Story: Inheritance

Page 3. Wills, trusts and bequests

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Wills

Wills are written, witnessed statements which express the wishes of individuals regarding the disposal of their estates after death. They may also:

  • appoint estate executors
  • appoint guardians of children under 18
  • set out funeral arrangements
  • record wishes about organ and tissue donation
  • record if the body is left for medical science and teaching.

Anyone aged 18 and over can make a will. People under 18 can make a will if they are in a relationship, have permission from the Family Court, are in the military or spend significant time at sea.

Making a will can be an important and meaningful process. Material goods and property represent a life, while decisions concerning the division of estates usually involve people with intimate and long-standing connections or organisations in which the deceased had a close interest.

People who leave wills die testate, and those without a will, or with an invalid will, die intestate. In these cases, the estate is distributed by the court to family members. If the deceased has no living relatives the estate goes to the government.

Future use

Historians and social scientists sometimes use wills to understand how families operated and how kinship, ethnic and friendship networks function, in the past and present. Historian Lyndon Fraser used wills to explore what he described as the strength of ethnic bonding and social connectedness among Irish Catholic migrants in Canterbury in the 19th century, in his book To Tara via Holyhead (1997).

Family trusts

A family trust is a legal entity which holds assets like cash and houses for the benefit of family members. The settlor (person who makes a settlement of property) creates the trust and transfers his or her assets to trustees, who administer them for beneficiaries.

The settlor can also be a trustee and beneficiary. The trust becomes the owner of the assets, but the settlor can still access the money tied up in the assets if they are a beneficiary.

Until October 2011 assets up to a certain value per year and per person could be transferred to the trust without incurring gift duty (a tax on monetary gifts). From October 2011 gifts to a family trust were no longer liable for gift duty and assets of any amount can be transferred to a family trust. The compliance costs of administering gift duty were seen to outweigh the revenue collected and the protections offered. Gift duty had existed in New Zealand since 1885. Its purpose was to discourage gifts before death directed at avoiding estate duty – which was abolished in 1992.

Trusts were usually created to protect family assets. For example, if long-term residential care was required, the settlor could be eligible for a government subsidy towards that care and the trust assets would not need to be sold to pay for it. However, assessment of eligibility for government subsidies for long-term residential care changed in August 2011, shortly before the abolition of gift duty. This change relating to financial assessment of assets and giving reduces some of the advantages of creating a family trust.

In 2018 the maximum amount a person could gift over the five years before their assets were assessed for eligibility for subsidised long-term residential care was up to $6,000 per year. This amount is reviewed annually on 1 April taking into account consumers price index (CPI) adjustments for the previous calander year. ‘Extraordinary’ gifting outside this five-year period, which includes the gifting of assets such as a family home, could be included in financial means assessment when applications are made for long-term residential care subsidies. Gifting outside the five years before any means assessment could be considered 'extraordinary' if it was engaged in to deprive a person of property that would be taken into account in an assessment of their eligibility for subsidised residential care.

Charitable trusts and bequests

A charitable trust holds and protects assets for charitable purposes. It can be set up when a person is still living or as part of their will. There are no taxes (such as gift duty) associated with charitable trusts. One of the oldest and best-known charitable trusts resulting from a will is the Thomas George Macarthy Trust, which first distributed funds after Macarthy’s death in 1912.

Bequests are one-off or ongoing gifts made in a will to people or organisations (usually charitable). Some bequests are made in the form of an educational scholarship. Ongoing bequests perpetuate the name of the giver long after their death. Will beneficiaries can contest bequests.

Charitable trusts, societies or institutions established exclusively for charitable purposes have to be registered on the Charities Register and have a written set of rules, constitution and trust deed to be eligible for tax exemptions on their assets. In 2018 the Register was administered by Charities Services – Ngā Rātonga Kaupapa Atawhai, Department of Internal Affairs. 

Stringent requirements

William Georgetti left assets in his will to fund a perpetual scholarship supporting postgraduate study. He specified that candidates needed to be ‘of good moral character and repute’ and ‘of good health certified by a physician of repute’.1

Public Trust – Te Tari Tiaki Iwi

The Public Trust – Te Tari Tiaki Iwi is a Crown entity which provides trustee, will and estate administration services. It was established in 1873 after politician Edward Stevens raised the idea of a state-supported trust to protect the assets of vulnerable people such as widows and orphans. In the 2018 it was the largest provider of trustee services in New Zealand and handled around 8,000 estates, 4,000 trusts and wrote 4,000 wills per year.

Footnotes:
  1. ‘William Georgetti scholarship.’ Public Trust, http://www.publictrust.co.nz/grants-and-scholarships/how-do-i-find-one/grants/william-georgetti-scholarship.html (last accessed 18 November 2010). Back
How to cite this page:

Ann Dupuis, 'Inheritance - Wills, trusts and bequests', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/inheritance/page-3 (accessed 16 November 2018)

Story by Ann Dupuis, published 5 May 2011, reviewed & revised 3 Oct 2018