally be made within 12 months of the grant of administration (or two years for minors or those lacking capacity), though extensions may be allowed before final distribution.

Law Reform (Testamentary Promises) Act 1949

The Law Reform (Testamentary Promises) Act 1949 allows a person to claim against an estate where such person provided services to the deceased during their lifetime and were promised (either expressly or implicitly) a testamentary reward that was not fulfilled. The court may award reasonable compensation based on the value of the services, the circumstances of the promise, the size of the estate, and competing claims. Such claims must be filed within 12 months of the grant of administration, although limited extensions are possible if the estate has not yet been distributed.

Property (Relationships) Act 1976

The Property (Relationships) Act 1976 classifies all property of married, civil union or qualifying de facto partners as either separate property or relationship property, with relationship property (usually property acquired during the relationship, including the family home) shared equally when the relationship ends, whether by separation or death. After a partner’s death, the survivor may choose Option A (a division of relationship property under the Act) or Option B (taking what the deceased partner’s will or intestacy provides), and must normally elect within six months of the grant of administration. A presumption applies that all property owned by the deceased at death is relationship property unless proven otherwise. De facto partners of less than three years may claim only in limited circumstances, for example if there is a child of their relationship, they have made a substantial contribution to the estate or not recognising the claim would result in serious injustice.

In respect of any of the above claims, these may be waived whilst an individual is alive, through a “contracting out agreement” under the Property (Relationships) Act 1976, or resolved by a negotiated position often recorded in a deed of settlement or deed of family arrangement.

New Zealand succession planning is heavily guided by the Property (Relationships) Act 1976, which classifies property as separate or relationship property and, on death, allows the surviving partner to elect either a division of relationship property (Option A) or take under the will or intestacy (Option B).

Lifetime transfers of separate property by one partner are permitted, but transfers of relationship property or dispositions intended to defeat the other partner’s rights can be unwound or compensated under Sections 44 and 44C of the Property (Relationships) Act 1976, making these rules a “clawback” regime.

In practice, New Zealand law therefore protects surviving partners through equal sharing principles, elective rights on death, and statutes that prevent lifetime dispositions from undermining marital property entitlements.

Under Sections 21, 21A and 21B of the Property (Relationships) Act 1976 (PRA), parties are able to contract out of the provisions of that Act. However, those contracting out agreements (under Section 21) or settlement agreements (under Sections 21A and 21B) are only binding on the parties if they meet the statutory criteria set out at Section 21F of the Act.

Section 21F of the PRA sets out the procedural requirements for agreements under the Act as follows:

• the agreement must be in writing and signed by both parties;
• each party to the agreement must have independent legal advice before signing the agreement; the
• signature of each party to the agreement must be witnessed by a lawyer; and
• the lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.

The procedural elements must be met (as described above) for an agreement to be enforceable. However, even if the agreement meets all procedural requirements, the court may still set aside an agreement if enforcing it would result in a “serious injustice”.

Courts will generally uphold an agreement where:

• both parties fully understood the legal and practical consequences;
• there was no coercion, imbalance of power or exploitation;
• the agreement was entered into freely, without undue pressure;
• the outcome remains fair in light of the relationship’s evolution, including contributions, sacrifices or unexpected changes; and
• both parties made full and frank disclosure of property and financial circumstances.

Tax on Gifts

Gift duty used to apply to lifetime gifts in New Zealand, but only to gifts made before 1 October 2011. If a person made gifts totalling NZD27,000 or more in any 12 month period before that date, gift duty was payable. Since 1 October 2011, gift duty has been abolished, and no duty applies to any gifts made after that date.

Personal Tax

New Zealand’s income tax system is governed primarily by the Income Tax Act 2007 and the Tax Administration Act 1994, which also outlines Inland Revenue’s authority to administer and enforce tax laws. Income tax is charged annually on a taxpayer’s taxable income, with the standard tax year running from 1 April to 31 March, and individuals and self employed persons are required to file returns after year-end. Tax rates are set each year, with current individual rates applying from 1 April 2021 onward.

