One life, two countries: structuring your will when you hold assets in New Zealand and the UK

Two countries, two sets of rules

We are regularly asked to help people who have built a life in New Zealand while keeping a financial foothold in the United Kingdom. It is a common story: someone emigrates, buys a home in Auckland, joins KiwiSaver and builds up savings here, yet still holds a UK pension, an ISA, a bank account or a share portfolio, and often has close family in Britain. When it comes to putting a will in place, that split raises questions a purely domestic will never has to answer.

The core difficulty is that each country applies its own succession law to the assets that sit within it, and each has its own approach to tax on death and its own process for granting authority to deal with an estate. New Zealand and the UK do not share a single rulebook. Getting the structure right is what keeps an estate from becoming slow, expensive or unintentionally exposed to tax that careful planning could have reduced.

Where an asset sits, and where you belong

Two concepts do most of the work in cross-border estate planning. The first is situs, which is simply where an asset is treated as located: land and buildings sit where they physically are, bank accounts and shares are generally located by reference to where the institution or company is based. The second is your personal connection to a country, described in the UK by concepts of domicile and, increasingly, long-term residence, and relevant in New Zealand chiefly to which court can act and which law applies. These ideas decide which country can tax an asset, whose law governs how it passes, and where a grant of probate needs to be obtained.

How the UK side generally works

The UK levies inheritance tax on death, and it is easy to underestimate. As a general guide, the UK can tax the worldwide estate of a person who is closely connected to the UK, and can tax UK-situated assets of someone who is not, with a significant flat headline rate, currently 40 per cent, applying above the available tax-free threshold. There are reliefs, allowances and exemptions that can materially reduce the bill, and the rules on who counts as connected to the UK have changed in recent years and continue to evolve. The practical point for clients is that UK inheritance tax needs to be approached with real care and with current UK advice, because assumptions carried over from a few years ago are often out of date.

New Zealand sits in sharp contrast. New Zealand abolished estate duty decades ago and no longer imposes gift duty, so there is no New Zealand tax on death simply because an estate is large. That asymmetry is why the UK exposure, not the New Zealand position, is usually the part of a cross-border estate that most needs attention.

One worldwide will, or a will in each country

For someone with assets in both countries there are broadly two structures. A single worldwide will can deal with everything the person owns wherever it is. Alternatively, separate wills can be prepared in each country, each one drafted by a lawyer in that jurisdiction and confined to the assets there. Separate situs wills often allow probate to proceed in each country in parallel rather than one waiting on the other, which can save months.

The most common and most damaging mistake here is the revocation trap. A will usually contains a clause revoking all earlier wills. If a later UK will revokes an existing New Zealand will, or the reverse, the person can be left partly or wholly without a valid will in one country without realising it. Where separate wills are used, each must be carefully limited so that it revokes only earlier wills dealing with that country's assets, and the two must be coordinated between the New Zealand and UK advisers. This is the single decision on which cross-border will planning most often turns.

The assets that do not pass under your will

Some of the largest items in a cross-border estate never pass under a will at all, and clients are frequently surprised by this. Pensions are the classic example. Unlike a New Zealand KiwiSaver, UK pension is generally dealt with according to the scheme's own rules and any nomination the member has made, not according to the will. UK ISAs, employee share schemes and similar wrappers also carry their own rules on death. It is worth checking that every nomination is current and points where you intend, because an out-of-date nomination can send a substantial sum somewhere the will was never able to redirect.

Executors and incapacity across borders

Choosing who administers the estate deserves thought when the estate spans two countries. An executor who is elderly, unwell or living far from the assets can make an already complex administration harder. Many clients appoint someone based in each country, or a professional executor, so that there is capable authority on the ground where the assets are. It is also worth remembering that arrangements for incapacity do not travel between countries: a New Zealand enduring power of attorney governs New Zealand affairs, while a UK lasting power of attorney is needed for UK affairs, and the two are put in place separately.

Two scenarios our clients recognise

Scenario one: established in New Zealand, roots still in Britain

Consider someone who moved to New Zealand well over a decade ago, has settled here for good, owns their Auckland home outright and has KiwiSaver and local savings, but still holds a UK pension, an ISA and a modest UK bank balance. Their instinct is often that Britain is behind them, so UK tax cannot be an issue. The reality is more nuanced. After a long period living in New Zealand their connection to the UK for tax purposes may well have faded, which would tend to limit UK inheritance tax to their UK-situated assets rather than their worldwide estate, but that is a UK-law question that must be checked rather than assumed. The right structure is usually a New Zealand will for the New Zealand assets and a coordinated UK will for the UK assets, with pension nominations reviewed so nothing slips outside the plan.

Scenario two: a more recent arrival still weighing where home is

Now consider someone who arrived in New Zealand only a couple of years ago, still owns a home in the UK they might one day return to, has immediate family in Britain and has not decided whether New Zealand is permanent. Here the UK connection is likely to be much stronger, and the risk that the UK can tax the worldwide estate is a live one. For this client the connection question is not a footnote; it can drive the entire plan. Early, current UK advice alongside their New Zealand will is far more valuable than a document prepared on the assumption that the move has already severed the UK tie.

How we help

At PK Law we prepare the New Zealand will and estate documents, identify the UK issues that need specialist input, and work alongside a UK solicitor and, where tax is in play, a UK tax adviser, so that the two sides of your estate fit together rather than working against each other. If you hold assets in both New Zealand and the UK and have not reviewed your will since your circumstances changed, we would be glad to talk it through.

This article is general information only. It is not legal or tax advice, and it does not take account of your particular circumstances. UK law and tax rules, including inheritance tax, change over time and can be complex. You should obtain your own New Zealand legal advice and, for the UK aspects, your own UK legal and tax advice before acting.