Residential Care Subsidy & Gifting – High Court Ruling 

Summary of articles by Duncan Cotterill & TEO Training - 31 May 2013

The residential care subsidy is paid to individuals to cover long-term care in a hospital or rest home.  The subsidy is subject to asset and income testing.  As the asset threshold is relatively low in comparison to house prices (the threshold is currently $213,297), many people have chosen to sell their family home into a trust and gift the remaining debt back over time to ensure the ongoing availability of the home, particularly when one person remains out of care.

In determining assets on applying for a residential care subsidy, any gifts made in excess of $6,000 per annum for the preceding five years of the application and any gifts in excess of $27,000 at any time prior to that are able to be brought into the asset calculation.

A recent decision in the High Court case B v The Chief Executive of the Ministry of Social Development [2012] NZHC 316 has confirmed that for the purposes of means testing for the subsidy, the relevant gifting threshold applies to the combined gifting of the applicant and their spouse or partner.  Therefore gifting is limited to $27,000 per couple, not per individual.  This approach has been taken by the Ministry since 2010.  As a result of this decision, many people who expected to be eligible for the subsidy will no longer qualify.  This is due to having been involved in gifting programmes (particularly prior to the repeal of the gift duty regime) by which they have annually gifted, with their spouse or partner, a combined total of $54,000 to a family trust.

The decision of the High Court is under appeal and will be heard by the Court of Appeal in August 2013.

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