These rates are progressive:

• 10.5% on income up to NZD15,600;
• 17.5% on income between NZD15,601–NZD53,500;
• 30% on income between NZD53,501–NZD78,100;
• 33% on income between NZD78,101–NZD180,000; and
• 39% on income over NZD180,000.

An additional 45% rate applies where the taxpayer has not provided the required notification.

From 1 April 2021, New Zealand introduced a 39% top tax rate for individuals earning over NZD180,000. Inland Revenue was also given stronger information-gathering powers, meaning trust tax returns must now include extra details about the trust’s income, financial position, distributions and settlements.

Tax on Capital Gains

New Zealand has no general capital gains tax, but residential property sold within a set “Bright line” period may be taxed. The Bright line period was five years for properties bought between 27 March 2018 and 26 March 2021, increased to ten years for most properties acquired on or after 27 March 2021, and later shortened to two years from 1 July 2024. Exemptions apply for a person’s main home, and rollover relief is available for some ownership transfers.

New Zealand is one of the only OECD countries without a comprehensive capital gains tax, which continues to fuel a long-running public and political debate, often canvassed in the lead-up to New Zealand elections. One part of society recognises that a capital gains tax is necessary to make the tax system fairer, more efficient, more fiscally sustainable and in line with international norms, and the other part of society believes that it would dissuade investment in New Zealand, discourage immigration, slow economic growth, and impose unnecessary complexity on taxpayers.

In New Zealand, there is no stamp duty, land tax, wealth tax or specific healthcare tax (being otherwise funded from general taxation).

Estate duty in New Zealand was abolished for all deaths on or after 17 December 1992, and there has been no indication that it will be reinstated. Executors must file the deceased’s final tax return (using the deceased’s IRD number), ensure all outstanding tax is paid, and then file separate tax returns for the estate (using a new IRD number) until it is fully administered and wound up. Before distributing assets, all estate income must be returned and any tax paid. Under Subpart FC of the Income Tax Act 2007, transfers of assets and liabilities on death are generally treated as deemed disposals and acquisitions at market value, subject to certain exceptions.

Inter Vivos Gifts

With no gift duty payable in New Zealand, it is common for individuals to carry out gifts during their lifetime to reduce the assets in their personal name, and thereby reduce the risk of a successful/significant claim on their estate once they have died. A court’s ability to make awards under the Family Proceedings Act 1955, and the Law Reform (Testamentary Promises) Act 1949 is limited to the assets of the deceased’s estate, subject to limited legislative methods in which a court can enlarge an estate to meet claims.

In recent years, certain claims have been brought in which adult children have argued that their deceased parent owed them a fiduciary duty to protect their economic interests by providing for them, and seeking the court to remedy the breach by recognising a constructive trust in favour of the claimant child. Recently, an inter vivos gift to a discretionary trust was set aside in the High Court when it was held the donor breached his fiduciary duty to his children. Here his duty was to “refrain from sexually or physically assaulting them” and the court held at the time of the gift he owed each of the plaintiffs a duty to recognise them as members of his family and to provide for them from his wealth, due to the vulnerability [that] his earlier breach of fiduciary duties had caused them. The case made its way to the Supreme Court (which confirmed the Court of Appeal, and overturned the High Court decision) where the court unanimously rejected the appellants’ claim that their father owed them fiduciary duties extending into their adulthood, and declined to unwind his inter vivos transfers of assets into a trust.

Following the consultation made by the New Zealand Law Commission in its 2021 Review of Succession Law, it became clear that some practitioners and individuals believe the ability to divert property by transferring it to a trust to be an inalienable right, consistent with testamentary freedom and a person’s right to use legitimate estate planning methods to structure their affairs however they wish. Conversely, others believe that sufficient property should be available to meet entitlements and successful claims, and the deprivation of such property from an estate (and the subsequent deprivation of satisfaction of certain claims) could result in unjust outcomes, the avoidance of obligations, and could perpetuate or exacerbate intergenerational inequities.

