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The gifting programme
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Held in Trust
The gifting programme
Tuesday, 23 February 2010
By Janet Xuccoa
Hello Readers
Well the new year has well and truly started for us. In Trust Land we’ve conducted hundreds of ATM’s which I discussed in my last article.
Out of those ATM’s we found a common issue that arose – Gifting. So in my next couple of articles I’m going to talk about gifting and hopefully, remove all the confusion. I’m going to cover how gifting arises, what the process is, why it’s so vital that you gift and the problems that can come about.
THE HOW
You cannot simply transfer your assets to the Family Trust. If you did this, the law would deem that you have made a gift and gift duty would be payable. So to avoid gift duty, you need to sell your assets at market value to the Trust.
When you do this, the Trustees will probably not pay you cash for the assets. Rather, they will give you an IOU, which is often referred to as a Deed of Acknowledgement of Debt.
This Deed of Acknowledgement of Debt will record that the Trust owes you a particular sum of money for the asset it has just purchased from you.
The balance owed to you by the Trust under the Deed of Acknowledgement of Debt will be an asset in your hands and a liability to the Trust.
To reduce down the credit balance owed to you by the Trust under the Deed of Acknowledgement of Debt, you need to gift.
THE PROCESS
Gifting is a process involving you forgiving part of the debt owed to you.
At law, you are able to forgive up to $27,000 per person, per year, without incurring gift duty. If you chose to forgive more than this balance, you will be liable to pay gift duty on the amount of the gift you have made over and above this $27,000 threshold.
The gifting process involves five steps:
• You as the Donor (the person making the gift) sign Deeds of Partial Forgiveness of Debt, Gift Certificates and Resolution
• The Trustees as Donees (the people accepting the gift) also sign these documents noting on behalf of the Trust their acceptance of the gift
• The above documents are filed with the Inland Revenue Department
• The Inland Revenue Department stamps the Gift Statements and returns them to the person who prepared the documents, and
• The stamped Gift Statements should be filed with the Trust’s papers and the Trustee Resolutions accepting the gift should be filed in the Trust’s Resolution Book.
In our next article I will tell you why you need to gift and the type of problems that commonly arise. I’ll also give you some tips on how to avoid these potholes.
Until next time, enjoy running your Trust.
Ciao. Janet
© Gilligan Rowe & Associates Ltd
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
