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

Changes to the gift duty law that came into effect on October 1 seemed to hold out the promise of making life a lot more simple for people who wanted to transfer money or other assets to family members or to Family Trusts.

As people have come to grips with what is involved, it has become apparent that things are not as simple and straight forward as they might seem.

One of the complications is the possible effects on eligibility to have rest home care paid for by a person making a large gift.

In determining eligibility for a Residential Care Subsidy, WINZ allows gifts of a total of $27,000 in any year or $6000 a year in the five years before the application is made. Any gifts of amounts over those figures are still regarded as assets of the person applying for the subsidy. A gift of say $200,000 to a family member or Trust in an attempt to reduce assets to qualify for a residential care subsidy will therefore not work. The best approach would probably be to continue on making gifts of $27,000 a year. This is not much help to someone who is getting on in years and still has a reasonable amount of assets in their own name. Time will beat their efforts to reduce their assets to a point where they qualify for a Residential Care Subsidy.

Even if assets can be reduced sufficiently to qualify, WINZ will require the income produced by the assets that are held in the name of the Trust and most of the applicants National Superannuation to be used to pay for the care before WINZ contributes anything towards that cost so that even if someone qualifies on the asset test, people can end up paying most or all of the cost of the care themselves anyway.

There may be very good reasons for making gifts of substantial amounts to reduce assets but, in most cases, doing so in order to qualify for a Residential Care Subsidy is not one of them.