The Commission’s review (when conceiving of a new “Inheritance Act”) concluded that the frustration of certain claims by various measures is inconsistent with the rights the new Act would provide individual claimants, and that this would justify some anti-avoidance measures. The report recommended, inter alia, the new legislation should enable the court to claw back assets in the event that the property had been disposed of with intent to defeat an entitlement or claim under the new legislation (based on similar provisions in New Zealand legislation, such as the PRA, that provide for recovery of such property).

If this ground was to be substantiated, the Law Commission recommended that the court would be empowered to order that the property in question (or part thereof) be returned, subject to certain exceptions, to the estate by the recipient, or that the recipient compensate the estate in the same amount.

Trusts

An express trust may be created either during a person’s lifetime (an inter vivos trust) or under a will, in which case it takes effect only on the will maker’s death. Any person capable of owning property may establish a trust or act as a trustee. To form a valid trust, the three certainties must be present: intention to create a trust, identifiable trust property and identifiable beneficiaries. The Trusts Act 2019 codifies these principles by defining express trusts, outlining their core characteristics, and confirming that they must be created either under statute or by satisfying the three certainties.

Discretionary trusts are used commonly in New Zealand to establish succession plans and provide flexibility for settlors wishing to transfer their wealth to other beneficiaries, and retain some oversight in doing do. This is considered a conventional asset planning method in New Zealand, and with some exceptions, is not a method that is associated with the suspicion or apprehension that trustees experience in other jurisdictions.

Wills

Perhaps more commonly than trusts, individuals regularly establish wills to effect a clear and coherent succession plan with the freedom described above, with the only limitation being a successful claim on the estate governed by the will. Wills either leave assets directly to descendants or other beneficiaries, or to trusts established during the will maker’s lifetime, or within the will itself (a testamentary trust). Executors of wills are in many instances required to obtain a grant of probate of the will to formalise their appointment and the will’s validity, which is granted by registrars of the New Zealand High Court, in most instances following a without notice civil application.

New Zealand’s succession planning mechanisms are influenced primarily by the absence of gift duty, estate duty and most transfer taxes, making lifetime transfers and trust structures straightforward and tax efficient.

Constraints instead arise from anti-avoidance rules, particularly Sections 44 and 44C of the PRA as described above, which allow clawback of transfers intended to defeat relationship property rights, and from enhanced trust disclosure obligations introduced in 2021. Limited capital gains rules (Bright line regulations) and the trust tax rate also affect planning strategies, but overall the regulatory environment remains flexible and facilitative.

Insolvency Regulation

There are other various opportunities for a third-party creditor to establish a successful claim to recover assets held by the debtor in a trust. To limit these rights of recovery, it is preferable to transfer assets into a trust prior to there being any known obligations to creditors, or any developing risks.

The Property Law Act 2007 (PLA) provides a mechanism for the court to set aside particular dispositions of property in the event such disposition compromises a creditor intentionally or is made while the debtor was (or would be, following the disposition) insolvent.

The relevant rules are in subpart 6 of part 6 of the PLA (Sections 344–350). The subpart applies only to a disposition of property that was made after 31 December 2007, and was made by a debtor who meets one or more of the following criteria at the time of the disposition:

• was insolvent when making the disposition or became insolvent as a result;
• was engaged, or about to engage, in a business or transaction for which the debtor’s remaining assets were unreasonably small given the nature of that business or transaction;
• intended, or believed, or reasonably should have believed that the debtor would incur debts beyond the debtor’s ability to pay; and
• was made with intent to prejudice a creditor, or by way of gift, or without receiving reasonably equivalent value in exchange.

The Insolvency Act 2006 empowers the Official Assignee to set aside voidable gifts, being:

• gifts made within two years before an adjudication of bankruptcy; and
• gifts made within five years before an adjudication of bankruptcy where the bankrupt was unable to pay their debts at the time.

The test for insolvency under both the Insolvency Act and the PLA is an objective cashflow test – that is, can the debtor pay thier debts when they legally fall due.

New Zealand does not yet have a settled legal definition of digital assets, but the term is generally understood to cover anything owned in a virtual or electronic form rather than a physical one.

