Legal Brief with Alan Tate of Harris Tate www.harristate.co.nz

Around 19,000 New Zealanders receive a residential care subsidy to pay for the cost of their rest home or private hospital care.

The cost of this care is usually around $950 per week.
To qualify for the subsidy people need to be assessed as needing rest home care and have assets below, in most cases, $210,000.

A question that is often asked is whether it is possible to give away your assets as you get older to put you in a position to qualify for the subsidy.

Many people have transferred assets to family trusts in the hope that this will qualify them for a subsidy. Other people have looked at the removal of gift duty on 1 October 2011 and have thought that after that date they can simply transfer all of their assets to someone else, or a trust, which will immediately put them in the position of being able to qualify for a subsidy as they will have no assets.

Nothing is as simple as it seems. The residential care subsidy system is administered by the Ministry of Social Development which has a detailed set of rules to determine eligibility. The general rule is that if anyone has ‘deprived' themselves of assets then the value of those assets is added back into the applicant's assets for the purpose of assessing eligibility.

MSD allows gifts of $6000 per year to be made in the five years prior to the date of the application and gifts of $27,000 per year in the years before that.

For that reason the transferor of the family home or other assets to a trust is unlikely to help in qualifying for a subsidy unless those transfers were done and the gifting process completed some years ago.

The same calculation with respect to gifts will continue to apply after October 1 when the gift duty rules change so that a bulk transfer of assets is not going to work either.

The conclusion is that any attempt to manipulate the ownership of assets in order to qualify for a residential care subsidy is not likely to work and in some cases can make the situation worse.

Even transfers of assets to a family trust for reasons other than eligibility can have unintended consequences for a later application for a residential care subsidy.
Great care is needed in this area. The rules are complicated and proper advice is necessary.