Gifting and Paying for Aged Care Costs: What You Need to Know

If you’ve helped a child with a house deposit, transferred your home into a trust, or given money to family, you’ve made a gift. While New Zealand no longer has gift duty, gifting can still affect whether you qualify for the Residential Care Subsidy (RCS).

Many people assume that once gift duty was removed, gifting became a non-issue. But when it comes to aged care support, Work and Income still takes a careful look at gifts made in the past. In some cases, gifting that was completely above board at the time can now be counted against you when applying for a subsidy.

It’s worth understanding the rules—because even if you’ve gifted in the past, you might still be eligible for help with care costs.

 

Gift duty ended, but gifting limits still matter

Gift duty was abolished in 2011. Before then, the law allowed each person to gift $27,000 per year without triggering tax. Many people structured gifts, especially to trusts, around that limit.

But when it comes to residential care, Work and Income (on behalf of MSD) applies its own gifting limits. These have nothing to do with duty/tax. They are used to assess how much you’ve given away and whether that should be treated as still part of your personal assets when deciding whether you qualify for the Residential Care Subsidy.

If your gifting exceeds what MSD allows, the excess is treated as if you still own it. This can push you over the asset threshold and block access to the subsidy.

What can you gift without affecting subsidy eligibility?

Work and Income applies gifting limits to what it refers to as an economic unit—this means either a couple or a single applicant. The same thresholds apply whether you are applying alone or jointly, unless you are a couple who is applying at the same time.

These are the current limits:

• If the gift was made more than five years before applying for the subsidy, you are allowed to have gifted up to $27,000 per year (per economic unit)

• If the gift was made within five years of applying, the limit is $8,000 per year (per economic unit)

Anything over these amounts is treated as an asset and added back into your financial position. There is no automatic write-off of over-gifted amounts, and they don’t disappear just because time has passed.

 

Example 1: A couple who transferred assets to a trust before 2012

In 2005, a couple transferred $750,000 worth of assets into a family trust. They began a gifting programme, giving $54,000 per year ($27,000 each), which matched the gift duty exemption at the time. They stopped in 2012, shortly after gift duty was abolished in late 2011.

Over seven years, they gifted a total of $378,000. Under MSD’s rules, only $189,000 of that is considered allowable ($27,000 per year for seven years as a couple). The remaining $189,000 may still be treated as if it belongs to them.

They could restart a gifting programme now, gifting $27,000 per year to reduce the over-gifted amount. If they have few other assets and don’t yet need care, this strategy may bring them within the subsidy threshold over time.

This shows how gifting programmes set up under the old tax rules may still need to be adjusted when viewed through today’s care funding lens.

 

Example 2: A parent who gifted cash to adult children

In 2019, a father gave $100,000 to each of his three adult children—$300,000 in total. In 2024, he applies for the Residential Care Subsidy.

MSD allows $8,000 per year in gifting within the five years before applying. That’s a total of $40,000. The remaining $260,000 may be treated as an asset.

If the father has few other assets, this may not push him over the limit. But if he also owns a home or other savings, the over-gift could tip the balance and lead to his application being declined.

While both of these situations have relatively fortunate outcomes, it is not always the case.

 

Why this matters

Although only about five percent of New Zealanders aged 65 and over are in residential care at any one time, the chance of needing care increases sharply with age. Most people enter care around age 85, and the average stay is about 18 months.

Often, the move into care happens suddenly, following a fall, illness, or a decline in mobility. That means there’s usually little time to restructure finances or fix past gifting decisions.

If you’ve done significant gifting, or used a trust structure, it’s important to review your position now—not when care is urgently needed.

 

Is gifting still a good idea?

Yes, gifting can still be a useful part of estate or trust planning. But the rules around residential care funding are different to tax rules. Just because something made sense at the time doesn’t mean it won’t have unexpected consequences now.

In some cases, people assume they won’t qualify for support when they actually do. In other cases, they find out too late that past decisions are standing in the way of help they need.

Getting advice early can make all the difference.

 

What to do next

If you’ve gifted in the past or used a trust to hold your assets, now is a good time to take stock. You might need to:

• Review your gifting history and amounts

• Check whether your trust assets are still being treated as personal assets

• Restart a gifting programme if appropriate

• Seek legal advice before assuming you’re ineligible—especially around gifting made to family trusts

Many people can still qualify for a subsidy, even if they’ve made gifts in the past. The key is understanding how the rules work and planning around them while you still have time.  

A good conversation now and a relatively small investment in legal advice can save a lot of stress and money later—for you and your family.

Get in touch—to discuss how we can review, assess and help you plan for eligibility.