Although judicial and statutory guidance remains limited, recent case law has acknowledged that digital assets can be treated as property. In a recent decision, the court observed that it is “obvious” digital assets should receive property law protection given their widespread role in modern life. New Zealand courts have also recognised digital assets as property in matrimonial matters, where the Family Court held that cryptocurrency qualified as relationship property and can be divided under the Property (Relationships) Act 1978.

Crypto-assets in New Zealand are treated as property for tax purposes, and their tax treatment depends on how they are used, rather than what they are called. They are not subject to GST when bought or sold, although GST may apply if they are received as payment for ordinary business activities. Crypto-assets are classified as excepted financial arrangements, so if they form part of a taxpayer’s trading stock, they must be  valued at cost at year end.

When considering succession issues, will makers in New Zealand will be well-advised to take account of digital assets in their succession plans. These can include the following.

• Business digital assets with monetary value – can include online selling accounts (TradeMe, eBay, Etsy), digital content, websites and hosting platforms, social media accounts, domain names, and cryptocurrencies such as Bitcoin or Ether.
• Personal digital assets with monetary value – can include mobile apps, online dating or gaming accounts, online utility or subscription accounts, loyalty points.
• Sentimental digital assets – can include include email and social media accounts, online photo and video storage, and other personal data stored on computers or mobile devices.

Will makers need to consider custodial methods of these various assets, appropriate methods to hold authority to enter and use these assets, and take specialist advice to make provision for these assets in testamentary documents. It is not uncommon for New Zealand will makers to make provision in their wills for digital assets.

Family business succession in New Zealand commonly involves a mix of ownership planning, governance structuring and financial/estate planning mechanisms.

New Zealand advisers place importance on the identification of successors early and the provision of time for them to build capability, leadership skills and commercial experience. This includes formal mentoring, education and trial leadership roles.

Families often obtain an independent business valuation to ensure transparency, manage expectations and guide ownership transfers (whether by sale, gifting, inheritance or a combination of these). Valuation data helps reduce conflict and supports equitable treatment of children not entering the business.

Discretionary trusts are commonly used in New Zealand family business succession planning. They allow families to:

• use a flexible and ring-fenced entity to hold the business assets;
• stage asset transfers across generations;
• protect assets from relationship property and creditor claims; and
• avoid disruption on the death of a founder or business owner.

Many successful New Zealand family businesses implement advisory boards, and multi-generational governance bodies to oversee the operation and succession of the business. These structures provide accountability, continuity and strategic oversight, and they support long-term sustainability during generational transition.

Family businesses also employ appropriate insurance (for example, key person insurance, in the event a key family leader dies, or life insurance, to make provision for inheritances for non-business owning descendants).

It is becoming common for families to develop and adopt “family constitutions” or written succession plans, which can cover family history and principles, business exit policies, dividend expectations, investment policy and mechanisms for the resolution of disputes.

These structures are usually supported by bespoke asset planning documents to provide for decision makers to be appointed in the event of incapacity of a key person, the eventual transfer of wealth through a will, and guidance to the trustees of a trust.

New Zealand business structures (primarily companies, limited partnerships and trust-owned operating companies) are governed by the Companies Act 1993 and the Limited Partnerships Act 2008. These provide a predictable, low-complexity legal environment, allowing families to use corporate restructures, share transfers, buy-sell agreements and shareholder arrangements to manage succession.

The Companies Act framework also supports:

• staged ownership transfers (eg, share buy backs, issuing new shares to successors); and
• governance continuity, including advisory boards or formal boards, which are increasingly common in New Zealand family enterprises.

This makes corporate structuring a central tool in long-term succession planning.

Succession strategies for family businesses in New Zealand are otherwise shaped by a favourable legal and tax environment, particularly the absence of gift duty, inheritance tax and general capital gains tax, which makes trust ownership, gifting and corporate restructures relatively efficient.

The majority of trusts used in New Zealand are private trusts, which usually afford the trustees complete discretion as to which of the beneficiaries receive assets from the trust and in what proportion.

