Gift duty was abolished on October 1.
The headline read: "Demise of gift tax opens door".
The article went on to say that "billions of dollars are expected to be passed to trusts in coming weeks as wealthy Kiwis take advantage of the end of gift duty."
However, according to the legal profession, the advice is "do not rush" into large-scale gifting.
There are several reasons why.
The September newsletter from NZ Law outlines these reasons.
The advice is that while gift duty, which was payable by an individual on any amount over $27,000 ($54,000 for a couple) has been abolished, all legislation and rules concerning rest-home subsidy, insolvency, relationship property and inheritance claims, are still in force.
Many people have commented that the "Government will take all your money in your old age" unless you have a trust to protect your assets.
In fact, all the Government wants you to do is look after yourself until you are no longer able to do so.
You are means tested if you apply for a rest-home subsidy.
The rules are still the same in that the Ministry of Social Development (formerly Winz) will want to know if you and/or your spouse or partner have given away more that $6000 a year over the previous five years, (from date of application) or more than $27,000 in any year prior to the five-year period.
These rules will not change, although the amount that can be retained as cash assets if only one person requires care are still increasing annually at the rate of $10,000.
Many lawyers will not now form trusts just simply for persons to qualify for the rest-home subsidy.
There have to be more pressing reasons that just "wanting my taxes back".
In the case of insolvency the Insolvency Act 1976 gives the Official Assignee the power to cancel a gift that was made within two years of bankruptcy. Gifting at the rate of $27,000 would not be a problem but a huge sum would be looked at carefully.
If declared bankrupt you have to prove that you were able to pay your debts after any gift, without the assets that were gifted.
As the NZ Law newsletter states, "a prudent person would obtain a Solvency Statement after the gift has occurred".
In the matter of relationship property, there are now several cases where, in a separation, the gifting has not been completed.
A rushed completion or perhaps a devious transfer can be set aside or compensated for, under the Property Relationships Act 1976.
It is possible for family or any person who feels aggrieved by being cut out of a will (especially if they have proof of intention from the deceased) to lodge a claim under the Family Protection Act 1955.
Trusts are useful here if you want to protect your children from "unsatisfactory" relationships.
You do not necessarily have to have a trust to begin a gifting programme.
You can "sell" assets to family members by transferring ownership, creating a loan and forgiving the debt by gifting. This method is most likely to be used extensively by farming families as succession planning.
In all cases legal advice should be obtained before rashly giving all of your assets away.
Peter Smith is an authorised financial adviser and a certified financial planner and is the principal of Kepler Group Otago Ltd, Dunedin. Email: pete@keplergroup.co.nz . A disclosure statement is available free on request.
