How do gifts affect aged care fees and the age pension?

Gifts can affect pension entitlements and aged care fees and are therefore one of the many crucial topics facility admissions officers should discuss with a potential resident.

Centrelink and the Department of Veterans’ Affairs place limits on gifting, and anything in in excess of the allowable thresholds are assessed under both the assets and income tests for five years from the date of the gift.

Centrelink allows pensioners to gift up to $10,000 per financial year and up to $30,000 over a five-year period without affecting either their aged care fees or pension entitlements. These limits apply to both singles and couples – the limits do not double for couples.

It is not uncommon for prior gifts to come to the attention of Centrelink/DVA when someone moves to residential care and this can lead to unintended consequences for both the resident and the provider. It is important for the admission officer to ask questions about gifts within the previous five years as part of the admission process.

Recent example:

A potential resident comes to a facility presenting as a non-homeowner pensioner and informs the admissions officer they only have $20,000 in their pensioner savings account with no other assets. It is reasonable to assume the resident will be assessed as a fully low means/concessional resident and the facility would expect to receive a Basic Daily Care Fee plus their maximum accommodation supplement. For the resident, only the Basic Daily Care Fee is payable – no RAD/DAP or RAC/DAC.

However, if the admissions officer enquired about their age pension and identified the resident was receiving less than the full fortnightly pension, this would suggest Centrelink’s records were different to what was advised by the family.

After contacting an Alteris adviser, it emerged the resident had sold their home for $450,000 two years ago and went to live with their daughter and son-in-law. .

They advised Centrelink of the sale of the home who then assessed the parent as a non-homeowner based on this information, resulting in a marginal reduction in their pension entitlement under the income test.

A few months later, the parent gave $430,000 as a cash gift to their daughter & son-in-law to pay off their mortgage. As their pension had already been reduced, they didn’t consider it necessary to re-contact Centrelink. Had they done so, their pension would have marginally increased because of the $10,000 reduction in their assessable assets. However, because they exceeded the gifting limit by $420,000, this amount continued to be assessed under both the assets and income tests for five years from the date of the gift.

When Centrelink became aware of this prior gift, they adjusted their records from $450,000 in a bank account to $20,000 in a bank account plus $420,000 deprived assets for the next three years.

Consequently, the resident was assessed as a RAD payer with a Means Tested Care Fee of $10.99 per day or $4,012.59 per year.

If the parent was admitted into a $450,000 RAD room, their care fees (Basic Daily Care Fee + DAP + Means Tested Care Fee) would be more than $41,000 per year which would be approximately $18,700 more than their annual income.

With only $20,000 in their bank account and three years before the $420,000 ceases to be assessed as a deprived asset, this highlights the significant impact of making a gift if they subsequently need to enter residential care. It is therefore easy to see why gifting is an important issue that should be addressed by both the resident and the provider, prior to admission.