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The High Court, in Broadbent v The Chief Executive of the Ministry of Social Development [2017] NZHC 1499 (a test case), has told the Ministry of Social Development that it is not correctly applying the means testing assessment for income when determining someone's eligibility for a residential-care subsidy.
On Mrs Broadbent's application for a rest home subsidy the Ministry accepted that her "permissible" gifting to her trust of $27,000.00 per annum prior to the period commencing on the date five years before the date on which she applied for a subsidy, did not disqualify her for a subsidy at the first asset test stage of the means assessment. However when it conducted the second stage of the means test concerning income the Ministry's policy or practice of deeming that the applicant had deprived herself of the income streams associated with the earlier gifted assets was applied. Accordingly it quantified the amount and then treated it as her income for the purposes of the income assessment process. As a result it put her income above the income threshold necessary for her to qualify for a residential care subsidy and it was declined. Mrs Broadbent therefore had to pay the maximum sum towards her rest home care.
The Ministry was held by the Court to be wrong in treating this so called deprived income as Mrs Broadbent's own. In saying this the Court applied basic common law principles concerning the nature of gifts. The Judge, Justice Katz, noted that whilst the Ministry's practice may well be consistent with its policy objectives that people should use the resources available to them before seeking financial support from the state, it did not accord with the statutory scheme of the Social Security Act 1964 and the Social Security (Long-Term Residential-Care) Regulations 2005. Rather the statutory scheme had to be aligned with the longstanding principles of common law of what is an unconditional gift of an asset to another person, namely that it includes all the rights, benefits and entitlements associated with the gifted asset including any right or entitlement to future income. The Judge said that "there is nothing to suggest that Parliament envisaged that either allowable gifting (in the sum of $6,000.00 per annum) or permissible gifting (in the sum of $27,000.00 per annum) was intended to be conditional in nature. In the absence of some clear indication to the contrary, such gifting must be considered to be unconditional". In Mrs Broadbent's case her gifting was no different to the standard unconditional gifting settlors make to a trust which did not retain the right to the income which the asset might in the future generate. Accordingly the Ministry was wrong to factor that income actual or notional back into the means assessment process when assessing her eligibility for a residential-care subsidy.
This judgment was issued on 30 June 2017. The Ministry has a right to appeal it within 20 working days. It will be interesting to see if that occurs and if any legislative amendment ends up happening.
If you have any questions or concerns about this topic please contact Peter Fuscic on (09) 306 6746 (pfuscic@mcveaghfleming.co.nz) from our Auckland City Office.
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© McVeagh Fleming 2017
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.
