Family trusts and rest home subsidies

Tom and Sarah are both 82 years old. They are both in good health, but recognise that within a few years they may need to go into care. They approach their lawyer to see if a family trust would help them get a rest home subsidy.

The lawyer first looks at what they own: the family home (value $350,000) and investments to the value of $250,000. Tom and Sarah have a net worth of $600,000. Their lawyer explains that Tom and Sarah would have to form a family trust and sell all their assets into it, and then start to gift. At $54,000 a year the $600,000 of assets would take 11 years to gift. They would then have to wait five years (a Work & Income rule) which would mean that they would be 98 years old before they could apply for a Rest Home Subsidy. Tom and Sarah have left it too late and so decide that a family trust isn’t for them.