Trusts and Rest Home Costs: What Most Advisors Miss
Many people are being told that Trusts no longer protect assets from residential care means testing. That advice is often wrong—or at best, incomplete.
The truth is: **well-structured Trusts still provide powerful protection.**
1. Growth in Trust Assets Is Safe
When assets are transferred into a Trust, their future growth is protected.
**Example:**
- In 1990, you transferred your $200,000 home into a Trust.
- In 2024, the home is worth $1,000,000.
Only the $200,000 value at the time of transfer is considered for means testing. The **$800,000 gain is fully protected.**
2. Wills That Leave Assets to a Trust
Many wills are drafted to leave assets to a family Trust. That means:
- If the surviving partner later needs residential care, those inherited assets remain protected inside the Trust.
- Without a Trust, most assets pass directly to the survivor, maximising their liability for care fees.
3. Inheritances for Children
If your children inherit personally, their share is exposed. If later in life they:
- Enter a rest home,
- Go through a relationship breakdown, or
- Become bankrupt,
that inheritance may be lost.
With a Trust, trustees can hold back distributions or transfer assets into a child’s own Trust. That way, inheritances remain secure.
4. The $1 Million Retirement Village Mistake
We’ve seen widowed and single clients sell a Trust-owned home for $1,000,000, wind up the Trust, and buy a retirement village occupation right in their own name—because their a lawyer advised that Trusts no longer helped.
The result? **Only $291,825 is protected** under current gifting limits as at 1 July 2025 if you need rest home care. The remaining $708,175 is exposed to residential care subsidy means testing.
If they had retained the Trust and prepared a Deed of Loan from the Trust to fund the retirement village, the full $1,000,000 would have remained protected.
This mistake is tragically common—often caused by accountants or lawyers without specialist knowledge of Trusts and residential care subsidies.
Real-Life Stories
**✅ Success – Michael & Susan**
Michael and Susan kept their Trust. Their home, originally worth $200,000, grew to $1,000,000. The $800,000 gain was protected from means testing when they needed rest home care.
**⚠️ Failure – Alan & Judy**
Alan and Judy wound up their Trust on the advice of their lawyer, who informed them that Trusts no longer worked for care subsidies. They sold their Trust-owned home for $1,000,000 to buy into a retirement village in their own names. Only $291,825 was protected—the rest was exposed when they needed rest home care.
The Bottom Line
Trusts still work. The key is understanding how the rules really apply. A Trust can shield decades of asset growth, provide flexibility, and protect inheritances safely for future generations.
📖 **Next step:** Contact us to book a **Trust Check** at our offices or via Zoom with Kirsty Hourigan +64 9 4155704. We’ll review your Trust and ensure it continues to provide the protection you expect.
Disclaimer: This blog is general information only, not legal advice. The decision to wind up a trust has serious implications, including potential loss of asset protection and tax consequences. Please seek professional advice for your situation before taking any action.
