Generational Wealth Transfer in NZ: Building a Legacy Beyond Money

Why Most Family Wealth Disappears

Families lose wealth across generations primarily because they fail to talk about it, not because they make bad investments. Around 70 percent of family wealth is gone by the second generation and 90 percent by the third, according to research covering more than 3,250 wealthy American families published by Roy Williams and Vic Preisser in Preparing Heirs (2003). Only 15 percent of that loss was caused by poor financial advice or inadequate planning. The dominant cause, at 60 percent, was a breakdown of communication and trust within the family. A further 25 percent was attributed to heirs who were not prepared to manage what they received.

In our experience advising multi-generational New Zealand households, this matches what we see. The families who preserve wealth across generations are rarely the ones with the most sophisticated financial structures. They are the ones who have had the hardest conversations earliest.

For New Zealand families, the practical implications are significant. With no inheritance tax (abolished under the Estate Duty Abolition Act 1993), no estate duty, and no gift duty (abolished under the Taxation (Tax Administration and Remedial Matters) Act 2011), the tax-driven estate planning conversation that dominates overseas advice is largely irrelevant here. What matters most in New Zealand is what the research says matters most everywhere: how well you communicate your intentions, how thoroughly you prepare the next generation, and whether the legal structures around your wealth actually match your family's reality. With total New Zealand household net worth estimated at roughly $2.2 trillion according to Reserve Bank of New Zealand balance sheet data, the scale of wealth moving between generations over the next two decades is substantial.

The Three-Generation Pattern and How to Break It

The "shirtsleeves to shirtsleeves in three generations" adage exists in nearly every culture. In Mandarin it is fù bù guò sān dài; in Italian, dalle stalle alle stelle e dalle stelle alle stalle. The pattern is consistent:

• First generation builds the wealth through effort, risk-taking, and discipline. They carry a visceral understanding of what it cost.
• Second generation witnesses the sacrifice, inherits the discipline, and generally maintains or grows what was built.
• Third generation inherits the outcome without the context. With no firsthand experience of building, the appreciation fades, and often the wealth fades with it.

Each generation needs to be a first-generation builder in some dimension. The wealth may already exist, but the sense of earned ownership must be recreated. That might mean building a business, leading a family philanthropic effort, or taking responsibility for an aspect of the family's financial governance. The mechanism matters less than the principle: inherited wealth survives when the people who receive it have built something themselves. For those on the receiving end, inheriting a large sum comes with its own decisions that benefit from advance preparation.

What You Are Really Passing On

The Williams and Preisser research found that what you transfer to the next generation matters far less than how you transfer it and what you transfer alongside it. Four dimensions tend to separate families who sustain wealth from those who lose it.

• Values and principles. These form the decision-making framework your family uses when you are no longer in the room. They are transferred through behaviour, not lectures. Involving children in real financial decisions, such as how much to give to charity or how to allocate a family trust distribution, teaches values more effectively than any abstract conversation.
• Work ethic and ambition. Children who see effort rewarded and who experience earning their own way develop resilience that sheltered wealth can erode. Tying financial responsibility to contribution from a young age is one practical expression of this.
• Financial literacy. Wealth without financial competence is a countdown. Teaching the next generation about compounding, risk, debt, and the difference between assets and liabilities is one of the highest-return investments a parent can make.
• Family connection. A shared sense of identity and belonging gives family members a reason to cooperate rather than compete when wealth is eventually distributed. Shared traditions, regular gatherings, and a culture of open communication reinforce this. Understanding what generational wealth actually is helps the whole family work from a common frame of reference.

The Ethical Will: A Document Worth Writing

A legal will distributes your assets. An ethical will explains why. Sometimes called a legacy letter, it is a non-binding document that communicates your values, life lessons, hopes for your family, and the reasoning behind your financial decisions.

The concept is centuries old, rooted in religious traditions, but it has gained renewed attention among estate planners internationally because it addresses the exact gap the Williams and Preisser research identified. An ethical will is a direct tool for strengthening communication and trust within a family before either is tested by a death or dispute.

There is no required format. Some people write a letter. Others record a video. The content typically includes what you believe matters most in life, the mistakes you learned from, your hopes for how inherited wealth will be used, and the reasons behind any unequal or conditional distributions. A parent might write something like: "I have left the bach to Sarah because she is the one who has maintained it and brought her children there every summer. I love all three of you equally, and I have balanced this through other provisions in the estate." Even a few sentences of direct explanation like this can prevent years of family conflict.

