Lump Sum versus Progressive Gifting

Under the legislation effective prior to 1 October 2011, for a New Zealander, if you have provided GIFTS to people or trusts of any property and they exceeded certain limits in any 365 day period GIFT DUTY may be applicable to such gifts.

The old GIFT DUTY rates, which were on a progressive scale depending on the level of gifting, charged GIFT DUTY on gifts greater than $27,000.

Therefore, under GIFT DUTY rules prior to 1 October 2011 most people ran GIFTING PROGRAMMES for their FAMILY TRUSTS where they would manage their GIFTING at $27,000 per annum per donor so that no GIFT DUTY was payable by the donors.

POST 1 OCTOBER 2011

Even though GIFT DUTY does not apply from 1 October 2011, people transferring assets to Trusts still need to consider and document whatever GIFTS they may be transferring to Trust.

It is still very important for people who are considering setting up FAMILY TRUSTS for their homes or other assets to consider doing so at the time they are purchasing such assets, rather than at some future date when those assets may have appreciated.

The reason for this is that even though GIFT DUTY may not apply from 1 October 2011, the protection your Trust will afford you is largely dependent on how it has been administered and the time frame around when and how assets have been transferred into the Trust. If you sell a personal residence into a FAMILY TRUST for ASSET PROTECTION purposes, the value of the personal residence at the date of its transfer will be the maximum amount you need to gift on that property in the future (subject to additions and improvements you may make to the property out of your own personal funds). 

CLICK HERE TO FIND OUT THE DETAILS ON HOW A PROPERTY IS TRANSFERRED TO TRUST FOR ASSET PROTECTION PURPOSES

Please note however that if you have transferred your family home into the FAMILY TRUST because you are aware of an imminent creditor attack or because you are attempting to quickly protect your assets from a claim that someone or some Governmental body may be able to make in the near future, it is unlikely that a lump sum GIFT will protect those assets.

This is especially the case where people are looking for the benefit of their Trust and their gifting programme to exclude assets held in their Trusts from being included in assessment for Government REST HOME SUBSIDIES.