Trusts and the Avoidance of Claims Against Your Estate After Death

Saturday 13 April 2013, 9:39AM

By Andersen Accountants Limited


Many countries have forced heirship rules whereby the law dictates the distribution of the estate of the deceased, regardless of any contrary provisions in the will. In some countries gifts made during the deceased’s lifetime can be clawed back into the estate in order to satisfy the forced heirship rules.

A New Zealand foreign trust can be a useful tool in avoiding the application of such rules. A New Zealand foreign trust has an overseas resident settlor who transfers assets to the trust. The assets are held by the trustees on behalf of people chosen by the settlor (this can include the settlor, however, sometimes, for tax and jurisdictional reasons, it is necessary to exclude the settlor from any direct benefit under the trust).

By settling assets on to a New Zealand foreign trust, those assets are likely to be effectively removed from any claim based on forced heirship provisions. Even if a claim could be made, the claim would be against the deceased settlor, which is not likely to assist the advancement of the claim given that the assets would be held in the names of the trustees.

A high degree of privacy is provided to trusts under New Zealand law. Usually the trustee of a foreign trust would be a New Zealand registered company. Although companies are publicly registered in New Zealand, because the shareholders can be nominees this means that, combined with the secrecy surrounding most New Zealand based trusts, that the settlor’s dealings have an added layer of confidentiality and protection.

A New Zealand foreign trust provides an opportunity to pay no tax on income earned outside New Zealand, and it also provides an effective means of ensuring testamentary freedom.

For New Zealand residents an ordinary family trust can ensure a similar result with regard to estate claims.

Kristina Andersen
Andersen Accountants Limited
Telephone: 09 3695198