In 2011 the government abolished Gift Duty which had been in effect for many years and was one of the major hurdles people had to face when wanting to protect their assets by forming a trust and selling the assets to the trustees.
Prior to the abolition of gift duty the maximum a person could give away in any 12 month period without paying duty was $27,000. Gifts of more than this amount attracted duty on an increasing scale based on the amount of the gift. There was a requirement to file Gift Statements with Inland Revenue for all gifts in excess of $12,000 each year.
Now that it has been abolished a person can give away whatever they like without having to pay any duty. Sounds like a perfect world however there are a few things one needs to consider before any gifting.
Are you likely to need Aged Care Assistance?
If yes you need to understand the gifting rules WINZ apply when deciding if they will grant a benefit. They have the right to refuse a benefit if they can establish that the applicant has taken steps to deprive themselves of assets or income.
Do you have an existing trust with a gifting programme?
It may well be that you need to continue with your gifting programme in your trust and possibly even reduce the amount you gift each year to ensure you do not fall foul of the WINZ rules.
Are you in a business situation where there is already some risk of you being sued?
If yes be careful. There are many provisions in a number of laws that enable the courts to make orders that in effect invalidate gifts if they were made at a point in time when the person making the gift was in a position where they should have known that the gifting was likely to affect their ability to meet their financial business committments.
Are you making the gift to try and defeat the legitimate claims of another person?
If yes once again be very careful and make sure you seek good legal advice before making the gift.
If you are in a relationship and gift assets to a trust or another person the gift may be invaild if there is a relationship breakup and the other party contests the gift. This can apply even if there was not the absolute intention to defeat the other parties claims but that the gift had the effect of doing this.
So in summary the old gifting laws have been abolished and that is a good thing but it is not open slather with no other considerations.
Every case needs to be assessed on its merits based on the personal circumstances of the clients both at the time they want to make the gift and what their circumstances may be a little later in life.