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To Gift Or Not To Gift?

This article was written by Fleur McDonald.

For many of us, gifting and gifting programmes relate directly to the Family Trusts we have established to protect the assets we have built up over our lifetimes.  When the Government abolished gift duty on 1 October 2011, many of us saw the ability to gift in bulk as very attractive, but there are many reasons why this may not be right for you. 

While the government has abolished gift duty as far as tax is concerned, the Ministry of Social Development (the “Ministry”), the government agency which administers the Residential Care Subsidy scheme (the “Subsidy”), has made it very clear that their gifting regime has not been abolished. In fact, the Ministry’s gifting regime is applied meticulously to every subsidy application. 

To give some background to the subsidy, as an individual, or a couple where both are in care, the Ministry regulations allow you to retain assets in your own name of $219,889.  This asset threshold includes both real property (house and land) and personal property (cash and investments). 

If however, one of you is still living in the family home, you can choose to apply an alternate threshold where the family home and one vehicle are exempt.  Be aware however that in this situation, the assets you are allowed to retain are set at a lower threshold of $120,416. 

Gifting is allowed under the subsidy regime but under strict parameters.  If you gift over those parameters, the excess gifts will be added back into the Financial Means Assessment, which is used to assess your eligibility. 

Currently, gifts of $27,000 per year are allowed.  The catch here is that this is not $27,000 per year, per person but $27,000 per year, per application, which includes both your assets and the assets of your spouse or partner.  You are therefore able to gift at $13,500 each for a total combined annual gift of $27,000.   

You should also be aware that, in the five (5) years directly preceding a Subsidy Application, allowable gifting is reduced to $6,000 per application, per year. 

Please also note there are strong anti-avoidance provisions in the Social Security Act 1964 and attempts to dispose of or deprive yourself of assets which might have otherwise been available to pay for your care costs will be subject to rigorous scrutiny. 

Gifting in one lump sum to your trust may not be in your best interests.  It may be that the best possible solution is to continue a gifting programme but at the reduced rate of $13,500 each so that your combined gifting comes within the Ministry’s regulations. Otherwise you run the risk that they Ministry will claw back gifting to such an extent that you fail the Financial Means Assessment and will not be eligible for assistance.  

At Harmans we understand that this may impact on you and we are happy to discuss your options with you.  Give Phillipa Shaw a call on 03 352 2293 to arrange an appointment to discuss your situation

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