Is it worthwhile creating a family trust these days?

You may be asking this question because you've heard that setting up a family trust could help you avoid paying residential care fees and qualify for a subsidy, if you need care in the future. The short answer is that a trust is very unlikely to achieve this.

There may however be other benefits of you setting up a family trust, so speak to your professional advisor/s.

Why this has become harder

Family trusts set up with this purpose have been seen by many as being unfair. People with family trusts, and potentially quite a lot of resourcing behind them, might get access to a subsidy that more modestly resourced residents might not.

Work and Income, which carries out the financial assessment for the Residential Care Subsidy on behalf of Health NZ, has been aware of this for a long time. When it assesses your application, it looks beyond who legally owns your assets, by checking whether you have "deprived" yourself of assets or income. This means giving away money or property, or arranging your affairs, in a way that reduces what you have available to pay for your care. If Work and Income decides this has happened, it can count those assets or that income as if you still had them.

Gifting to a trust

Transferring assets into a trust is usually treated as a gift. Only a limited amount of gifting is allowed before it is counted back into your assessment:

• in the five years before you apply for the subsidy, up to $8,500 a year
• more than five years before you apply, up to $27,000 a year

This information is of a general nature. It is not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose. It is not an alternative to legal advice and does not replace any requirements under any relevant Act, Regulations, Code of Practice, Rule, Standards or Orders. While we have endeavoured to ensure this information is accurate and as useful as possible, we accept no responsibility, loss or liability resulting from the use of this information. We urge you to seek appropriate or professional advice on all issues such as this.