Giving away your assets

Rumour has it that the fifth biggest lender in New Zealand is the Bank of Mum and Dad.  There are three popular products this Bank is able to offer their customers.

1. A Loan (usually interest free and the loan is to be repaid on the sale of the property the customer is purchasing);

2. Jointly purchase property together.  Since the Brightline rules has come down to two years this option has become more popular.  This investment can provide a return to the Bank on the increase in equity on their share of the property and usually the customer pays all the rates and insurances in exchange for sole occupation of the property. 

3. A gift.  This sometimes comes with a condition that the customer signs a relationship property agreement with their partner to prevent the gift becoming matrimonial property.

If you would like more information about either of the first two options, please get in touch.  But in the spirit of Christmas, we want to touch on this last option and explain how giving your assets away works.

If you have a family trust, giving the asset away can be relatively simple, provided the recipient is a beneficiary of the trust.  If you wish to give away your personal assets there are some greater implications.  In October 2011 the IRD abolished gift duty – so this means there is no tax to pay (the threshold was previously $27,000 per person, per year) for gifting.

Depending on your age and stage in life, the Residential Care Subsidy may be a consideration before giving away your assets.  This government-funded Subsidy provides for long-term residential care in a hospital or rest home.  The application is means tested, which means if you have more than $155,873 of assets (i.e. money in the bank, shares, investments, property) – or $284,636 including your home and vehicle – then if your assets exceed these sums you will not receive government funding (there are some other options in this case).

Part of the application process requires you to disclose any gifts that you have made over the last five years.  A single person is allowed to make a gift of $8,000 per year (a total of $40,000).  Anything longer than five years ago you are allowed to gift up to $27,000 per year. The sums are also different if your spouse died in the last five years, or if you are a couple.  So, it is a little bit tricky to know when or if, you will need to apply for the Subsidy and which threshold will apply at the time of the application.

Obtaining some advice at the outset can ensure there are no misunderstandings further down the track.  We are open till 3.00pm on 20th December 2024.

Obtaining some advice at the outset can ensure there are no misunderstandings further down the track. 

Give us a call on 09-973-5102 or make a time to come and see us at either our Kumeu or Te Atatu office.

Debra Barron is the Principal of the firm and based at our Te Atatu office.

p: 09 282 4192

e: debra@cslegal.co.nz