WINZ is now taking a broader view in the assessment of an applicant’s assets. They are now looking back throughout the entire history of a couple’s gifting to their trust and reviewing the acceptability of all gifts made.Ferne Bradley Partner
Retired couples who have placed their assets into family trusts to protect them, will now find that they could get caught out if they are assessed for their eligibility to receive a residential care subsidy for rest home living.
A recent Court of Appeal ruling has upheld a decision made by the Ministry of Social Development (for Work and Income New Zealand (WINZ)) to assess an applicant’s eligibility for a rest home subsidy on a combined basis, rather than singly for each partner. For many retirees, this means that a proportion of their assets held in a family trust may not be excluded from means testing, as previously thought.
Partner at Malley & Co Lawyers (Christchurch) and family trust specialist, Ferne Bradley, says that our generally ageing population, combined with the abolishment of gift duty in 2011, has prompted a rise in the number of family trusts operating in New Zealand. This has prompted WINZ to revisit its interpretation of the governing Social Security Act 1964.
“Previously,” Bradley says, “WINZ focused predominantly on the five years prior to the application for subsidy and tended not to ask about gifting during earlier periods. They also previously never questioned whether couples could make the same level of gifts as a single person. However WINZ is now taking a broader view in the assessment of an applicant’s assets. They are now looking back throughout the entire history of a couple’s gifting to their trust and reviewing the acceptability of all gifts made.”
A single person is able to gift $27,000 a year until the last five years before they apply for a subsidy. During the last five years they can gift $6,000 per year. Gifting up to the allowable limit is not considered a personal asset and is therefore not subject to means testing. However, confusion has arisen in recent years as to whether the same $27,000 threshold applies to couples as to individuals. This Court of Appeal decision confirms that WINZ is correct in its decision to treat gifting of couples on a combined basis, so that they are limited to gifting only $27,000 between them ($13,500 each).
“If a couple has gifted $54,000 per year, on the basis that they are gifting the maximum $27,000 each, when it comes time for one or both of them to apply for a rest home subsidy, and if they are both still alive and living together, then $27,000 of their gifting per year will be treated as a personal asset and included in asset testing. If this brings their total personal assets over the allowable asset threshold then their eligibility for a rest home subsidy will be affected by the amount of the excess.”
Gifting can still reduce the available asset pool for the purpose of determining whether someone is eligible for government residential care subsidies. Bradley says that while this ruling clarifies a complex situation, she believes it could have adverse affects on many people who previously thought they were doing the correct thing in protecting their assets, while still ensuring their eligibility for a subsidy should it be needed in the latter years of their life.
Bradley advises anyone who is unsure about their previous gifting or who is looking to set up a family trust for the purpose of relationship property protection to get advice from their lawyer.