For Canadian in-laws acquiring property in New Zealand, choosing between direct ownership and a family trust entails legal and financial considerations. Financial contributions require careful tax scrutiny, and navigating mortgage financing necessitates understanding lender requirements. Expert legal and immigration advice is crucial for a smooth property acquisition process.
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“My mother and father-in-law are looking to eventually move over to NZ for retirement once they get the visa thing sorted. They are Canadian, and my wife is Canadian with a permanent resident visa… we have just had our first child, and they want to be closer to us and their grandchild/future grandchildren. I am a Kiwi. My question is… what is the best way for them to buy a property in our name? I mean, we will live at the address for the foreseeable future until the visas are sorted on their end in a few years. Can they gift a big lump sum and have us purchase a property relatively easily? Or will we be strung up for tax, etc? This property will not be used for any business purposes…”
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Property Ownership and Structure:
Your in-laws, being Canadian, can explore property ownership in New Zealand either under their own names or through the establishment of a family trust. Each option has distinct legal and financial implications. Owning property in their names directly may simplify certain aspects, but a family trust could offer additional benefits, such as estate planning and asset protection. Seeking advice from a legal professional experienced in property transactions is crucial to making an informed decision based on their specific needs and goals.
Financial Contributions and Tax Implications:
If your in-laws plan to contribute a significant sum to the property purchase, it’s essential to consider potential tax implications. While gift duty has been abolished in New Zealand, there may still be tax considerations related to the transfer of assets. Consulting with a tax professional can clarify the tax implications of a substantial financial gift, ensuring compliance with local tax regulations and helping to minimise any potential tax burdens.
Mortgage Financing and Lender Requirements:
If your in-laws contribute financially, exploring mortgage financing options is essential. However, be aware that lenders typically require the borrower (you) to be the owner-occupier. This means that your in-laws’ financial contribution may be treated as a gift rather than a loan. Discussing these considerations with a mortgage advisor is advisable. This helps to understand how the financial arrangement aligns with lender requirements and to explore the most suitable financing options for your situation.
Legal Guidance and Visa Considerations:
Seeking guidance from a New Zealand lawyer specialising in property transactions is crucial to navigating the legal aspects of the purchase. They can help ensure compliance with local laws and regulations, facilitating a smooth property acquisition process. Additionally, consider the implications of property ownership on your in-laws’ visa status. Aligning the transaction with Immigration New Zealand requirements is essential to avoid any complications related to their residency status. Professional advice will be instrumental in addressing both legal and immigration aspects, providing a comprehensive approach to the property purchase.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