Occasionally, income-only trusts are used, or income trusts with discretionary access to capital (for example, through the establishment of a life interest in a will).

Generally speaking, trusts are established during the lifetime of the settlor, but some may be established within a will (a “testamentary trust”) which ultimately has the same effect as an inter vivos trust.

Charitable trusts are another common entity used in New Zealand. These are trusts that have a charitable purpose under New Zealand Law. The Charities Act 2005 sets up the system for registering and monitoring charitable trusts in New Zealand. A trust must be registered with the Charities Board to receive charitable tax status.

The charitable purposes of this type of trust must meet the legal definition of “charitable purposes” and satisfy several other requirements. These include that:

• the trust’s funds cannot provide private financial benefit to trustees;
• each trustee must confirm that they are qualified to act as an officer of a charity; and
• the trust’s winding-up clause must ensure that any remaining funds go only to charitable purposes, not private or non-charitable use.

Recent developments in New Zealand have influenced the benefits and practical considerations of planning with trusts and related structures.

The Trusts Act 2019 represents the most significant modernisation of trust law in over 60 years, clarifying trustee duties, expanding disclosure obligations and increasing compliance expectations. This has prompted trustees and advisers to review existing structures to ensure they meet the Act’s heightened governance standards, or consider whether a trust is required at all.

In addition, changes to tax settings, such as increases to the trust tax rate and expanded Inland Revenue disclosure requirements under the Taxation Act 2017 and subsequent reforms, have to some extent reduced the desire for holding assets in a trust. These developments have created both opportunities for more transparent, better-governed trust administration and obstacles for those relying on trusts primarily for tax efficiency or minimal compliance structuring.

Overall, the current environment favours well-managed, purpose-driven trusts but imposes greater scrutiny, reporting obligations and trustee accountability, affecting how families choose and maintain trust structures and, in some cases, influencing the choice of jurisdiction for those with cross-border considerations.

There remains a market for using overseas jurisdictions for alternative structures which might provide for greater confidentiality, more attractive tax settings, predictable court interpretation and fewer compliance requirements, and a highly mobile society makes this more common and practical. However, this must be balanced with the risks of consistent scrutiny on these jurisdictions.

In New Zealand, corporate trustees of private family trusts are not required to hold a licence. Any person or company capable of holding property can act as a trustee under the Trusts Act 2019, unless the trust deed specifies otherwise.

A professional trustee, who is paid to act as a trustee, is expected to exercise a higher standard of diligence and knowledge than an unpaid trustee, while a professional corporate trustee is expected to use the special skill and care which it professed itself to have in its advertising and marketing literature and other dealings with the settlor of the trust. This is a default duty under the Trusts Act, and may be modified in the trust deed to provide for a different standard.

New Zealand allows families, advisers or corporate service providers to establish private trustee companies, often used to act as the sole trustee of a trust. These are typically ordinary limited liability companies created for the sole purpose of acting as trustee.

Such companies offer structural benefits such as limited liability, continuity and simpler transfer of assets and control.

For tax purposes, New Zealand classifies trusts into four types:

• complying trusts;
• non-complying trusts;
• foreign trusts; and
• charitable trusts

The main difference between these categories is how trust distributions are taxed. Income earned by trustees is taxed either as beneficiary income or trustee income. Beneficiary income is income that vests in, or is paid to, a beneficiary during the year (or within 6–15 months after year end). Trustee income is simply income that is not beneficiary income.

A complying trust is one that, throughout its life, has met all New Zealand tax obligations and has not earned certain types of foreign-sourced or exempt income.

A New Zealand foreign trust exists when no settlor has been a New Zealand tax resident since the trust was first settled. If a settlor later becomes New Zealand resident or a New Zealand resident makes a settlement on the trust, it stops being a foreign trust. Foreign trusts must also meet specific record-keeping and disclosure requirements.

