By Tara Grant - 23 Aug 2013
- 1 comment
The practice of a couple gifting $27,000 per annum each to a
trust ($54,000 per couple) has existed for many years. This
was the limit that could be gifted before gift duty tax was imposed
prior to the abolition of gift duty on 1 October 2011. Gifting
the maximum allowed before the imposition of gift duty also ensured
that assets were transferred to a trust as efficiently as possible
to give best effect to asset protection and estate planning
schemes.
The High Court's recent decision in B v MSD will come
as a shock to those who believed that by completing a gifting
programme at $54,000 per annum per couple, they would automatically
be eligible for a residential care subsidy.
The Ministry of Social Development (MSD)
assesses all applications for residential care subsidies by
considering applicants' assets and income (a financial means
assessment). The current thresholds are set out by the
MSD at the link below.
MSD's assessment also includes consideration of gifts made, so
that if you or your spouse/partner has given away assets, these
assets may still be counted in your financial means assessment.
Gifts of up to $6,000 per year made in the five years before you
apply can be excluded from your financial means
assessment. Gifts of more than $27,000 per year made before
the five year period may be considered "deprivation", in
which case MSD may assess the value of the "excess gift"
in your financial means assessment.
An example of how MSD apply this policy was highlighted in B
v MSD when Mrs B applied for a residential care
subsidy. Mr and Mrs B set up a family trust in 1987. As was
typical of the time, Mr and Mrs B annually gifted $27,000 by way of
forgiveness of debt to the trust. In completing its financial
means assessment of Mrs B, MSD ruled that that there had been
deprivation, as the gifting done by Mr and Mrs B totalled $54,000
per annum. Mrs B appealed the decision. The appeal was
ultimately heard and dismissed by the High Court when Justice
Collins confirmed that the MSD was right to apply the threshold of
$27,000 per year in gifting per couple not per person.
The case of B v MSD has now been appealed to the Court
of Appeal with a hearing scheduled for this month. We will let
you know the outcome of this appeal as soon as it is known. No
matter what the outcome of the appeal, B v MSD highlights
the broad discretion MSD has when considering applications for
residential care subsidies and the authority it has to conclude
that a person has deprived or otherwise given away their rights to
assets and income.
Please contact our specialist
trust and estate planning team if you have any questions about
gifting or residential care subsidies.
Links
Work & Income
information for individuals regarding residential care
subsidies
Contacts
Tara
Grant
Lewis Grant