Articles: Trusts and Asset Protection Articles

"Gifting" - by Miles Agmen-Smith

© Copyright ASCO Legal 2013

How Much to Gift?

There are many different factors to take into account.  One of them is the risk that making too large a gift now could disqualify some people later when they might otherwise have been eligible to receive subsidised hospital or residential care.  There could be a large financial cost to this.  Equally there are also risks in not making gifts, both for this and many other reasons, depending on the circumstances.

The subsidy problem comes from a quite different law than the gift duty law.  This comes under the Social Security Act.  What the Regulations made under the Act say is that if, in any one 12-month period, at any time in the past, gifts are made which are greater than $27,000, then the total value of the excess over $27,000 will normally be treated permanently as having been a “deprivation of property” and will be added back into the calculation of a person’s means, possibly many years in the future, when calculating their entitlement to a government subsidy.  In other words, a decision now about gifting larger amounts will (most likely) be binding permanently even in the distant future.  Even though it is illogical, under the rules, when entitlements are later calculated the “excess” amount in large gifts will be included in assets. Those excess amounts will not be treated as having been reduced with the passage of time, whether at the rate of $27,000 per year or any other rate at all. 

These laws are also administered by a quite different Government department, the Ministry of Social Development, which also has very wide discretions to decide who is and who is not eligible.

Because of these factors, as well as a number of other reasons which may apply, any major decision as to the gifting of assets to your trust is one which needs to be considered carefully against your overall circumstances.

The Budget

Included in the Budget delivered on 24 May 2012 was an announcement raising the exemption limit for allowable assets for subsidy eligibility to $213,297 from 1 July 2012.  Until the change these limits have been calculated on a formula which lifts the threshold by $10,000 a year, every year.  Pre-budget: the limits were $210,000 or less (combined, if there are two people, but there are some other options in that situation) or $115,000 depending on various circumstances.  The Budget change is also to tie increases in future periods to the increase in the Consumer Price Index (“CPI”).  The Budget did not change a number of the other small print details, which might also apply and which may need to be considered.  These include an option of $6,000 per year gifting, ownership of properties and vehicles and a number of other factors.

We note that the budget did not do away with Funeral Trusts which also remain a prudent option available for many people to consider.  These allow up to $10,000 (extra) to be set aside on a special purpose basis.  Do let us know if you would like to know more about these trusts.

 We have prepared this guide to and for our clients. It is not a substitute for detailed advice as every individual situation differs, and also government policies, laws and general conditions constantly change. We are happy to assist anyone who wishes to obtain more detailed advice or information on these or other matters.

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