Trustee income is generally taxed at a flat rate of 39% (increased from 33% in April 2024), while beneficiary income is taxed at the beneficiary’s own tax rate, subject to source of income rules. Complying trusts are not taxed on most other distributions, but non-complying and foreign trusts may face extra tax depending on the type of distribution and where the income or beneficiaries are located. Special rules also apply to beneficiary income for children under 16. When trustees allocate income to beneficiaries, they can credit it to a beneficiary current account instead of paying it out.

Modern Relationship Classifications

The Marriage (Definition of Marriage) Amendment Act 2013 changed New Zealand law so that marriage is defined as the union of two people, regardless of sex, sexual orientation or gender identity. Terms like “husband” and “wife” in legislation are now replaced with “spouse”.

A civil union partner is someone in a legally registered civil union. Any two people aged 16 or over (with guardian consent if 16–17), who are not closely related and not already married or in a civil union, may enter a civil union. New Zealand also recognises certain overseas relationships that are treated as civil unions.

A de facto partner is someone in a relationship (same sex or opposite sex) where both people are 18 or older, live together as a couple, and are not married or in a civil union. Whether two people live together as a couple depends on factors such as how long they have lived together, their financial arrangements, property ownership, commitment to a shared life, care of children and how they present publicly.

Whether or not a person’s parents were married at their conception or birth has no implications on succession rights in New Zealand law.

Polyamory

The 2023 New Zealand Supreme Court case of Mead v Paul dealt with property rights in polyamorous relationships. The central issue determined in this decision was whether the Property (Relationships) Act 1976 could extend the definition of a relationship to include polyamorous relationships. It was held that while a triangular relationship could not qualify under the PRA, the polyamorous relationship may be subdivided into multiple qualifying relationships for the purposes of the PRA.

The majority judgment agreed that a triangular relationship could not come under the protection of the PRA. However, the court could subdivide the relationship into multiple relationships. This is the “vee” arrangement, where one party is married to another while simultaneously in a de facto relationship with another, third party.

Conflicts do arise where family relationships are recognised differently overseas, particularly concerning marriage, civil unions and de facto partnerships. New Zealand resolves these conflicts by applying its own statutory definitions of relationships under the Property (Relationships) Act 1976 and related legislation, recognising foreign marriages where valid, and using conflict of law principles to determine when foreign orders or relationships should be recognised. Unless a party successfully protests jurisdiction, New Zealand law governs succession and relationship property rights in respect of New Zealand situated property, even if a relationship is defined differently under foreign law.

Foreign Orders

When a person dies overseas leaving assets in New Zealand, their New Zealand estate does not vest until administration is obtained in New Zealand. If probate or letters of administration were granted overseas, they must be resealed in New Zealand for the executor to act, and once resealed, they have the same effect as if issued by the New Zealand High Court. Resealing is available only for grants from Commonwealth countries, the Republic of Ireland and Hong Kong. For all other jurisdictions, a new New Zealand application for probate or administration is required.

Foreign Wills

A will made overseas is treated as valid in New Zealand for movable property if it complies with the law of the place where it was made, the will maker’s domicile when it was made, the law of their domicile of origin or the law of their domicile at death. Likewise, a will made in New Zealand is valid for movable property if it meets the requirements of New Zealand law or the law of the will maker’s domicile when made or at death. A change of domicile after the will is made does not revoke it as it relates to movable property in New Zealand. If a person dies overseas owning assets in New Zealand, their New Zealand estate does not vest until New Zealand administration is obtained, and any foreign probate or administration must be resealed in New Zealand (or a new New Zealand probate obtained) before it has legal effect in New Zealand.

Taxation on Non-Residents

Non-residents are taxed in New Zealand only on income that is factually sourced in New Zealand, as outlined in the Income Tax Act 2007 (s YD 4). Overseas jurisdictions will usually allow a foreign tax credit for New Zealand tax paid, limited to the amount of tax payable in that jurisdiction on the New Zealand sourced income.

Double Taxation

To prevent people who are tax resident in more than one country from being taxed twice on the same income, New Zealand has entered into double tax agreements with many other countries. These agreements set out which country has the right to tax particular types of income.