With the number of family trusts in New Zealand continually on the rise, a recent High Court decision has highlighted an issue relevant to a vast majority of individuals with gifting programmes.
Much media attention has been focussed on the relationship between the effect of gift duty abolition on an individual's gifting programme and that individual's eligibility for a residential care subsidy. On application for a subsidy, the Ministry of Social Development (MSD) has long considered whether excess gifting has been made by an applicant (an annual threshold of $6,000 for the five years prior to the assessment and an annual threshold of $27,000 for historic gifting prior to that period).
Longstanding practice nationwide has seen gifting programmes to family trusts traditionally comprise an annual gift per person of $27,000. Only recently has MSD suggested that notwithstanding this practice (and MSD's apparent acceptance of such practice), the limit of $27,000 applies 'per couple' and not 'per person' with any excess over and above that threshold being deemed deprivation and factored back into the applicant's assessable means accordingly.
In B v Chief Executive of the Ministry of Social Development  NZHC 3165 the High Court recently considered whether the $27,000 annual threshold applied to gifting only by the applicant (Mrs B) or to the combined gifting of Mrs B and her husband. Holding that the $27,000 threshold for historic gifting applied to the annual gifting of both Mrs B and her husband, the Court rejected the argument that this was intended to mirror the previous threshold under the now abolished gift duty regime, despite the existence of Cabinet documents which linked the threshold with that regime.
Based on the particular circumstances, the question of eligibility will currently seem irrelevant. However, circumstances can change with time. The result of this recent decision is that many people who have maintained a commonly accepted form of gifting programme may now find they are ineligible for a subsidy in the future.
There is doubt among the legal fraternity as to the correctness of this decision and it will be interesting to see whether the appeal (scheduled for August 2013) is successful. In the meantime however, the decision reiterates the need to consider individual circumstances in considering quantum for a gifting programme.