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Inheritance

by Ann Dupuis

Inheritance is the process of transferring estates to other people at death. It can strengthen connections between the dead and the living – or cause serious conflict, if people disagree over how an estate is distributed.


Inheritance matters

European settlers brought inheritance practices and legal conventions with them to New Zealand in the 19th century. Māori had existing practices relating to inheritance of leadership and land. Māori succession to land in particular was modified by colonial institutions like the Native Land Court. In the 21st century succession to land held under Māori title is dealt with differently from general land and other assets contained in estates.

What is inheritance?

Inheritance is the process of transferring estates to other people at death. It is a way of making, continuing and strengthening economic connections between the dead and the living and across generations. Inheritance can also cause conflict when there is disagreement over the way estates are distributed.

Estates include a wide range of assets such as cash, houses, businesses, land and smaller items such as furniture, jewellery and cars. They vary in size depending on individual circumstances. Some New Zealanders die with little or nothing to bequeath beyond personal belongings and items of sentimental value. Debts are paid out of the estate and not by will beneficiaries.

Strings attached

Some people try to exert a controlling influence on the beneficiaries of their will. Thomas Cawthron left his solicitor’s sister Minnie Palmer an annuity in his will when he died in 1915. The will stated that 'if the said Minnie Elizabeth Palmer gets married or has sexual intercourse with any man then this last payment shall absolutely cease for ever'.1 The story behind this instruction is not known.

Inheritance process

Most inheritances involve family, and go through a two-stage process if couples are involved. First, an estate is passed on to the surviving spouse or partner. When the surviving partner dies the estate goes to the next generation or to other family members such as siblings or nephews and nieces if there are no children.

Among married couples it is mainly women who pass on family assets, because they typically live longer and are younger than their male partners.

Beneficiaries

Traditionally, it was common for wives to benefit only from the interest generated by their husband’s estate, and not have access to the assets, which were left to the succeeding generation. With greater gender equality and increased participation in the labour market by women in the late 20th century this practice – sometimes referred to as control from the grave – became less common.

Inheritance by the eldest son (primogeniture) did occur in New Zealand in the 19th and early 20th centuries, although a study of wealthy families at this time found equal inheritance amongst siblings was common and sons and daughters were often treated similarly.

Less well-off families had less to divide. Among some families there was an expectation that daughters would be maintained by husbands (unless they remained single) and would therefore receive less valuable items such as dinner sets. This attitude changed over time, and by the late 20th century equality among siblings was the norm.

Unequal divisions typically occur when one child needs extra or special care (often due to illness or disability), where a particular child has provided special care or services to the parents, or where unequal treatment of children (such as money given to one child and not another) occurred during the deceased’s lifetime.

Explanatory note

Wills do not have to state why decisions are made regarding the division of estates, but some people provide an explanation. Frank Hill’s will stated: ‘I record that I have made no provision from my residuary estate for my said son [A] and my daughter [B] as I believe that they and their families are financially well off and have no need for financial assistance from me. The bequest of my residuary estate to my said daughter [C] is in recognition of her kindness and responsibility in attending to my personal affairs over recent years.’2

Factors affecting inheritance

For most estates the home is the most important asset. Home-ownership rates among older people are high but average incomes are low. To maintain a good standard of living and meet expenses, some sell the family home and buy a smaller, cheaper home. Others enter equity release schemes, which allow access to the money tied up in the home without selling. Money is loaned and interest is charged. The interest and principal loan are repayable when the home is sold. This affects the value of estates – there is less money left over for inheritances.

Expenses related to rest-home care can affect the value of inheritances, although asset- and income-tested subsidies are available for people in care. Those with assets and incomes above the thresholds pay more for care.

In the 21st century diverse forms of family complicate inheritance. Blended families raise questions about inheritance rights to the home and other assets if these are not owned equally by the couple.

Footnotes
    • Quoted in Margareta Gee, 'Cawthron, Thomas, 1833?–1915.' Dictionary of New Zealand biography, updated 22 June 2007, http://www.teara.govt.nz/en/biographies/2c13/ (last accessed 4 April 2011). Back
    • Quoted in Ann Dupuis, ‘Housing wealth and inheritance: a theoretical and empirical exploration.’ PhD thesis, University of Canterbury, 1997, p. 191. Back

Māori inheritance and succession

Traditional Māori inheritance

In traditional Māori society leadership, land and resource rights could be inherited.

Tribal chiefs inherited mana (authority) over land and people. Mana was passed by the chief to the chosen heir – usually the eldest son of the senior wife, though he could be passed over if he was not suitable. Successors could be named by a chief on his deathbed. This was referred to as take ōhākī.

Chiefs were usually men, but women could inherit and exercise mana. This was sometimes exercised by husbands in their stead and passed on to their heirs.

