Update on succession and gift duty

Freddy gets updated on succession and gift duty


The only certainty in life is change

Farmer Freddy has invited Pebbles over for Sunday lunch.  He is after some more free legal advice! 

Over lunch, Freddy mentions that he is thinking seriously about transferring the farm into a family trust and coming up with a succession plan.

“I know I’ve talked to you about this in the past Pebbles”, apologises Freddy, “but I realise I’ve now got to start putting my words into action. 

“I need to understand how all the things we’ve previously discussed, such as transferring assets into trusts, the repeal of gift duty and succession planning, fit together”, says Freddy, “and what, if anything, has changed”.

“That’s OK,” says Pebbles, “it’s always good to revisit previous issues to make sure you’ve got a clear picture.

“As you know”, continues Pebbles “it’s common for farmers to transfer their farms and other assets into family trusts in order to protect those assets from potential relationship property claims or claims by creditors.  

“Farmers also want to ensure they have some sort of income to rely on once they retire.”

“You’ll remember that no money actually changes hands when the assets are sold to the Trust.  Instead, it’s agreed that the Trust ‘owes’ the money and the ‘loan’ is reduced by making ‘gifts’.

“Gift duty was abolished a year ago meaning you can now gift any amount you like to your Trust without incurring gift duty.  Previously you were only allowed to gift $27,000 per year without incurring gift duty.

“The ability to transfer an asset immediately with no debt back is really helpful when it comes to succession planning.

“Previously, the residual debt was treated as an asset of a person’s estate when they died and was vulnerable to challenge under the Family Protection Act by family members who believed provision should have been made for them in the Will. 

“Now you don’t need to worry about that.”

“But it’s not as easy as just ringing my lawyer and getting him to prepare the documentation is it”, asks Freddy.

“That’s right Dad,” advises Pebbles, “Careful consideration is needed.  There are some things you need to be aware of before you go ahead and make one complete gift to your Trust, such as whether you are solvent and your future eligibility for residential care subsidies, to name a few”.

“Just remember that all families are different Dad, and your succession plan must be designed to suit your needs and your family’s needs.  It’s always good to have a clear plan in mind before going to see your lawyer”.

“And as the law is constantly changing, it’s always a really good idea to sit down and re-visit all of the options every now and again,” says Pebbles. 

 

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document.

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser.

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