Is Your Trust Gifting up to Date?

Is your Trust gifting up to date? In 2011  The gift duty for dispositions of property under the Estate and Gift Duties Act 1968 was abolished, thus removing the threshold of how much could be gifted in any  year and the requirement to lodge paperwork with the IRD.   Unfortunately, at around the same time many trusts discontinued their regular gifting programs.

10 years on, the result of discontinued gifting programs is that many Trusts now have funds advanced from beneficiaries showing as liabilities on the Trust balance sheet.   Unless you are formally gifting funds you have advanced to the Trust, these funds remain your personal asset and are not “protected” by the trust.

What this means?

Any amounts advanced to the Trust, possibly to service a mortgage or other ongoing commitment may have built to a significant balance.  The value of ungifted funds will remain your personal asset and  therefore included in Means and Assets tests for Aged care, creditor claims and relationship property assessments.

Keeping up with your trust gifting program is an important step in managing your commercial and personal risk and should be considered with the completion of each years Financial Statements

Whilst there is no threshold for how much can be gifted in any year, extraordinary gifting can be clawed back in some instances.

What is extraordinary gifting and how far can it be clawed back?

The amounts and periods vary depending on which piece of legislation apply.  It’s also prudent to consider that legislation may change and may be applied retrospectively.

The legislation, most likely to apply to gifting is  The Social Security (Long-Term Residential Care) Regulations 2005.  Currently the maximum amount that a person or their spouse can gift over the period of five years prior to the date of the person’s financial means assessment, without it affecting the income and assets test is up to $6,500 per year.  This amount is reviewed annually of the 1 April.

Gifts made outside the current and to be prescribed five-year gifting period are generally not included in the financial means assessment unless the gifting is considered extraordinary (ie, it is an asset for the purposes of the financial means assessment as there has been deprivation of property).

Our ‘Is Your Trust Gifting up to Date?’ not enough?

The better you understand your business and your financials, the easier it will be to make more money and ultimately achieve your goals.   We have developed comprehensive resources to enable business owners to fully understand and interpret their numbers.  Need more help? Join our free webinars on financial awareness coaching or talk to us about personalised financial awareness coaching.  Contact Samantha for a call, zoom or meet on 06 871 0793.



Related Links:

Are you earning enough?

Guide to Your Financial Reports – Part 5 (Statement of Changes in Equity)

What is the Point of Employment Contracts?


Feeling out of the loop? Click here to subscribe to the IRD to stay up to date.