Too tapu to walk

Hinematioro, a Ngāti Porou leader and woman of mana, was tapu (sacred). She did not walk but was carried in a litter from place to place so she did not make the ground tapu. Early missionary Samuel Marsden referred to her as a ‘great Queen’.1

Ancestral land was passed down through generations via continuous occupation. This was known as ahi kā (a lit fire) or ahi kā roa (a long-burning fire). It limited the number of people living in an area and using its resources. Use rights over resources such as bird-trapping trees and fishing spots were usually inherited on an individual basis. Land and use rights could be passed down by both parents to male and female children. Married women retained land independent of their husbands.

Native Land Court

After 1865 Māori land succession was overseen by the Native Land Court (later called the Māori Land Court). Until 1873 only 10 owners could be listed on land titles. These 10 were supposed to represent a larger community of owners, but in fact became the legal owners.

Land claims based on conquest rights (take raupatu) were the most successful, followed by continuous occupation (ahi kā). After 1873 all owners were listed on titles. Children could succeed to land regardless of where they lived, which disrupted the tradition of ahi kā. Some land blocks ended up having thousands of owners, which made administration difficult.

Contemporary Māori land succession

When an owner of land under Māori title dies, a succession order is made by the Māori Land Court. This transfers the land interests of the deceased to the successors. Until 1 July 1993 Māori land could be left to anyone. After this date it could only be left to blood relatives, whāngai (adopted children), spouses, partners and members of the same hapū

Footnotes

Wills, trusts and bequests

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
    • ‘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

Regulating inheritance

Inheritance law

Wills are governed by the Wills Act 2007. This partially replaced the Wills Act 1837, which was passed by the British Parliament and became New Zealand law.

Until the 1870s real estate belonging to a person who died intestate automatically passed to the eldest son (a practice known as primogeniture). This was abolished by laws passed in 1874 and 1879. People could still leave property to whomever they wanted in wills. From 1878 children born outside of marriage could claim support from their deceased father’s estate.

From 1900 husbands, wives and children could contest wills if they were not adequately provided for, under the Testator’s Family Maintenance Act. This law ensured dependants were not left destitute and dependent on state support. It was extended to cover children born outside of marriage (1936), parents in certain circumstances (1943), grandchildren, adopted children and adopted grandchildren (1947) and stepchildren (1955). From 2002 de facto (including same-sex) partners could contest wills, and (along with married couples and, from 2005, couples in civil unions) they were able to claim half the relationship property on their partner’s death.

Family effort

During the debate on the Testator’s Family Maintenance Bill in the House of Representatives in 1900, some speakers recognised the contributions made to the family economy by wives and children and argued that this was why husbands and fathers had to make adequate provision for them in wills. One said that it was well known that ‘very often the wealth and property accumulated by the husband was not the result altogether of his own efforts, but was the result of the combined labour, brains, and penuriousness of the husband and wife.’1

In the 21st century challenges to wills were governed by the Family Protection Act 1955. If someone was promised a reward for services in a will, but the promise was not kept, they could contest the will under the Law Reform (Testamentary Promises) Act 1949.

Estate or death duties are taxes on inheritance and were introduced in New Zealand in 1866. This duty was abolished in 1992.

Management of estates

If executors are appointed in a will they look after the estate. Administrators (usually the person who will benefit most from the estate) are appointed by the court if there is no will. Executors are approved to act by the High Court in a grant of probate, while administrators are granted letters of administration.

Executors and administrators pay outstanding debts and taxes (using the estate’s assets) and distribute the residual assets according to the will. They organise the funeral if this is not done by family or friends. Lawyers and other professionals sometimes assist the executors and administrators.

Footnotes
    • New Zealand Parliamentary Debates, 1900, p. 505. Back

Family farm inheritance

If family farms are transferred to the next generation, this usually takes place well before the owner’s death and often even before their retirement. Because family farms can provide the livelihoods of more than one generation, farm succession is a serious issue which requires careful planning and negotiation. Farm succession is also important for the New Zealand economy, because farm-based products are significant export earners.

Who inherits?

Inherited farms typically pass to one successor (usually a son), but the process is complicated by the need to divide property fairly among all children. For this reason the successor purchases the farm – this also provides the retiring couple with an income. Sometimes part of the original farm is sold to meet these obligations. Children who leave the farm to pursue other careers often continue to see it as home.

Farm succession remains a largely male-orientated process in the 21st century – relatively few daughters inherit farms – though couples usually own a farm equally.

Succession process

Farm succession is usually an ongoing process. It involves more than passing on land and stock – skills are also passed on and family traditions perpetuated. Typically, a young, married farmer, whose wife may also come from a farming background, enters the farm succession process. He is usually employed on the farm full-time, but may also be purchasing his own stock, farm equipment and small blocks of land. His wife may work on the farm or off-site.

The young couple increasingly takes on joint management responsibilities for the farm. The process ends when they acquire full ownership and most or all aspects of farm management. The retiring couple then moves to a smaller property or a nearby town, but are likely to retain a limited role on the farm and offer advice.


External links and sources

More suggestions and sources

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How to cite this page: Ann Dupuis, 'Inheritance', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/inheritance/print (accessed 26 May 2019)

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