Inheritance Agreement (New Zealand)

An Inheritance Agreement (also called an advancement agreement or family arrangement) is a document used in New Zealand estate planning to record an advance payment of a beneficiary's expected inheritance, or to formalise the terms on which family members agree to the distribution of an estate. It is most commonly used where a parent wishes to assist an adult child financially during their lifetime (for example, contributing to a house deposit or business), and both parties wish to document whether this is an outright gift, an advance on the child's inheritance (to be accounted for when the estate is distributed), or a loan. Under the Administration Act 1969, the executor of a New Zealand estate is responsible for distributing the estate in accordance with the Will. Where advances have been made, the Inheritance Agreement provides the executor with a written record of what was paid and how it should be treated at distribution. Inheritance Agreements are also used to document the terms of a family arrangement made after the testator's death, where the beneficiaries agree to a different distribution than provided in the Will (a 'deed of family arrangement').

Whether a payment to a child during a parent's lifetime is treated as a loan, a gift, or an advance on inheritance depends on the documented intention of the parties at the time of the payment. This distinction is critically important for New Zealand estate administration. If the payment is a loan, the child owes the estate the amount paid plus any agreed interest, and the executor must recover this amount before distributing the estate. If the payment is an outright gift, the child retains it free of any obligation to account for it from their inheritance. If the payment is an advance on inheritance (also called a hotchpot advance), the amount is brought into account when calculating the child's share of the estate — the child receives less from the estate to reflect what has already been paid. The Inheritance Agreement (or advancement deed) should clearly state which of these three treatments applies. Without a written agreement, disputes frequently arise after the parent's death about whether payments were loans or gifts, causing family conflict and potential litigation. The Family Protection Act 1955 may also be relevant if other beneficiaries claim the advances constituted an unequal distribution.

The Property (Relationships) Act 1976 (PRA) governs the division of property between spouses, civil union partners, and de facto partners on the breakdown of a relationship or on death. Under the PRA, property that a person inherits is generally treated as separate property — it is not subject to equal sharing with their partner on a relationship breakdown. However, if an inherited asset is used to improve or invest in relationship property (e.g., inherited funds used to renovate the family home), the asset may lose its separate property character and become subject to sharing. An Inheritance Agreement can document the separate property status of an advance on inheritance, reducing the risk that a beneficiary's partner claims a share. Some families also use contracting out agreements (relationship property agreements) under s 21 of the PRA to confirm that inherited funds will remain separate property — these must be signed by both partners with independent legal advice. Where an Inheritance Agreement involves a child in a de facto relationship, the parties should consider the PRA implications carefully before executing the agreement.

Yes — adult beneficiaries of a New Zealand estate can agree among themselves to vary the distribution provided by a Will or intestacy, by entering into a deed of family arrangement (a form of Inheritance Agreement). Such arrangements are recognised by New Zealand courts as a legitimate exercise of the beneficiaries' rights to deal with their own interests in the estate. A deed of family arrangement must be: agreed by all affected beneficiaries; in writing; and supported by consideration (or executed as a deed if no consideration passes). The executor must be a party to or informed of the arrangement and must distribute the estate in accordance with it. Deeds of family arrangement are commonly used where: the Will does not reflect the deceased's true intentions; the beneficiaries agree that a different distribution is fairer; a beneficiary wishes to disclaim their share in favour of another person; or tax considerations make an alternative distribution advantageous. Any variation must comply with the Family Protection Act 1955 (FPA) — a deed of family arrangement that reduces the provision made for a spouse or child may be set aside or challenged if it leaves that person without adequate provision. Legal advice is strongly recommended before entering into any deed of family arrangement.

A Inheritance Agreement (New Zealand) does not legally require a lawyer in New Zealand, and individuals and businesses may draft and execute the document independently. The Wills Act 2007 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified New Zealand lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The High Court of New Zealand has jurisdiction over disputes arising from this type of document, and Companies Office may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.