For blended families or situations where a legal will might be challenged, an ethical will provides context that can defuse tension before it begins. Few New Zealand advisers routinely suggest writing one, and no law requires it, but for many families it is the single most valuable document in the estate.

Having the Conversation

Talking about money and mortality is uncomfortable for most families. The Public Trust Intergenerational Wealth Report (2023) found that while 98 percent of New Zealanders surveyed wanted to leave some form of legacy, very few had taken concrete steps to communicate their intentions to family members.

Structured family meetings, even informal ones held annually, give wealth, values, and intentions a place in the conversation before a crisis forces it. A useful approach is to discuss values first, then intentions, then structures. Leading with numbers tends to trigger anxiety or entitlement. Leading with values creates a shared foundation. Even setting aside one hour each year over a meal to discuss what matters most to the family, before any mention of specific assets or dollar amounts, can shift the dynamic from passive expectation to shared responsibility.

The difficult topics are the most important ones. Unequal distributions between children are common and reasonable, but unexplained unequal distributions are a leading source of family conflict after a death. Blended families face additional complexity: stepchildren, former partners, and new relationships all create competing expectations. In New Zealand, the Property (Relationships) Act 1976 means wealth gifted or distributed to an adult child can become relationship property if that child's relationship later ends, potentially directing family wealth to a former in-law. Naming these risks openly and putting protective structures in place together is more effective than leaving them unaddressed.

The New Zealand Legal Toolkit for Wealth Transfer

Because New Zealand has none of the tax-driven pressures that dominate estate planning in the United States, United Kingdom, and Australia, the challenges here are primarily about family dynamics, legal protection, and governance. Several legal tools are specific to the New Zealand context.

Wills and the Family Protection Act

A will is the foundation. Without one, the Administration Act 1969 determines who inherits, and the result rarely matches what anyone intended. Even with a will, the Family Protection Act 1955 allows eligible family members, including spouses, children, and in some cases grandchildren and stepchildren who were being maintained by the deceased, to challenge it if they believe adequate provision has not been made. You cannot simply disinherit close family members in New Zealand without meaningful risk of a successful court claim. This makes clear communication of your reasoning, including through an ethical will, and sound legal drafting essential.

Family Trusts

Trusts remain a primary vehicle for intergenerational wealth transfer in New Zealand. The Trusts Act 2019, fully operative since January 2021, significantly increased trustee duties and beneficiary information rights. Trustees must now provide basic trust information to every qualifying beneficiary (generally adult beneficiaries) unless a court grants an exemption. For families who previously used trusts partly for privacy, this is a material change.

Trustee income has been taxed at 39 percent since April 2024, following the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024. This aligns the trustee rate with the top personal tax rate. Distributing income to beneficiaries on lower marginal rates can still be more efficient, but the calculus has shifted. Any trust established before 2021 warrants a review against the current requirements.

Contracting Out Agreements

A contracting out agreement (often called a prenup or postnup) under the Property (Relationships) Act allows your children to protect inherited or gifted wealth from becoming relationship property. This is one of the most underused tools in New Zealand estate planning. Discussing it as a family before a distribution is made normalises the conversation and removes the personal sting.

Enduring Powers of Attorney

Legacy planning covers incapacity as well as death. An enduring power of attorney (EPA) under the Protection of Personal and Property Rights Act 1988 ensures a trusted person can manage your property and personal care decisions if you lose the capacity to do so yourself. Without an EPA, your family may need a costly court application to manage your affairs.

KiwiSaver Investment Balances on Death

A KiwiSaver investment balance passes to the deceased's estate and is distributed according to the will, or under intestacy rules if there is no will. There is no mechanism for nominating a direct beneficiary within a KiwiSaver Scheme. For members with significant KiwiSaver investment balances, this makes the will even more important.

What a Legacy Plan Looks Like in Practice

Consider a New Zealand couple in their early sixties. Their combined assets total roughly $2.5 million: a family home worth $1.2 million, a diversified investment portfolio of $800,000, combined KiwiSaver investment balances of $300,000, and a rental property with around $400,000 in equity. They have three adult children aged 27, 30, and 34. The eldest is married, the middle child is in a de facto relationship now past four years (well beyond the three-year threshold under the Property (Relationships) Act after which equal sharing of relationship property applies), and the youngest is single. There is one grandchild, aged two.

A family trust was established fifteen years ago but has not been reviewed since before the Trusts Act 2019. Neither parent has written an ethical will. There have been no family meetings about wealth or intentions. The children in relationships have no contracting out agreements.

