What does a gift involve?
The recent High Court decision of Broadbent v. The Chief Executive of the Ministry of Social Development introduced the interesting idea that gifting is generally unconditional.
The decision relates to an application for a residential care subsidy, which was declined because the applicant, Mrs Broadbent, was considered to have deprived herself of income when selling property to a Trust.
Usually, if a person gifts assets to a Family Trust, the Ministry supports a clear, two-step analysis in determining whether or not the person meets the criteria for a rest-home subsidy.
Firstly, there is an assessment of their assets. This includes gifts previously made by the person to a Family Trust.
But, even if gifting of those assets falls within the “permissible limits”, the Ministry separately reviews the same gifting to determine whether the income stream those assets could potentially generate exceeds the threshold.
In this case, the Ministry found that Mrs Broadbent satisfied the first stage of the test. In the years before she applied for a subsidy, Mrs Broadbent had only ever gifted assets to her Family Trust at a level which was accepted to be permissible gifting.
However, for the second step of the analysis, the Ministry adopted its practice of deeming that Mrs Broadbent had deprived herself of income streams associated with the assets she had gifted to her Family Trust. As a result, the Ministry treated that income as her own and found she had income greater than the threshold.
As a result, Mrs Broadbent was required to contribute to her rest home care costs.
However, when the matter was appealed to the High Court, the decision of the Court went against the Ministry of Social Development. The Ministry was told that it was not correctly applying the means testing assessment in accordance with the law.
The decision holds that gifting by a person is not normally intended to be conditional in nature. The unconditional gift of an asset to a Trust necessarily involves the relinquishment of all future income streams from that asset too. Included within the gift of an asset is a gift of all the rights, benefits and entitlements associated with that asset.
So, while the Ministry’s practice may well fit its policy objective that people should use their own resources before seeking financial support from the state, it did not fit with the Court’s interpretation of the law.
It will be interesting to see whether the decision is successfully appealed, or whether the Ministry will look for legislative change.
If you need help navigating these issues, contact us at 0800 87 87 82 or on firstname.lastname@example.org.