Rest Home Subsidies vs. Gifting

The following is content from the CCH Q&A Service around where gifting by couples can fall foul of entitlements to rest home subsidies.  Many people have been merrily gifting to their family trust expecting to be able to tap in to rest home subsidies in the future.  The following will come as news to many.

QUESTION:

Have there been any new developments around the issue of how gifting affects the residential care subsidy?

I know that Work and Income New Zealand (WINZ) takes the view that couples with family trusts who have been part of a gifting programme and have gifted $27,000 each per annum will have breached the threshold to qualify for the subsidy.

Has there been any clarification of this issue by WINZ or Inland Revenue?

ANSWER:

Clarification of this issue has been provided by the High Court in B v Chief Executive of the Ministry of Social Development [2012] NZHC 3165. (WINZ is the service delivery arm of the Ministry of Social Development.) The decision, released in late 2012, concludes that where couples have together gifted $54,000 annually in a gifting programme, the spouse applying for a residential care subsidy will have breached the $27,000 threshold.

The legislation at the heart of the case is the Social Security Act 1964, which has means-testing provisions for both assets and income. Section 147A states that where a person (or the person’s spouse or partner) applies for a means assessment, and that person has “directly or indirectly deprived himself or herself of any income or property”, the chief executive has a discretion to assess the person as if the deprivation has not occurred. The Social Security (Long-term Residential Care) Regulations 2005 state that this definition of deprivation of property includes gifts in a 12-month period that exceed $27,000.

As a result of this decision, most couples with family trusts who have taken part in conventional gifting programmes will not qualify for the residential care subsidy.

REFERENCE:

Social Security Act 1964, s 147A.

Social Security (Long-term Residential Care) Regulations 2005, regs 9, 9B.

B v Chief Executive of the Ministry of Social Development [2012] NZHC 3165.

GD Clews “Over-gifting and Rest Home Subsidies” <www.taxcounsel.co.nz/Resources/NZ+Tax+Case+Notes/Case+Notes+2012/Over-gifting+and+Rest+Home+Subsidies.html>.

V Ammundsen “Residential care subsidy up-date for couples” (5 December 2012) <http://mattersoftrust.wordpress.com/2012/12/05/residential-care-subsidy-up-date-for-couples/>.

(Disclaimer – this is general advice and may not be appropriate to your own unique position.  Always seek specific application to your circumstances from an expert.)