WHAT IS THE RELATIONSHIP BETWEEN GIFTING AND REST HOME SUBSIDIES?

The Ministry of Social Development which administers rest home subsidy applications has clearly indicated that while the GIFT DUTY abolition has an impact on Trusts from a Gift Duty and Tax Administration perspective, the changes do not have any impact on the Social Security Act. Under the Social Security Act, the Ministry of Social Development can include in its calculations when assessing elderly people for Rest Home Subsidy applications assets and income which those people have deprived themselves of at any time in their life.

The normal circumstances where “deprivation of income or assets” occurs is where people have transferred assets to other people or trusts for an under-value, or where gifting to trusts has been undertaken in excess of the Ministry’s guidelines. Generally, (and please note that this may not be the case in all peoples’ circumstances) the Ministry accepts the following:

  • Gifts in the five previous years of up to $5,500 are acceptable and are not likely to be clawed back; and
  • Gifts of up to $27,000 in any years preceding the last five years are acceptable and are not likely to be clawed back.

Therefore, while a Lump Sum Gift may appear to be beneficial to remove your requirement for having an ongoing GIFTING PROGRAMME, such a GIFT will fall foul of the Ministry of Social Development’s guidelines, and would likely be included in a calculation as to whether you are eligible for any rest home subsidies.

Please note that it is critically important to understand that these Ministry of Social Development guidelines have no time limits placed on them. Therefore, if you set up a Trust in 2011 and gift a $500,000 property to the Trust by way of a Lump Sum Gift in that year, the Ministry can still include that asset in its calculation when you apply for a rest home subsidy, even if that application is made thirty or more years later (whatever the time frame may be for you).