A practical legacy plan for this family would involve several interconnected steps, and the order matters.

1. A review of the existing trust. This is urgent because the trust likely does not comply with the Trusts Act 2019 disclosure and governance requirements, which means the trustees may already be in breach of their statutory obligations. If any adult beneficiary requests basic trust information, the trustees are legally required to provide it. An out-of-date trust deed may also give trustees powers or discretions that no longer reflect the settlors' wishes.
2. Updated wills for both parents, drafted with the Family Protection Act in mind and reflecting current intentions. If one child is to receive the family bach, for example, the reasoning should be documented in both the will and an ethical will so the other children understand the decision was deliberate and considered. Without this, the child who misses out has both the emotional motivation and the legal standing to challenge the will.
3. Enduring powers of attorney for both parents covering property and personal care. If either parent were to lose capacity without these in place, the family would face a court process under the Protection of Personal and Property Rights Act 1988 to appoint a property manager, costing time and money when both are already under pressure.
4. A conversation with the two children in relationships about contracting out agreements. The middle child's situation is particularly time-sensitive: with a de facto relationship already past the three-year threshold, any assets distributed to that child are exposed to a relationship property claim on separation right now. A gift or trust distribution made without a contracting out agreement in place could result in half of that amount going to a former partner if the relationship ends.
5. An ethical will from each parent explaining their values, their reasoning for any unequal or conditional distributions, and their hopes for the family.
6. Scheduling the first family meeting to discuss intentions, values, and the broad shape of the plan.
7. A life insurance adequacy review to ensure cover is sufficient to meet any immediate estate obligations without forcing asset sales at a difficult time.

None of these steps requires enormous expense. Each addresses a specific risk that, left unmanaged, could undermine the entire legacy. The sequence reflects a principle: address existing legal exposure first, then build the communication and governance layer that holds everything together long term.

Keeping the Plan Alive

A legacy plan is a living system. Certain events should trigger a review: a new relationship or separation in the family, the birth of a child or grandchild, a significant change in asset values, a change in the law (as happened with the Trusts Act 2019 and the trustee tax rate increase), or a change in your own wishes.

It is also worth checking whether digital assets are accounted for in your will and trust documentation. These include online financial accounts, cryptocurrency holdings, intellectual property, and any business conducted through digital platforms. Access credentials and instructions for these assets are easy to overlook and difficult for executors to recover without guidance.

The team around the plan matters as much as the plan itself. A financial adviser, a lawyer experienced in trusts and estates, and an accountant each play a distinct role. Where the real value compounds is in the ongoing family conversation. An annual check-in, even a brief one, keeps intentions visible and gives the next generation a sense of shared responsibility rather than passive expectation.

As Joseph Darby, CEO of Become Wealth, puts it:

"The families who do this well treat legacy planning as a conversation, not a transaction. The legal and financial structures are important, but they are only as strong as the family's understanding of why they exist."

Mapping how your will, trust, insurance, powers of attorney, and family communication interact often surfaces issues people did not know they had. If you would like help working through those connections for your own family, that is what our financial planning team does. You can start a conversation with one of our financial advisers.

Frequently Asked Questions

What happens if I die without a will in New Zealand?

The Administration Act 1969 determines who inherits. If you have a surviving spouse or partner, they receive your personal chattels and a set share of the estate, with the remainder divided among children. If there is no spouse and no children, the estate passes to parents, then siblings, then more distant relatives. The outcome rarely matches what people would have chosen, and the process is slower and more expensive than administering a valid will.

Do I need a family trust if New Zealand has no inheritance tax?

Tax is only one reason to hold a trust. In New Zealand, trusts are more commonly used for asset protection, controlled distribution to beneficiaries over time, and managing relationship property risk. The Trusts Act 2019 has increased the governance burden, so the trust must justify its ongoing cost and complexity.

What is the difference between an ethical will and a legal will?

A legal will is a binding document that directs how your assets are distributed. An ethical will is a personal, non-binding letter or recording that communicates your values, life lessons, and the reasoning behind your decisions. Courts do not enforce ethical wills, but they can provide context that prevents family disputes.

How do I protect wealth I give to my children from their partner's claims?

A contracting out agreement under the Property (Relationships) Act 1976, signed by both your child and their partner with independent legal advice, is the primary tool. Structuring the gift through a trust with appropriate terms can also help, though the Trusts Act 2019 disclosure requirements mean the partner may become aware of the trust's existence and value.