Press Release – Guardian Trust
The abolition of gift duty in relation to trusts has generally been well received. Now that the new legislation is in place, trust experts are discussing the key factors to consider when acting on abolition of gift duty, and what individuals need to understand …Media Release December 2011
THOSE WITH TRUSTS TOLD TO SEEK ADVICE
BEFORE ACTING ON GIFT DUTY ABOLITION
The abolition of gift duty in relation to trusts has generally been well received. Now that the new legislation is in place, trust experts are discussing the key factors to consider when acting on abolition of gift duty, and what individuals need to understand about how the abolition applies to their own circumstances and objectives before freely gifting assets to a trust.
Gift duty, which was abolished on 1 October, formerly applied when a person made gifts totalling more than $27,000 in a 12-month period. Now, gifting may be done freely.
Richard Broad, head of legal in personal client services at Guardian Trust, says, “The reaction to news of gift duty abolition has been that it’s a good thing – in most people’s minds, less tax can’t be bad. Other advantages are that there can be a lot less paper to deal with, because there’s no need when setting up a trust to transfer assets and set up a gifting programme that can last for many years. For instance, you can immediately gift the family home to the trust, with a lot less paperwork required.”
He says it’s important to note that while gift duty has been wiped, many of the other legal safeguards that previously applied to disposing of assets remain in place.
“People need to know that even with abolition they should continue to take care when gifting,” Mr Broad says. “The safeguards are designed to prevent people giving assets away in an attempt to disadvantage others or unfairly advantage themselves. For example, in relation to creditor protection, there are clawback provisions associated with gifting that will protect those owed money if a person tries to give assets away to defeat creditors.”
Older people who may be considering going into a retirement home or other residential care might seek the government subsidy available for these purposes, and therefore should gift mindfully, Mr Broad says. “Many people want to ensure they are eligible for the subsidy, and the law is intended to prevent people deliberately minimising their assets to qualify for the subsidy they can get if they go into care.
“Abolition does not allow you to gift away assets to a trust or anyone else right before going into a home. If you gift more than permitted then go into care, you may be required to access those assets before qualifying for government support.”
Similarly, other allowances that are means-tested prevent those who have gifted away assets from applying for Working for Families or other social benefits.
Guardian Trust general manager of personal client services Philip Morgan Rees says, “Most importantly, people with trusts should seek advice in relation to their specific circumstances. Though abolition can be very advantageous there may be other factors to consider, and before acting people should be advised on how they might be affected.”
The Property (Relationships) Act has long been cited as a reason for the establishment of many trusts, and Mr Morgan Rees notes that people in de facto relationships will still need to take care with relationship property that is held in trust. “The Act allows for dispositions in certain circumstances, but if you gift away from a partner it can still be challenged in court – this hasn’t changed with abolition.”
Mr Broad says, “Gift duty abolition has implications for a range of financial areas, and can mean loss of effective financial control of a trust. We would simply say to people that the implications for their circumstances can be complex, and they should seek the advice of an independent trustee before acting in response to this law change.”
About Guardian Trust
Guardian Trust has been serving New Zealanders for nearly 130 years and is a market leader in trust & estates and wealth management. As one of New Zealand’s foremost trustee companies, it specialises in asset management and protection, providing wide-ranging advice and expertise in philanthropy, estate planning and administration, financial planning, and personal and corporate trusts.
Guardian Trust is the country’s pre-eminent provider of philanthropic services, administering over 450 charitable trusts that provide in excess of $26 million in funding every year. In real terms, Guardian Trust has distributed grants on behalf of its clients to more than 530 charities across the country in the last three years alone.
Guardian Trust is a wholly-owned subsidiary of The Trust Company, a leading independent Australian trustee.