Many New Zealand families use trusts to hold assets for reasons such as creditor protection, relationship property protection, and safeguarding assets for vulnerable beneficiaries. As primary beneficiaries age, they may choose to move into a retirement village. This usually prompts a review of whether the trust is still needed. Most villages require occupation rights to be held in personal names, not by a trust.
Clients should therefore discuss, with family, whether to retain the trust or distribute key assets—often including the family home—to primary beneficiaries. The original purpose of the trust should guide this decision.
If the trust is retained, it will generally need to fund the occupation right. This is typically done by lending funds to the residents. However, retirement villages usually deduct a portion of the purchase price as a capital sum; this portion may be better treated as a capital distribution rather than a loan, as it cannot be repaid.
Moving into a retirement village is also generally a good opportunity to review estate planning documents, including wills and enduring powers of attorney. Villages often require copies of enduring powers of attorney and confirmation that valid wills are in place.
Want to learn more?
Our team at JB Morrison has expertise in advising on the entry into retirement villages on behalf of residents, and also all aspects of estate planning using trusts. Get in touch with our Wellington and Rotorua Trusts and Estates teams, for personalised advice and to book a consultation.
