Gifting and its Impact on Finances in Aged Care

For many, there’s a true joy in gifting, an act that strengthens bonds and brings happiness to both receiver and giver. Yet, when you or a loved one is considering entering aged care, the financial implications and rules around gifting money or assets become important. Whether for altruistic reasons, estate planning, or simply wanting to help family members, understanding the rules can help avoid potential pitfalls.

What is Gifting?

In a financial context, gifting refers to the act of giving away assets, such as money, property, or shares without expecting anything in return. It’s an act usually done out of generosity or occasionally as a part of estate planning.

Rules Around Gifting Before Entering Aged Care

Understanding gifting rules is important when aged care is a factor:

Gifting Free Areas

Whether you’re a single person or a couple, the gifting free areas are identical. You can gift:

  • $10,000 in one financial year.
    • $30,000 over 5 financial years, but this cannot include more than $10,000 in any single financial year. (See Services Australia website for correct amounts. These are correct Sept 2023)

Exceeding the Gifting Free Area

You’re free to give away any amount and any number of gifts. However, if your gifts’ total value surpasses the gifting free area, it could impact your payments. Specifically:

  • The excess amount will be counted in your assets test.
    • The deemed value will also be included in your income test.

This rule applies for 5 years from the date you make the gift. If for some reason, you get back the gifted amount, the considerations could change.

Implications of Gifting

Affecting Aged Care Costs

Exceeding the permissible gifting limit can affect your means-tested care fees and eligibility for pension since the surplus may still be seen as part of your assets.

Impact on Pension

Gifting can affect the income and assets test for pensions. If you’ve gifted above the allowable limit, it could reduce the pension amount you’re entitled to.

Loss of Control

Once you gift an asset, you lose control over it. It’s essential to trust the recipient and be confident in your decision, especially if it’s a significant amount or a precious family heirloom.

Tax Implications

Depending on where you live, there might be tax implications for both the giver and the receiver. It’s crucial to consult with a tax professional before making significant gifts.

To Gift or Not to Gift

If you’re considering gifting assets or money before entering aged care, it’s not a decision to be made lightly. Reflect on why you want to gift – whatever the reason, understanding the rules and implications is important to ensure you comprehend the whole picture and any specific consequences so you can make an informed choice. 

Always consult with a financial planner or advisor when considering gifting. They can provide guidance tailored to your situation, ensuring that you make informed decisions that won’t adversely affect your aged care or financial well-being. We can help you with all your aged care financial planning. You can contact us here.

Note: This article offers general advice and may not reflect current regulations. Always consult with financial and legal professionals before making significant financial decisions.

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