Repeal of Gift Duty
Fri Oct. 3rd 2014
The repeal of gift duty will most likely affect those who have embarked on a gifting programme following the setting up of a trust. They now, as from 1 October 2011, will be able to forgive the balance of the debt owed to them by their trust outright.
Previously on the creation of a trust and transfer of assets to that trust, a debt was owed to the person settling property into that trust. This was forgiven at the rate of $27,000 per annum. Gifting of any more than this would have resulted in the assessment of gift duty payable to the Inland Revenue Department.
As from 1 October 2011 the gift duty provisions have been repealed which in effect means that whatever gifting a settlor has yet to complete can be done at once. However, prudent settlors will discuss the implications of this approach with their solicitor and accountant to make sure this is the best course of action in their specific circumstances. There may be tax implications for those who have transferred investment properties, etc. There also may be situations where a settlor does not want the whole of the debt owed by the trust to be completely forgiven.
However for many people who have been gifting to their trusts the repeal of the gift duty regime will save costs and it will also enable those who may have thought it was too late for them to transfer assets to a trust and embark on a long gifting programme to think again.
There will of course still be checks in place to prevent the abuse of transferring assets into a trust specifically in order to defeat creditors, avoid the effects of the Property (Relationships) Act when in a relationship and avoid the user pays situation at the eleventh hour.
The contents of this article are for general information only and does not constitute legal advice and should not be substituted for professional legal advice obtained from your solicitor.