Thinking of gifting your property to a family member… be careful of rest home subsidy limits…

A retired couple owned a small seaside apartment.  One partner’s health was deteriorating, so they decided that it would be best if she entered a rest home.  They were aware that there were asset thresholds that you had to be under in order to be eligible for a rest home subsidy.

They decided they want to gift their apartment to their children, which they thought would push them under the means testing threshold.  They went to their lawyer to discuss this and were surprised to hear that gifting an asset like that could create problems for rest home subsidies.

How you can be eligible…

Your assets need to be under a certain amount in order to be eligible for a rest home subsidy (which is the government contributing towards the costs of your rest home care).  Whilst either you or your partner/spouse remains living in the house you must have either:

1. Total combined assets of less than $149,845 excluding the value of your house and car; or
2. Total combined assets of less than $273,628 including the value of your house and car.

If you are single or your spouse/partner is already in long term residential care, option 2 above is the only option that applies to you.

Gifting limits…

In order to make a gift without impacting on an application for a rest home subsidy, the maximum amount a single person can gift is $27,000 per annum, while the maximum amount a couple can gift is $13,500 each (totalling $27,000 between them).

However within the five years immediately prior to making an application for a rest home subsidy the current allowed gifting amount reduces to $7,500 a year per person. 

Any gift of more than $27,000 in any one year will likely be seen as “deprivation of assets” by WINZ when making an assessment for a rest home subsidy, and the whole gift could be “clawed back” by WINZ and counted as an asset in your hands.

If the retired couple mentioned above were to “gift” their apartment to their children, they would need to have done so gradually over time within the $27,000 limit to reduce potential rest home subsidy consequences.

In order to limit those unexpected consequences it is important to take legal advice before you consider gifting assets.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.