Introduction

Navigating cross-border estates in New Zealand can be tricky, needing smart planning to keep your assets safe and shared as you want. Folks with a lot of wealth or living overseas, owning stuff in different countries, really benefit from a solid estate plan. This plan helps them handle the maze of international laws and tricky tax stuff.

This guide provides essential information and practical guidance on key aspects of international estate planning. It covers drafting and validating international wills, understanding estate administration processes, and the strategic use of trusts for asset protection across jurisdictions. Whether you’re a New Zealander with overseas assets or an expatriate managing global holdings, this guide offers insights to help you secure your legacy effectively.

Overview of International Estate Planning in New Zealand

Key Considerations in International Estate Planning

International estate planning is a critical process for individuals with assets in multiple jurisdictions, including New Zealand. It involves creating a structured plan to manage and distribute assets according to the testator’s wishes, while considering the legal frameworks of different countries.

When planning your international estate, several key factors must be addressed:

1. Validity of Wills Across Jurisdictions
   A will valid in one country may not be recognised in another due to differences in legal requirements. In New Zealand, a will must be in writing, signed by the testator, and witnessed by two parties. For assets in multiple countries, it may be necessary to have separate wills for each jurisdiction to ensure compliance with local laws.
2. Domicile and Its Impact
   Domicile plays a crucial role in determining how an estate is administered. New Zealand law applies based on the domicile of the deceased, affecting:
   • The distribution of assets
   • Tax implications
   • The legal process
3. Understanding domicile is vital for individuals with international assets.
4. Role of Trusts in Estate Planning
   Trusts are a popular tool in New Zealand for managing assets. They offer benefits such as asset protection, tax efficiency, and the ability to distribute assets over generations. Trusts can hold assets in multiple jurisdictions, making them a flexible option for international estate planning.

Benefits of Using Trusts

Trusts provide several advantages for international estate planning:

• Asset Protection: Trusts can shield assets from creditors and ensure they are distributed according to the settlor’s intentions.
• Tax Efficiency: Trusts can help minimise tax liabilities by optimising income distribution among beneficiaries.
• Flexibility: Trusts allow for the management of assets across different jurisdictions, providing a structured approach to estate distribution.

Legal Considerations

When planning an international estate, you must navigate various legal requirements:

• Administration of Estates: The administration process varies between jurisdictions. In New Zealand, executors manage the estate, ensuring debts are paid and assets are distributed according to the will.
• Intestate Succession: Without a will, the estate is distributed based on intestate succession rules, which can lead to unintended outcomes, especially for international assets.
• Tax Implications: Different countries have varying tax laws, and understanding this is crucial to minimising tax burdens on the estate.

Drafting and Validating Your International Will in New Zealand

Will Formalities

A valid will in New Zealand must adhere to specific legal formalities to ensure its enforceability. These requirements are designed to prevent disputes and ensure the testator’s intentions are carried out faithfully.

The key formalities include:

• Written Form: The will must be in writing, whether typed or handwritten.
• Signature: The testator must sign the will at the end in the presence of two witnesses.
• Witnesses: Both witnesses must sign the will in the testator’s presence, confirming that they witnessed the testator’s signature.
• Testamentary Intent: The document must clearly indicate that it is intended to serve as the testator’s will.

If a will does not meet these formalities, Section 14 of the Wills Act 2007 allows the High Court to declare it valid if it reflects the testator’s intentions. This provision has enabled the court to uphold many informal wills that would otherwise be invalid.

Testamentary Capacity and Cross Border Considerations

Testamentary capacity is a critical factor in the validity of a will.

The testator must:

• Understand the nature and effect of making a will.
• Be aware of the extent of their property.
• Recognise the moral claims of potential beneficiaries.

For vulnerable individuals, such as the elderly, lawyers should ensure the testator has the necessary capacity. If there are concerns, obtaining a medical certificate of capacity is advisable.

For expatriates and individuals with overseas assets, New Zealand law recognises wills made in other jurisdictions if they comply with:

• The law of the place they were made
• The testator’s domicile at the time
• Their domicile of origin

This recognition ensures that international wills are valid and enforceable in New Zealand. By adhering to these guidelines, individuals can ensure their international will is legally sound, and their wishes are respected across borders.

Administration of International Estates

Testate Succession Process

When a person dies with a valid will, the estate is administered by executors appointed in the will. These executors are responsible for carrying out the deceased’s instructions as outlined in the will. The process typically involves the following steps:

1. Probate Application: The executors must apply to the High Court for a grant of probate. This involves submitting:
   • The original will
   • Affidavits confirming the deceased’s death
   • Documentation of their domicile at the time of death
   • Evidence of the will’s validity
2. Asset Management: Once probate is granted, the executors are authorised to manage the estate. Their responsibilities include:
   • Gathering all assets
   • Paying any outstanding debts
   • Ensuring the estate is distributed according to the will
3. Holding Period: Executors are required to hold the assets for at least six months from the date of probate. This waiting period serves two important purposes:
   • It allows time for any claims against the estate to be made
   • Distributions made after this period are protected from claims, which reduces the executors’ liability

Intestate Succession Rules for Overseas Assets

If a person dies without a valid will, the estate is distributed according to the intestate succession rules outlined in the Administration Act 1969. These rules determine how the deceased’s assets, including overseas assets, are divided among surviving family members.

