Repeal of gift duty

As of 1 October 2011, you can gift any amount to your trust without incurring gift duty, however there are conditions.

Farmer Freddy is sitting in his favourite chair enjoying his cup of tea and reading the newspaper when Pebbles pops her head in for a quick catch up.

"Hi Dad, how has your day been?" she asks as she joins Freddy.

"I've been flat out," answers Freddy, "but I've just put my feet up and am now catching up on the news. Actually, while you are here Pebbles, I have just been reading an article about trusts and the repeal of gift duty. Given that I have a family trust Pebbles, can you give me a quick run down on what the repeal of gift duty means to me."

"Well Dad," explains Pebbles, "gift duty has been repealed as of 1 October 2011. Previously, you were only able to gift $27,000.00 a year to your trust without incurring gift duty". "Now, you can gift any amount you like to your trust without incurring gift duty."

"This is great news," says Freddy, "I had better ring my lawyer and get him to prepare the documentation so I can gift the balance of the debt owing to me by my trust."

"Hang on a minute Dad," cautions Pebbles, "there are a number of things to be aware of (just to name a few) before you go ahead and make one complete gift to your trust." Pebbles briefly summarises:

  • "you need to be solvent (i.e. your assets need to be greater than your liabilities) at the time of the gift, otherwise the gift may be cancelled;
  • you need to give consideration to future eligibility for a residential care subsidy (the Ministry of Social Development has set limits on how much gifting is allowable in any one year); and
  • gifting documentation still needs to be prepared (e.g. a Trustees' Resolution and a Deed of Forgiveness of Debt)."

"Oh," sighs Freddy, "I guess it's not just as simple as making a call to my lawyer then."

"No" replies Pebbles, "you really need to have a good chat to your lawyer and your accountant and give some more thought to this."

"Your lawyer will be able to help you with the documentation requirements and discuss the residential care subsidy issue and other issues with you. You will also need to talk to your accountant regarding the accounting implications of making one complete gift and whether or not you need to complete a solvency declaration to establish solvency before making one complete gift."

"Thanks Pebbles, yet again you have pointed me in the right direction. I will make some phone calls tomorrow to discuss this gifting matter in more detail. In the meantime, let's have a look at the sports section of the paper.... the All Blacks vs Australia and Wales vs France. What a great weekend of rugby ahead!"


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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