New Zealand Trusts for Migrants
Family trusts are quite common in New
Zealand as a way of holding assets on behalf of families.
Trusts can
offer a range of advantages including:
-
Protection from means and asset
testing (especially for rest home fees)
-
Asset protection (for example
protecting your personal assets from business creditors and family
disputes)
-
Tax (trusts are taxed at a lower rate than higher rate tax payers)
-
Estate/Succession Planning (a
trust allows you to have more control and confidentiality than a
will in who your assets go to when you die, and may also allow you
to protect assets from challenges under New Zealand's fairly
liberal Property Relationships Act)
New Zealand operates complex trust
tax laws, which centre on the residence of the trust settlor and
beneficiaries. There are three tax classifications of trusts
(complying trusts, foreign trusts, non-complying trusts) with
different tax rates and treatments applying to each.
New Zealand operates a gift duty
regime which applies to gifts that exceed NZ$27,000 in combined value
per year. This applies to gifts made by persons living in New
Zealand, and gifts of property situated in New Zealand by
non-residents.
To avoid gift duty charges on assets
being settled into trusts, most assets settled on trusts in New
Zealand are sold to the trust on a "debt back" basis - $27,000 of
the gift is forgiven every year. It is possible for a husband and
wide to combine their gift duty allowances to speed up the process,
but even a modest family home settled into a trust can take a number
of years to complete the gifting process.
Pre-Migration Trusts
If you have UK assets that you wish
to hold in the long term, you can settle them into a New Zealand
foreign trust before you emigrate. The entire value of the assets in
the trust can then be settled without being subject to the gift duty
regime -
-
as long as the assets are not
based in New Zealand
-
as long as you have not
previously lived in New Zealand (this is one of the few instances
where New Zealand tax domicile comes into play.)
You can then convert your trust into
a complying trust once you have arrived.
Setting up a New Zealand trust may
also work in your favour if you intend to hold assets in the UK in
the long term and do not wish them to become subject to UK Inheritance Tax.
Great
care must however be taken when setting up an offshore trust from the
UK to ensure that you do not trigger any UK tax charges -
particularly if the amount you are placing in the trust exceeds the
nil-rate band for UK Inheritance Tax. There are other types of asset
holding vehicle which may also be helpful such as a New Zealand
Limited Partnership which may not trigger the UK tax charges
applicable to trusts. We strongly suggest that you take advice from
experts who are familiar with both UK and New Zealand trusts and tax
if you intend to set up a pre-migration trust, as offshore trusts are
a specialised area of both tax and trust law.
New Zealand trusts offer a number of advantages, but they can be
complicated to understand and there are ongoing compliance and
administration costs. Please see the article on Setting up New Zealand Trusts in our Legal Guide to Life in New Zealand on our UK website for more information.
This article was compiled with
assistance from UK-NZ tax expert Martin Riley from Sterling Tax
Services
and offshore trust specialist Henry Brandts-Giesen from Helmores
Barristers and Solicitors.
They're great people to talk to if you are thinking of using a trust
for UK and/or NZ tax planning.
Don't hesitate to contact us if you have any questions about your tax position as a UK migrant to New Zealand or a Kiwi returning from the UK.
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