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General

Trust reversals and residential care subsidies

Eligibility for a residential care subsidy (RCS) is dependent on the applicant meeting stringently applied asset and means limits.  Where assets have been transferred to a trust, an applicant can still qualify for a subsidy, provided that any amount of gift counted back, does not exceed the permissible asset threshold.

Some people, who would otherwise qualify for a residential care subsidy, will no longer due to settling a trust too late or making a lump sum gift that is counted back for the purposes of a means testing.  The reason certain gifts are counted back is that where a person has chosen to deprive themselves of assets, as is the case where a gift is made to a trust, certain “deprivation” is counted for means testing purposes.  This is the case whether or not the person can benefit personally from the gift that has been made.  Although gift duty was abolished in 2011, the gifting limits that apply for RCS purposes have not been amended as a result of this.

Got it wrong?

Where a person has settled a trust that owns the family home and but for the gifts made to that trust, the person would otherwise qualify for a RCS, it may be possible to make a “trust reversal”.  A trust reversal requires that the trust’s assets are returned to the person and that their position is as it would be but for settling the trust.  However, a trust reversal is only accepted for RCS purposes when the trust has retained the original house sold or gifted to it.  Also note that while a trust reversal can be acceptable for RCS purposes there may be trust law and other consequences. 

This is a complex area and specialist advice is recommended. 

Also see Trusts and Residential Care Subsidies

References:

Discussion

2 thoughts on “Trust reversals and residential care subsidies

  1. Dear Vicki
    Your layman’s explanation has been of great help for me to understanding Beneficiary, trust and their rights – providing much clarity to my situation.

    Keep up the good work
    Regards
    Diana

    Posted by Diana | March 24, 2013, 12:03 am

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