Some people set up a family trust to receive residential care subsidy when they get old. By setting up a trust they dispose their interest in an asset to be eligible to receive subsidy. With changing rules of social security it is getting harder to get residential care subsidy.

With the abolition of gift duty you can gift as much as you want and there will not be any tax duty. However, for residential care subsidy there still is a maximum level of gift per couple is $26,000.

What is residential care subsidy?

Residential care subsidy is paid to rest homes or hospitals directly for entitled people by the Ministry of Health.

You can get it if you,

·         have had an assessment of your individual needs that confirms you need long-term residential care in a rest home or hospital and

·         need this care for an indefinite length of time and

·         are aged 50-64 years, are single and have no dependent child (for you, there is no asset test) or 

·         are aged 65 years or over and your assets are within certain limits and

·         are receiving contracted care services.

Asset threshold

There is an asset threshold which limits the maximum asset an applicant can have in order to get the subsidy.  From 1 July 2014, people who

·         Do not have a spouse or have a spouse who is also in long-term residential care

o   Must have combined total assets valued at $218,423 or less to qualify for Residential Care Subsidy

·         Have a spouse who is not in care, can choose a threshold of

o   combined total assets of $119.614 not including the value of their house* and car
OR

o   combined total assets of $218,423 which will include the value of their house and car

o   * The house is only exempt from the financial means assessment when it is the principal place of residence of the spouse/partner who is not in care or a dependent child.

The threshold is adjusted on 1 July each year.

Can I gift assets to meet the asset threshold?

The answer is no. If you give away assets, they still may be counted as assets in your financial means assessment. The social security system operates on the principle that people should look to their own resources first before seeking assistance from the state. Under the Act, all resources are required to be used to help the client support themselves. This approach did not change with the abolition of gift duty.

However, you can gift up to $6,000 within a 12 month period in each of the five years before you apply. This applies to each application for the Residential Care Subsidy.

Gifts of more than $27,000 per year, per application (for couples application too) made before the five year gifting period, may be added into the assessment.

Ref

http://www.workandincome.govt.nz/individuals/a-z-benefits/residential-care-subsidy.html

http://www.workandincome.govt.nz/individuals/brochures/residential-care-subsidy.html

http://www.workandincome.govt.nz/individuals/brochures/abolishing-gift-duty-and-the-effect-on-benefits-factsheet.html