The distribution follows a specific hierarchy:

1. Spouse/Partner and Children: If the deceased is survived by a spouse or partner and children, the distribution is as follows:
   • The spouse/partner receives the personal chattels
   • The spouse/partner receives a fixed amount (currently NZ$155,000)
   • The spouse/partner receives one-third of the remaining assets
   • The children receive the remaining two-thirds
2. Spouse/Partner and Parents: If there are no children, the distribution changes:
   • The spouse/partner receives the personal chattels
   • The spouse/partner receives the fixed amount
   • The spouse/partner receives two-thirds of the remaining assets
   • The parents receive the remaining one-third
3. Children Only: If there is no spouse or partner, the assets are divided equally among the children.
4. Parents Only: If there are no children or spouse/partner, the assets are divided equally between the parents.
5. Siblings: If there are no parents, children, or spouse/partner, the assets are divided among the siblings.
6. Extended Family: If there are no siblings, the assets may go to grandparents, aunts, uncles, or other relatives.
7. Crown: If there are no surviving relatives, the estate goes to the New Zealand Crown.

These rules ensure that the estate is distributed fairly and in accordance with legal provisions, even when there is no will. Understanding these processes is crucial for individuals with international assets to ensure their estate is managed according to their wishes or legal standards.

Incorporating Trusts in Cross Border Estate Planning

Benefits of Trusts in Estate Planning

Trusts offer several key advantages for individuals with international assets, acting as a flexible and secure mechanism to protect assets, enhance tax efficiency, and effectively carry out the settlor’s wishes across borders.

Key benefits include:

• Asset Protection: Shields assets from creditors and ensures distribution according to settlor’s intentions
• Preservation for Future Generations: Enables long-term asset management up to 125 years under New Zealand law
• Tax Efficiency: Helps manage tax liabilities through structured income distribution among beneficiaries
• Flexibility in Asset Management: Provides versatile structure for holding various assets across different jurisdictions

Establishing and Managing Trusts for Overseas Assets

Legal Requirements and Jurisdictional Advice

The trust must comply with New Zealand’s Trusts Act 2019, emphasising transparency and beneficiary rights. Additionally, cross-border trusts must comply with laws of all relevant jurisdictions where assets are held or beneficiaries reside. Specialist legal advice covering each applicable jurisdiction is essential to ensure validity and avoid creating potential ‘sham trusts’.

Foreign Trusts in New Zealand

A specific structure relevant to international planning is the ‘foreign trust’ under New Zealand law. These trusts, typically established by non-resident settlors, can:

• Hold diverse international assets via holding companies
• Benefit from New Zealand tax exemptions on worldwide income (if settlor remains non-resident)

Role and Duties of Trustees

Trustees must manage trust assets according to the trust deed while fulfilling significant legal duties, including:

• Acting honestly and in good faith (mandatory under Trusts Act 2019)
• Managing increased complexities when assets and beneficiaries span multiple countries
• Navigating different regulatory environments and compliance expectations

Disclosure Obligations

Trustees have mandatory and default duties under the Trusts Act 2019 to provide beneficiaries with core trust information, requiring careful consideration, especially for overseas beneficiaries with potentially different rights or expectations.

Tax Compliance

Trusts must comply with tax laws in all relevant jurisdictions. Professional tax advice specialising in:

• Cross-border scenarios
• Specific treatment of trusts
• Foreign trust considerations

Managing Cross-Border Complexities

Key challenges include:

• Differing legal systems
• Varying tax regulations
• Reporting requirements
• Potential difficulties in enforcing trustee duties
• Cross-border beneficiary rights enforcement

Given these complexities, trusts remain a valuable but sophisticated component of a comprehensive cross-border estate plan. Navigating this requires expert legal and tax advice tailored to the specific international circumstances. Contact PBL Legal to discuss how our specialists can assist you with establishing and managing trusts for your international assets.

Conclusion

International estate planning for cross-border estates in New Zealand is a complex but crucial process, especially for high net worth individuals and expatriates. This guide has covered key aspects such as drafting and validating international wills, understanding estate administration processes, the strategic use of trusts, and navigating legal considerations like domicile and recent law changes. A well-structured estate plan ensures that assets are distributed according to your wishes, while complying with the legal frameworks of multiple jurisdictions.

If you need assistance with your international estate plan, contact PBL Legal, experts in estate planning. Our specialised services can help you navigate the complexities of cross-border estates, ensuring your legacy is secure. Act now to protect your assets and provide peace of mind for your loved ones.

Frequently Asked Questions